Legislature(2019 - 2020)GRUENBERG 120

05/02/2019 03:00 PM STATE AFFAIRS

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Audio Topic
03:06:07 PM Start
03:06:51 PM Presentation: Building Divestment with the Division of Facilities Services (dot&pf)
03:44:27 PM HJR18
03:47:39 PM HJR7
05:03:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Building Divestment with the TELECONFERENCED
Division of Facilities Services (DOT&PF)
*+ HB 28 EQUAL PAY & MINIMUM WAGE ACT TELECONFERENCED
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HJR 5 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Scheduled but Not Heard
+= HJR 6 CONST. AM.:PERMANENT FUND & DIVIDEND TELECONFERENCED
Scheduled but Not Heard
+= HJR 7 CONST AM:APPROP. LIMIT; RESERVE FUND TELECONFERENCED
Heard & Held
+= HJR 18 CONST AM: PERMANENT FUND; POMV;EARNINGS TELECONFERENCED
Moved HJR 18 Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                          May 2, 2019                                                                                           
                           3:06 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Zack Fields, Co-Chair                                                                                            
Representative Jonathan Kreiss-Tomkins, Co-Chair                                                                                
Representative Gabrielle LeDoux                                                                                                 
Representative Andi Story                                                                                                       
Representative Adam Wool                                                                                                        
Representative Sarah Vance                                                                                                      
Representative Laddie Shaw                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S):  BUILDING   DIVESTMENT  WITH  THE   DIVISION  OF                                                               
FACILITIES SERVICES (DOT&PF)                                                                                                    
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 18                                                                                                   
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating to the Alaska permanent  fund and to appropriations from                                                               
the Alaska permanent fund.                                                                                                      
                                                                                                                                
     - MOVED HJR 18 OUT OF COMMITTEE                                                                                            
                                                                                                                                
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.                                                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 28                                                                                                               
"An Act  relating to an  annual report concerning the  payment of                                                               
equal pay for  comparable work; increasing the  minimum wage; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARING CANCELED                                                                                                         
                                                                                                                                
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.                                                                                                         
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
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.                                                                                                                       
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 18                                                                                                                  
SHORT TITLE: CONST AM: PERMANENT FUND; POMV;EARNINGS                                                                            
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS                                                                                    
                                                                                                                                
04/24/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/24/19       (H)       STA, JUD, FIN                                                                                          
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/25/19       (H)       Heard & Held                                                                                           
04/25/19       (H)       MINUTE(STA)                                                                                            
04/30/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/30/19       (H)       Heard & Held                                                                                           
04/30/19       (H)       MINUTE(STA)                                                                                            
05/01/19       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
05/01/19       (H)       <Bill Hearing Canceled>                                                                                
05/02/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
BILL: HJR  7                                                                                                                  
SHORT TITLE: CONST AM:APPROP. LIMIT; RESERVE FUND                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       STA, JUD, FIN                                                                                          
04/30/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/30/19       (H)       Heard & Held                                                                                           
04/30/19       (H)       MINUTE(STA)                                                                                            
05/02/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
MARK DAVIS, Director                                                                                                            
Division of Facility Services (DFS)                                                                                             
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented on "Building  Divestment with the                                                             
Division  Of Facilities  Services  (DOT&PF)" with  the  use of  a                                                               
PowerPoint presentation.                                                                                                        
                                                                                                                                
AMANDA HOLLAND, Management Director                                                                                             
Office of Management & Budget (OMB)                                                                                             
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered  questions during the presentation,                                                             
"Building  Divestment with  the Division  Of Facilities  Services                                                               
(DOT&PF)."                                                                                                                      
                                                                                                                                
CORI MILLS, Senior Assistant Attorney General                                                                                   
Labor and State Affairs Section                                                                                                 
Department of Law (DOL)                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Co-presented HJR  7 on behalf of  the House                                                             
Rules Standing  Committee, sponsor,  by request of  the governor,                                                               
with the use of a PowerPoint presentation.                                                                                      
                                                                                                                                
ED KING, Chief Economist                                                                                                        
Office of Management & Budget (OMB)                                                                                             
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Co-presented HJR  7 on behalf of  the House                                                             
Rules Standing  Committee, sponsor,  by request of  the governor,                                                               
with the use of a PowerPoint presentation.                                                                                      
                                                                                                                                
MIKE BARNHILL, Director of Policy                                                                                               
Office of Management & Budget (OMB)                                                                                             
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Answered questions  during the  hearing on                                                             
HJR 7.                                                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:06:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JONATHAN  KREISS-TOMKINS called the House  State Affairs                                                             
Standing   Committee    meeting   to    order   at    3:06   p.m.                                                               
Representatives  LeDoux, Story,  Vance, Shaw,  and Kreiss-Tomkins                                                               
were  present at  the call  to order.   Representatives  Wool and                                                               
Fields arrived as the meeting was in progress.                                                                                  
^Presentation:   Building  Divestment   with   the  Division   of                                                               
Facilities Services (DOT&PF)                                                                                                    
   PRESENTATION(S): Building Divestment with the Division of                                                                
                  Facilities Services (DOT&PF)                                                                              
                                                                                                                                
                                                                                                                                
3:06:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  announced  that   the  first  order  of                                                               
business  would  be  a  presentation  by  Mark  Davis,  Director,                                                               
Division    of   Facility    Services   (DFS),    Department   of                                                               
Transportation & Public Facilities (DOT&PF).                                                                                    
                                                                                                                                
3:07:25 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:07 p.m. to 3:09 p.m.                                                                       
                                                                                                                                
3:09:07 PM                                                                                                                    
                                                                                                                                
MARK  DAVIS,  Director,  Division  of  Facility  Services  (DFS),                                                               
Department of Transportation &  Public Facilities (DOT&PF), began                                                               
his  PowerPoint  presentation,  entitled  "Alaska  Department  of                                                               
Transportation   &  Public   Facilities,   House  State   Affairs                                                               
Committee,  Division of  Facilities  Services, Property  Disposal                                                               
Workgroup,"  by   reviewing  the  agenda   on  slide  2   of  the                                                               
PowerPoint, which read as follows:   "Purpose, Timeline, Process,                                                               
Sample product, and Questions."                                                                                                 
                                                                                                                                
MR. DAVIS turned  to slide 3 and relayed that  the purpose of the                                                               
presentation  is  to  provide   information  about  the  property                                                               
disposal  directive.   He referred  to slide  4, entitled  "Facts                                                               
Bearing on the  Problem," and offered the  following facts, which                                                               
read as follows:                                                                                                                
                                                                                                                                
     The State of Alaska has approximately 2200 state-owned                                                                     
                           buildings                                                                                            
                                                                                                                                
     The state has a backlog of deferred maintenance valued                                                                     
                       at $1.98 billion*                                                                                        
                                                                                                                                
      The Governor issued a property disposal directive to                                                                      
       executive departments requesting information about                                                                       
                           facilities                                                                                           
                                                                                                                                
        OMB accepted the offer from DOT&PF to assist in                                                                         
      gathering data via the facilities council and making                                                                      
                        recommendations                                                                                         
                                                                                                                                
     * Includes University deferred maintenance backlog of                                                                      
                          $1.2 billion                                                                                          
                                                                                                                                
MR.  DAVIS  reviewed the  timeline  on  slide  5 to  discuss  the                                                               
division's key events:  met  with the facilities council on three                                                               
separate  occasions;  conducted  several informal  meetings  with                                                               
Office of Management  & Budget (OMB); the  next scheduled meeting                                                               
with the facilities council is Friday [May 3, 2019].                                                                            
                                                                                                                                
3:11:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STORY   asked,  "Who   serves  on   the  facility                                                               
council?"                                                                                                                       
                                                                                                                                
MR. DAVIS  answered that the  facilities council is  comprised of                                                               
15 people designated by the  departments that routinely work with                                                               
DFS.   The council holds meetings  at least once per  quarter and                                                               
now more often to work on the property disposal initiative.                                                                     
                                                                                                                                
REPRESENTATIVE  STORY   asked  for  specific  names   of  council                                                               
members.                                                                                                                        
                                                                                                                                
MR. DAVIS  relayed the following  individuals:  Robert  Carr from                                                               
the Department of Military &  Veterans' Affairs (DMVA); Amy Burke                                                               
and  Keith Stephens  from  the Department  of  Health and  Social                                                               
Services (DHSS);  Dan Aicher from  the Department  of Corrections                                                               
(DOC); Lisa  Golisek-Nankerv from  the Department of  Education &                                                               
Early  Development   (DEED);  Pete  Bonin,   Division  Operations                                                               
Manager from DOT&PF.                                                                                                            
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  for   an  emailed  list  of  the                                                               
complete membership.   He requested  a general idea of  the types                                                               
of positions represented on the council.                                                                                        
                                                                                                                                
MR.  DAVIS  replied  that  it varies:  some  are  the  facilities                                                               
managers for  the departments; others  are division  directors or                                                               
sub-agency   managers   within   the   departments;   there   are                                                               
representatives  from OMB;  and there  is also  the chief  of the                                                               
Department of  Environmental Conservation  (DEC) laboratory.   He                                                               
concluded that the members are  whomever the department considers                                                               
best to represent it.                                                                                                           
                                                                                                                                
REPRESENTATIVE  STORY asked  to  know who  would  make the  final                                                               
decisions [regarding property disposal].                                                                                        
                                                                                                                                
MR.  DAVIS responded  that  the decisions  would  come from  OMB;                                                               
DFS's role is to facilitate collection and analysis of the data.                                                                
                                                                                                                                
REPRESENTATIVE WOOL asked  to know who on  the council represents                                                               
the  University  of  Alaska  (UA),  since  it  is  such  a  large                                                               
component of the state inventory.                                                                                               
                                                                                                                                
MR.   DAVIS  answered   that  the   council  does   not  have   a                                                               
representative  from  UA; DFS  intends  to  reach out  to  invite                                                               
someone from one of the three UA locations.                                                                                     
                                                                                                                                
REPRESENTATIVE WOOL pointed out that  slide 4 indicates that $1.2                                                               
billion  of  the  total $1.98  billion  in  deferred  maintenance                                                               
backlog is for UA.  He  asked how many of the 2200-plus buildings                                                               
in this category are UA buildings.                                                                                              
                                                                                                                                
MR. DAVIS replied that he will provide that information.                                                                        
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  whether OMB  and  the  executive                                                               
branch have  the power  and authority  unilaterally to  divest UA                                                               
buildings properties.   He stated  that he has the  same question                                                               
in reference to  the Alaska Court System (ACS).   He offered that                                                               
his questions relate to the matter of separation of powers.                                                                     
                                                                                                                                
3:15:46 PM                                                                                                                    
                                                                                                                                
MR. DAVIS moved  on to slide 6, entitled  "Approach to Analysis,"                                                               
to  demonstrate -  at a  high-level -  the approach  used by  the                                                               
workgroup to meet the intent  of the property disposal directive.                                                               
The workgroup  is asking the  facilities council members  to work                                                               
with department leadership to place  facilities into one of three                                                               
categories:     1)  the   "consider  category,"   which  includes                                                               
facilities  that  departments  believe are  logical  choices  for                                                               
gathering  information  to  determine  if selling  them  will  be                                                               
beneficial  to the  state;  2) the  "do  not consider"  category,                                                               
which includes  assets believed to  be the least likely  to sell;                                                               
and 3) the  "future analysis" category, which  includes all other                                                               
facilities.  He  said that based on the number  of facilities the                                                               
state  departments  have,  the  approach  provides  a  method  to                                                               
prioritize  the  work.   The  departments  are still  working  to                                                               
complete the  "consider" selection process.   He added  that once                                                               
all  the facilities  in the  "consider" category  are identified,                                                               
DFS  will review  them  against  a set  of  criteria and  develop                                                               
specific  recommendations.    He  clarified that  DFS  will  make                                                               
recommendations  as  to  what   properties  should  be  divested;                                                               
however, those  decisions will be  made in consultation  with the                                                               
relevant  agency through  its  representative  on the  facilities                                                               
council.  He emphasized that  DFS would not make a recommendation                                                               
counter to a department's desire.                                                                                               
                                                                                                                                
MR. DAVIS  referred to slide 7,  entitled "Building Consideration                                                               
Briefing," and stated that facilities  will be identified for one                                                               
of the three categories mentioned.   Slide 7 illustrates the one-                                                               
slide snapshot that  a workgroup member would develop  to aid the                                                               
group  in  discussing  the  disposition of  the  facility.    The                                                               
snapshots will be updated as  more information becomes available.                                                               
These work  products will  be delivered to  OMB in  the June-July                                                               
timeframe.  The  Annex Building, shown on slide 7,  is an example                                                               
of a  building that  would be  in the  "consider" category.   The                                                               
facilities  council is  waiting for  more information  to make  a                                                               
recommendation  on the  building.   It  is a  process that  takes                                                               
time,   and   as   more  information   becomes   available,   the                                                               
recommendations could  change.   In this way,  DFS can  track the                                                               
buildings that rise  to the top of the  "consider" category list,                                                               
at  which time  they  will be  referred to  OMB  to continue  the                                                               
process.                                                                                                                        
                                                                                                                                
3:21:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STORY  referred to the  example on slide  7, which                                                               
states that if the annex is  sold, DOT&PF could take advantage of                                                               
alternative leased  space in the  University of  Alaska Anchorage                                                               
(UAA) Bragaw facility for about $625,000  per year.  She asked if                                                               
those payments would go to UAA.                                                                                                 
                                                                                                                                
MR. DAVIS answered that the decision  has not been made; [the UAA                                                               
Bragaw facility]  is office space  that would meet  DOT&PF needs;                                                               
however, no  determination has been made  whether the transaction                                                               
is beneficial financially  for the state.  He  concluded that DFS                                                               
continues  to   evaluate  alternatives,  as  the   snapshots  are                                                               
updated.                                                                                                                        
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  when  DFS  will  have  made  its                                                               
recommendations.                                                                                                                
                                                                                                                                
MR. DAVIS responded that the  goal is to have the recommendations                                                               
by the end  of June; however, DFS is  still gathering information                                                               
on  the first  step  of  the analysis  -  the  list of  buildings                                                               
categorized  under "consider."   He  offered that  DFS is  behind                                                               
schedule, but the hope is to have  the list to OMB by July at the                                                               
latest.                                                                                                                         
                                                                                                                                
REPRESENTATIVE STORY  asked, "At what point  will the information                                                               
come back to this committee?"                                                                                                   
                                                                                                                                
3:24:08 PM                                                                                                                    
                                                                                                                                
AMANDA  HOLLAND,  Management  Director, Office  of  Management  &                                                               
Budget (OMB),  Office of the  Governor, answered that  the target                                                               
date for the preliminary report to  come to OMB from DFS is close                                                               
to the end of  June.  At that point, OMB  will review the results                                                               
to determine  how many facilities  are in the "consider"  and "do                                                               
not consider" categories;  it will give OMB  a comprehensive view                                                               
of  the   facilities  under  consideration;   and  OMB   will  do                                                               
additional  analysis.   She said  that OMB  will then  prepare an                                                               
aggregate report  that would include DFS  recommendations and the                                                               
additional  information from  OMB.   The  OMB  would submit  that                                                               
report within  two weeks of  the information being  received from                                                               
DFS - or mid-July at the latest.                                                                                                
                                                                                                                                
REPRESENTATIVE STORY  asked when the information  would come back                                                               
to the House State Affairs Standing Committee.                                                                                  
                                                                                                                                
MS. HOLLAND  answered that OMB  can provide the  preliminary list                                                               
of  buildings to  the  legislature  at the  same  time  as it  is                                                               
submitted to the office of the governor.                                                                                        
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked about the separation  of powers as                                                               
it relates to the disposal of properties of UA and ACS.                                                                         
                                                                                                                                
MS. HOLLAND  responded that OMB  does not have authority  over UA                                                               
or  ACS  to determine  what  they  will  do with  their  deferred                                                               
maintenance or with their facilities.   The two agencies could be                                                               
invited into the  facilities council, and the  council could work                                                               
with them to  identify additional opportunities for  the state to                                                               
realize some cost savings.                                                                                                      
                                                                                                                                
REPRESENTATIVE WOOL acknowledged that since  UA is in a different                                                               
category and OMB  does not have jurisdiction,  he now understands                                                               
why  no one  on the  council  represents UA.   He  asked for  the                                                               
deferred maintenance and number  of buildings under consideration                                                               
after excluding  UA.  He  mentioned there are some  University of                                                               
Alaska Fairbanks  (UAF) dorms  that are  old; however,  he opined                                                               
that  selling a  dorm and  putting  an office  building into  the                                                               
middle  of  the campus  doesn't  make  sense.   He  offered  that                                                               
selling  a building  that is  in the  middle of  a state  complex                                                               
would not always make sense.                                                                                                    
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS  asked   for   confirmation  that   the                                                               
executive  branch  has no  authority  unilaterally  to divest  UA                                                               
properties.                                                                                                                     
                                                                                                                                
MS. HOLLAND answered, "That is correct."                                                                                        
                                                                                                                                
3:28:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  stated that in Fairbanks,  a large inventory                                                               
of commercial  real estate is  sitting empty; the  buildings have                                                               
been for sale for a long  time.  He offered that adding buildings                                                               
to the real  estate market does not necessarily  lead to bringing                                                               
money into the  state.  He acknowledged that it  is possible that                                                               
consolidating   properties,   leasing   space,   and   shuttering                                                               
buildings  does  make some  economic  sense.    He asked  if  OMB                                                               
considered the fact  that putting a building up for  sale may not                                                               
actually result in selling it.                                                                                                  
                                                                                                                                
MS.  HOLLAND  responded  that  the  intent  behind  the  property                                                               
disposal directive  is to look  at the state  "footprint," decide                                                               
whether  property  is  being  used  in  the  most  effective  way                                                               
possible, and  look for opportunities  to be more  cost effective                                                               
both in  the short-term and  the long-term.  She  maintained that                                                               
by looking at  the categories, OMB can identify:    the buildings                                                               
with  deferred  maintenance;  the kind  of  deferred  maintenance                                                               
associated with a property; the  use of a property; the statutory                                                               
requirements  associated   with  a   property;  and   any  market                                                               
interested  in  purchasing  a  property.    She  maintained  that                                                               
divestment  of  property may  not  mean  necessarily selling  it;                                                               
other  possibilities include  transferring  ownership to  another                                                               
governmental entity or demolishing  the building.  She emphasized                                                               
that OMB strives to consider every possibility.                                                                                 
                                                                                                                                
3:30:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX asked  whether UA was part  of the property                                                               
disposal directive.                                                                                                             
                                                                                                                                
MS.  HOLLAND replied  that the  governor's  directive focused  on                                                               
having  each  department  -  the   operating  agencies  of  state                                                               
government  -  look at  its  facilities;  therefore, it  did  not                                                               
include UA.                                                                                                                     
                                                                                                                                
REPRESENTATIVE   LEDOUX   expressed   her  confusion   with   the                                                               
PowerPoint presentation:  On slide  4, the second fact bearing on                                                               
the  problem  is  that  the  state  has  a  backlog  of  deferred                                                               
maintenance valued at  $1.98 billion.  The  asterisk reveals that                                                               
$1.2 billion of  the deferred maintenance backlog  belongs to UA.                                                               
She stated  that she did  not understand why the  presentation is                                                               
geared to  the $1.98 billion,  when UA  has not been  included in                                                               
the directive.   She maintained that the discussion  should be on                                                               
the $.8 billion.                                                                                                                
                                                                                                                                
MS. HOLLAND relayed  that the backlog of  deferred maintenance is                                                               
a focal  point for OMB  in considering using state  property more                                                               
effectively and using property in  ways to consolidate functions.                                                               
She  agreed  that  the  entire backlog  is  $1.98  billion;  $1.2                                                               
billion of  that amount is the  UA backlog.  She  said that OMB's                                                               
focus is  on operating agencies,  and its  report will go  to the                                                               
governor.  She maintained that  she does not know what activities                                                               
the  governor  is  undertaking regarding  the  university.    She                                                               
stated, "I  can give you  a breakdown of  that leftover...backlog                                                               
of  deferred  maintenance.   So,  if  you  take the  total  $1.98                                                               
billion -  we already discussed  the university -  $134.7 million                                                               
is for school  district major maintenance; $616.8  million is for                                                               
executive  agencies and  the court  system.   If we  look at  the                                                               
split  in the  executive agencies,  $312.6 million  of that  $616                                                               
million is for  facilities; and so, while it  doesn't address the                                                               
entire  backlog, it  is a  significant portion  of the  executive                                                               
branch  backlog."   She  continued by  saying,  "$6.3 million  is                                                               
courts; $219 million is highways; $58 is aviation ..."                                                                          
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked Ms.  Holland to provide the numbers                                                               
to the committee in writing.                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX commented  that ACS is not  included in the                                                               
directive.                                                                                                                      
                                                                                                                                
MS. HOLLAND concurred.                                                                                                          
                                                                                                                                
REPRESENTATIVE  LEDOUX suggested  that school  districts are  not                                                               
included in  the directive, because  the buildings are  not state                                                               
owned.                                                                                                                          
                                                                                                                                
MS. HOLLAND  responded that  she does not  know.   She reiterated                                                               
that  the  directive is  designed  to  look at  executive  branch                                                               
properties   and   to   determine  if   there   are   cost-saving                                                               
opportunities.    She  continued  by  saying  that  part  of  the                                                               
directive  could   address  some  of  the   backlog  of  deferred                                                               
maintenance;  however, the  property disposal  directive was  not                                                               
written  for  the  purpose of  completely  solving  the  deferred                                                               
maintenance   backlog.     She  maintained   that  the   deferred                                                               
maintenance  backlog is  a contributing  factor to  consider when                                                               
choosing the  properties for disposal;  they are related  but not                                                               
reliant on each other.                                                                                                          
                                                                                                                                
REPRESENTATIVE LEDOUX expressed that  she does not understand why                                                               
Ms.  Holland  is discussing  properties  over  which OMB  has  no                                                               
control.  She mentioned that  school district buildings belong to                                                               
the municipalities.   She stated that  she is confused as  to why                                                               
the focus is not solely on the state-owned buildings.                                                                           
                                                                                                                                
MS. HOLLAND answered  that the directive does  focus on executive                                                               
branch state-owned buildings  over which it has  the authority of                                                               
disposal.     She   explained  that   the   information  in   the                                                               
presentation  was  an attempt  to  identify  the entire  deferred                                                               
maintenance backlog  amount and  to point out  that some  of that                                                               
backlog is for the executive branch.                                                                                            
                                                                                                                                
3:37:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS  expressed   that   although  a   noble                                                               
intention,  the information  has  created confusion;  DFS has  no                                                               
control over ACS,  UA, and school districts.  He  stated that the                                                               
committee will focus on executive branch agencies.                                                                              
                                                                                                                                
REPRESENTATIVE WOOL  offered that  recommendations could  be made                                                               
to other agencies.                                                                                                              
                                                                                                                                
REPRESENTATIVE VANCE  asked whether the state  is responsible for                                                               
paying for the deferred maintenance for courts and schools.                                                                     
                                                                                                                                
MS. HOLLAND  replied that she does  not know but would  share the                                                               
deferred  maintenance presentation,  which was  presented to  the                                                               
House  Finance Standing  Committee.   She added  that there  is a                                                               
state backlog  of deferred  maintenance; she  can give  the rough                                                               
breakdown of the split; however, she  does not have the answer to                                                               
the question.                                                                                                                   
                                                                                                                                
REPRESENTATIVE   VANCE  stated   that   she   learned  that   the                                                               
administration was  looking at state  leases, and someone  in the                                                               
Department of Administration (DOA), who  spent one day looking at                                                               
state  leases, realized  the state  was paying  more than  market                                                               
prices;  upon renegotiation  of the  lease, the  state saved  $17                                                               
million  in  one  day.    She offered  that  the  intent  of  the                                                               
directive is to see what else could be done better.                                                                             
                                                                                                                                
MS. HOLLAND agreed.                                                                                                             
                                                                                                                                
3:39:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS   referred   to  the   public   process                                                               
associated with  the directive.   He expressed  his understanding                                                               
that   DFS   will   make  a   suite   of   recommendations;   the                                                               
recommendations  will  go  to  the  governor's  office;  and  the                                                               
governor's office  will make the  final decisions.   He suggested                                                               
that if, for  example, the Sheldon Jackson Museum was  put up for                                                               
sale, there are people with very  strong feelings about that.  He                                                               
asked, "When does the public get a say?"                                                                                        
                                                                                                                                
MS. HOLLAND  replied that she is  not aware of a  requirement for                                                               
public comment or  public process.  She stated that  she can pass                                                               
the  request on  to the  governor  as a  recommendation from  the                                                               
committee.                                                                                                                      
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked whether  there  is  any plan,  at                                                               
present, for public process.                                                                                                    
                                                                                                                                
MS. HOLLAND responded that she is  not aware of what actions will                                                               
occur once OMB submits its report to the Office of the Governor.                                                                
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  told  Ms.  Holland  to  consider  it  a                                                               
recommendation  from  him  that  there be  some  opportunity  for                                                               
public comment.   He asked for DFS  and OMB to provide  a list of                                                               
the initial  recommendations to the House  State Affairs Standing                                                               
Committee once it is complete.                                                                                                  
                                                                                                                                
MS. HOLLAND said, "Yes, we can do that."                                                                                        
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  for  insight on  how the  Sheldon                                                               
Jackson Museum  got on the list  and into public discussion  as a                                                               
state facility - building and contents - that might be divested.                                                                
                                                                                                                                
MS.  HOLLAND replied  that she  is not  aware of  how or  why the                                                               
Sheldon  Jackson Museum  was mentioned  specifically.   She  said                                                               
that  DFS  is  continuing  to do  analysis  with  the  facilities                                                               
council.   She  stated  that she  is  not aware  of  any list  of                                                               
facilities or properties, and that  OMB is waiting for the report                                                               
from  DFS  before  moving forward  with  recommendations  to  the                                                               
governor's office.                                                                                                              
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked for confirmation that  at present,                                                               
there is  no affirmative  plan to  divest Sheldon  Jackson Museum                                                               
from state ownership.                                                                                                           
                                                                                                                                
MS. HOLLAND responded, "That is correct."                                                                                       
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  Ms.  Holland whether  she is  the                                                               
point  person at  OMB for  the executive  branch for  the process                                                               
going forward.                                                                                                                  
                                                                                                                                
MS. HOLLAND  answered that  she is  the person  to whom  DFS will                                                               
provide the report  and will work with other  OMB staff including                                                               
the administrative services  directors, if additional information                                                               
is needed.                                                                                                                      
                                                                                                                                
         HJR 18-CONST AM: PERMANENT FUND; POMV;EARNINGS                                                                     
                                                                                                                              
3:44:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   announced  that  the  next   order  of                                                               
business  would  be  HOUSE JOINT  RESOLUTION  NO.  18,  Proposing                                                               
amendments to  the Constitution of  the State of  Alaska relating                                                               
to  the Alaska  permanent  fund and  to  appropriations from  the                                                               
Alaska permanent fund.                                                                                                          
                                                                                                                                
CO-CHAIR FIELDS  relayed that  he supports HJR  18 as  a fiscally                                                               
conservative approach to  ensure the protection of  the corpus of                                                               
the permanent fund and the  permanent fund dividend (PFD) for the                                                               
next generations.                                                                                                               
                                                                                                                                
REPRESENTATIVE LEDOUX  stated that  she does  not support  HJR 18                                                               
because she believes it would lead to smaller PFDs.                                                                             
                                                                                                                                
REPRESENTATIVE WOOL  said that he has  reservations regarding HJR                                                               
18;  however,  he is  concerned  that  the  Senate will  pass  an                                                               
unbalanced budget  and the  legislature will  need to  take money                                                               
from  the earnings  reserve account  (ERA) or  the constitutional                                                               
budget reserve fund (CBRF).  He  maintained that HJR 18 is needed                                                               
to ensure financial security.                                                                                                   
                                                                                                                                
3:46:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS moved  to report  HJR 18  out of  committee with                                                               
individual recommendations and the attached zero fiscal note.                                                                   
                                                                                                                                
A  roll  call  vote  was taken.    Representatives  Story,  Wool,                                                               
Fields, and  Kreiss-Tomkins voted in  favor reporting HJR  18 out                                                               
of  committee.   Representatives  LeDoux, Vance,  and Shaw  voted                                                               
against it.  Therefore, HJR 18  was reported from the House State                                                               
Affairs Standing Committee by a vote of 4-3.                                                                                    
                                                                                                                                
           HJR 7-CONST AM:APPROP. LIMIT; RESERVE FUND                                                                       
                                                                                                                              
3:47:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  announced  that   the  final  order  of                                                               
business  would  be  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.                                                                                                                 
                                                                                                                                
3:48:45 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,  began  the  PowerPoint presentation,  entitled  "House                                                               
Joint Resolution 7  Appropriation Limit."  She  reviewed slide 2,                                                               
entitled  "Current  Constitutional  Spending  Limit  (Article  9,                                                               
Section 16)," which read as follows:                                                                                            
                                                                                                                                
     ? Limit set at $2.5 billion, plus inflation and                                                                            
     population growth since 1982                                                                                               
          ? Calculation for FY20 would be about $10.5                                                                           
          billion                                                                                                               
                                                                                                                                
     ? Spending subject to cap includes all UGF operating                                                                       
     and capital expenditures, most statewide items, plus                                                                       
     some DGF items                                                                                                             
                                                                                                                                
     ? Excludes PFDs, bond proceeds, debt service payments,                                                                     
     non-State sources of revenue, public corporation                                                                           
     revenues, and disaster declarations                                                                                        
                                                                                                                                
     ? At least 1/3 of limit reserved for capital projects                                                                      
     and loans                                                                                                                  
          ? Can break the limit for capital projects, if                                                                        
          approved by the voters.                                                                                               
                                                                                                                                
CO-CHAIR FIELDS asked to see a slide showing inflation-adjusted                                                                 
per capita spending for Alaska.                                                                                                 
                                                                                                                                
3:50:20 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,                                                                        
responded that he has that slide but it is not in the                                                                           
presentation.  He offered to provide that slide to the                                                                          
committee.                                                                                                                      
                                                                                                                                
CO-CHAIR   FIELDS  asked   for  confirmation   that  per   capita                                                               
inflation-adjusted  spending is  as low  today as  it was  in the                                                               
late 70s and early 80s.                                                                                                         
                                                                                                                                
MR.  KING answered  that technically  that statement  is correct,                                                               
but misleading.   He stated that the years  following that period                                                               
were lower,  even though the spending  today is as low  as it was                                                               
at the time period mentioned.                                                                                                   
                                                                                                                                
CO-CHAIR  FIELDS asked  for  confirmation that  on  a per  capita                                                               
inflation-adjusted  basis, state  spending is  now lower  than it                                                               
has been at most points in time for the last 35 years.                                                                          
                                                                                                                                
MR.  KING  responded  that  the  current  spending  adjusted  for                                                               
inflation and  population is higher now  than it was in  the late                                                               
90s and early 2000s.                                                                                                            
                                                                                                                                
CO-CHAIR FIELDS  asked if  that was  true on  a per  capita basis                                                               
deducting for permanent fund dividend (PFD) payments.                                                                           
                                                                                                                                
MR.  KING   replied  that  PFD  payments   are  not  historically                                                               
considered part of the budget,  therefore, are excluded.  He said                                                               
that  he would  have to  re-think the  question before  answering                                                               
completely.                                                                                                                     
                                                                                                                                
CO-CHAIR FIELDS stated  that today Alaska spends less  money on a                                                               
per  capita inflation-adjusted  basis in  terms of  operations of                                                               
the government than in most - if  not all - years, since the late                                                               
70s and  early 80s.   It demonstrates  that the spending  cap has                                                               
not been exceeded,  because the state has fiscal  discipline.  He                                                               
said that  he questions a  need for such a  cap.  Since  the high                                                               
oil price  years 2008-2013, the  state has engaged in  very large                                                               
budget  reductions, and  the state's  spending  is very  fiscally                                                               
constrained.                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS added that the  information that the governor has                                                               
presented  is neither  inflation-adjusted nor  adjusted on  a per                                                               
capita basis.  He maintained that  it is misleading to the public                                                               
when  the governor  claims that  spending has  exploded, when  in                                                               
fact it has not.                                                                                                                
                                                                                                                                
3:53:23 PM                                                                                                                    
                                                                                                                                
MR.  KING proceeded  with  slide 3,  entitled  "UGF Spending  and                                                               
Limit  History  (Inflation   Adjusted),"  which  illustrates  the                                                               
history  of the  state's inflation-adjusted  spending of  various                                                               
types  since  fiscal  year  1975  (FY  75);  it  includes  agency                                                               
operations spending, debt service  payments, and capital spending                                                               
-  all adjusted  for inflation.   He  maintained that  during the                                                               
period  FY  05  -  FY 13,  state  government  spending  increased                                                               
significantly  in  response  to  an  increase  in  revenue.    It                                                               
exceeded the  level of  spending during the  early 80s,  when oil                                                               
revenues  first started  to flow  into the  state.   The spending                                                               
level in  the early 80s  created the need for  the constitutional                                                               
amendment in 1982.                                                                                                              
                                                                                                                                
MR. KING  pointed out  that the  dotted black  line in  the graph                                                               
represents the  spending limit  - also  adjusted for  inflation -                                                               
and  the   green  line  represents   revenues.    He   noted  the                                                               
correlation between  revenues and  spending - as  demonstrated on                                                               
the graph -  and acknowledged that the  correlation is associated                                                               
more with  capital spending than with  agency operation spending.                                                               
He added that  agency operation spending did  increase during the                                                               
period of  high revenues; it  has gotten smaller since  that time                                                               
but is still greater than what it was during the early 2000s.                                                                   
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked whether  the numbers in  the chart                                                               
are also adjusted for population.                                                                                               
                                                                                                                                
MR.  KING  responded  that  the  numbers  are  not  adjusted  for                                                               
population.   He  stated that  the question  of the  necessity of                                                               
population adjustment is  one that should be  debated.  Increases                                                               
in  population  result in  a  need  for increases  in  government                                                               
services.   For  example,  more  cars on  the  road require  more                                                               
roads,  and  more  children  in  school  require  more  teachers;                                                               
however,  economies of  scale do  exist.   He contended  that the                                                               
need  is not  directly proportional  to the  population increase.                                                               
He  offered  that when  population  adjustments  are made  giving                                                               
credit to the full rate of  population growth, the result is that                                                               
the  ability for  the government  to  spend exceeds  its need  to                                                               
spend.   He pointed  out that from  FY 85 -  FY 05,  the spending                                                               
limit  allowed  the  growth of  government,  and  the  population                                                               
almost doubled, but government spending  did not grow in response                                                               
to the population growth.                                                                                                       
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  pointed out  that  the  graph gives  no                                                               
accounting  for population  growth  and asked  for the  rationale                                                               
behind giving zero recognition for population growth.                                                                           
                                                                                                                                
MR.  KING answered  that when  economists discuss  spending, they                                                               
are  referring  to  the  purchasing  power  of  a  dollar  -  the                                                               
inflation-adjusted value of  a dollar.  The graph  shows the cost                                                               
of the same level of government  services in today's dollars.  He                                                               
maintained that to adjust for  population would be "mixing apples                                                               
and oranges"; it  could be done and may provide  some insight and                                                               
value, but it is not instructive  on what the level of government                                                               
spending  should be  or what  it was.   He  offered to  provide a                                                               
chart showing per  capita spending but maintained  that the trend                                                               
is similar.                                                                                                                     
                                                                                                                                
3:57:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS referred  to Mr.  King's statement  that                                                               
population   growth  may   not  be   instructive  regarding   the                                                               
appropriate  level   of  government  spending.     Representative                                                               
Kreiss-Tomkins maintained  that although  there are  economies of                                                               
scale as  population grows, he  categorically rejects  the notion                                                               
that  population   growth  has   no  role  when   discussing  the                                                               
appropriate  level   of  government  spending,  and   he  rejects                                                               
accepting a  pure academic economic  outlook dictating  that only                                                               
inflation-adjusted dollars  count and not the  population and its                                                               
needs.    He  requested  a population-adjusted  graph  in  future                                                               
presentations.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  WOOL asked  for clarification  of the  comment in                                                               
the chart  that states  that the current  spending limit  did not                                                               
work.   He  maintained that  the  chart shows  that the  spending                                                               
neither exceeded the limit nor the revenue.                                                                                     
                                                                                                                                
MR. KING  explained that  when oil started  to flow  and revenues                                                               
more than tripled, government spending  also increased.  In 1982,                                                               
the public  approved a constitutional  amendment to  restrict the                                                               
government from being  able to grow at the same  rate as revenue.                                                               
He said  that the  intent was  that the  spending limit  would be                                                               
effective in  curbing government growth,  in the event  of future                                                               
revenue increases.  He stated  that during the 20-year period [FY                                                               
85 -  FY 05] in  which spending was far  below the limit  but the                                                               
limit continued  to grow,  when there  were excess  revenues, the                                                               
limit did  not restrict the  ability to spend.   He said  that in                                                               
the  early  1980s, Alaska  saw  a  260-plus percent  increase  in                                                               
government spending;  in 2004-2013  there was a  similar 260-plus                                                               
percent increase in  government spending.  He  maintained that if                                                               
you accept the  premise that the spending limit was  put in place                                                               
to limit government spending, then it did not work.                                                                             
                                                                                                                                
4:00:42 PM                                                                                                                    
                                                                                                                                
MR. KING  moved on  to slide  4, entitled  "What if  the Proposed                                                               
Spending Cap Passed before Oil  Prices Spiked?" and asserted that                                                               
if a  spending limit had  been in place  and it was  effective in                                                               
restricting the  government from  growing, additional  revenue of                                                               
about  $29  billion  would  be   in  the  permanent  fund  today,                                                               
generating about  $6 billion annually  under the  current percent                                                               
of market  value (POMV)  calculation.  He  offered that  the draw                                                               
would have  been more than adequate  to pay for the  entire state                                                               
budget and the permanent fund.                                                                                                  
                                                                                                                                
MR. KING  turned to  slide 5, entitled  "Sources of  UGF Spending                                                               
Growth," to  identify the  sources of  the increase  in spending.                                                               
The pie chart  [top right of the graphic] reveals  that in FY 13,                                                               
capital  spending  was  $1.8  billion  above  the  FY  05  level,                                                               
adjusted for  inflation; spending for agency  operations was $1.3                                                               
billion above  the inflation-adjusted  FY 05 level;  $400 million                                                               
was expended to  purchase Alaska's Clear and  Equitable Share Act                                                               
(ACES)  credits in  FY  05; and  the  unfunded retirement  system                                                               
[Public  Employees'   Retirement  System  (PERS)   and  Teachers'                                                               
Retirement  System (TRS)]  liability required  an expenditure  of                                                               
$614  million in  FY  05.   He  concluded  that  the increase  in                                                               
government spending was  due to a combination  of factors; almost                                                               
half  was due  to capital  spending; and  significant amounts  of                                                               
growth occurred in agency operations as well.                                                                                   
                                                                                                                                
MR. KING reviewed the sources  and increased levels of inflation-                                                               
adjusted spending  in the FY  19 budget  compared with the  FY 05                                                               
budget, as  shown in  the pie  chart [in the  lower right  of the                                                               
graphic].  He said that  agency operations are $750 million above                                                               
the FY 05 level after adjusting for inflation.                                                                                  
                                                                                                                                
REPRESENTATIVE STORY  asked for confirmation that  the investment                                                               
in the PERS and TRS retirement systems was about $3 billion.                                                                    
                                                                                                                                
MR. KING  responded that there  was a  $3 billion transfer  in FY                                                               
15;  because it  was  a transfer,  it  does not  show  up on  the                                                               
graphic.  He  explained that because of that  transfer, there was                                                               
not a retirement  contribution in FY 15, and  the contribution is                                                               
smaller in the years after FY  15 because of the reduction in the                                                               
liability.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  VANCE asked  why the  charts compare  spending to                                                               
the FY 05 level.                                                                                                                
                                                                                                                                
MR. KING referred to slide 3 to  point out that in the history of                                                               
the state's inflation-adjusted spending, FY  05 is the "low water                                                               
mark"; government  spending was  as low  as it  had ever  been in                                                               
inflation-adjusted  dollars.    He  maintained  that  it  is  not                                                               
unreasonable to revert to that level.                                                                                           
                                                                                                                                
4:04:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL  maintained  that   there  is  a  population                                                               
component, and although  the effect of an  increase in population                                                               
on the need for increased  government services is not one-to-one,                                                               
more people  are needed  to handle the  workload of  serving more                                                               
people in the  state.  He expressed  that there must be  a way to                                                               
scale that component into the spending calculations.                                                                            
                                                                                                                                
MR. KING  offered to present the  numbers on a per  capita basis.                                                               
He maintained that it would be  informative as far as showing how                                                               
the level  of spending has  been changing  on a per  capita basis                                                               
but is  not instructive  on what  government should  be spending.                                                               
He  stated  that as  the  population  grows, government  spending                                                               
would  not need  to increase  $17,000  per person  for every  new                                                               
person coming into the state.                                                                                                   
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  offered  that  the  difference  between                                                               
"instructive" and  "informative" will  be a  profound distinction                                                               
for the  committee going forward.   He maintained that it  is the                                                               
decision of the  committee members as to what  is instructive and                                                               
what   is  informative,   considering  that   the  constitutional                                                               
amendment proposed under HJR 7  would directly limit the power of                                                               
appropriation of the legislative branch of government.                                                                          
                                                                                                                                
MR. KING agreed that  it was a policy call.   He pointed out that                                                               
education  funding,  for  example,  increased  by  19-20  percent                                                               
during a  period when the  population of students  increased zero                                                               
percent.   He  maintained  that  it is  a  question  of not  only                                                               
someone  moving  to  the  state, but  the  services  that  person                                                               
requires; therefore, it is not an easy question.                                                                                
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether the  proposed amendment  is                                                               
needed considering the budget passed  by the Senate would deplete                                                               
the funds available for spending.                                                                                               
                                                                                                                                
MR. KING  answered that  removing the  safety net  does eliminate                                                               
one of  the tools for  addressing increased  government spending;                                                               
however,  it   would  not   prevent  government   growth  through                                                               
taxation, using PFD  funds, or increased revenues.   He said that                                                               
although that scenario does put  downward pressure on the budget,                                                               
it doesn't solve the issue addressed under HJR 7.                                                                               
                                                                                                                                
CO-CHAIR  FIELDS referred  to HJR  7, page  1, lines  7-11, which                                                               
read:                                                                                                                           
                                                                                                                                
     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.                                                                                                         
                                                                                                                                
CO-CHAIR FIELDS  asked whether the proposed  amendment would lock                                                               
the state perpetually  into fewer dollars per person  in terms of                                                               
appropriation.                                                                                                                  
                                                                                                                                
MR. KING concurred that government  spending would not be able to                                                               
grow at the rate of inflation and population.                                                                                   
                                                                                                                                
CO-CHAIR FIELDS pointed  out that Alaska has  an aging population                                                               
that will  cost more; a percentage  of that cost would  be to the                                                               
state;  and the  idea  that the  state  would arbitrarily  reduce                                                               
spending  every  year  regardless   of  population  or  needs  is                                                               
"crazy."                                                                                                                        
                                                                                                                                
REPRESENTATIVE   LEDOUX  asked   if   any  other   state  has   a                                                               
constitutional appropriations cap.                                                                                              
                                                                                                                                
MR. KING  responded that  he does not  have that  information but                                                               
would provide it.                                                                                                               
                                                                                                                                
REPRESENTATIVE WOOL  asked for confirmation  as to the  period in                                                               
which the school population did not increase.                                                                                   
                                                                                                                                
MR. KING responded that the  school population in Alaska has been                                                               
relatively stable since 1990 at about 130,000 students.                                                                         
                                                                                                                                
REPRESENTATIVE WOOL  asked, "even  though the  state population's                                                               
gone up a few hundred thousand?"                                                                                                
                                                                                                                                
MR. KING answered, "Yes, that's correct."                                                                                       
                                                                                                                                
REPRESENTATIVE WOOL asked, "What about prison population?"                                                                      
                                                                                                                                
MR.  KING replied  that  he  didn't have  that  information.   He                                                               
confirmed that the  segment of population that is  growing is the                                                               
aging population.                                                                                                               
                                                                                                                                
4:09:35 PM                                                                                                                    
                                                                                                                                
MS.  MILLS referred  to slide  7, entitled  "Appropriation Limit:                                                               
Section 1(a)"  to review the sectional  analysis for HJR 7.   She                                                               
pointed out that  the decision points in  the proposed resolution                                                               
relate to the  baseline that is established.   She mentioned that                                                               
the current constitutional limit is  $2.5 billion, and the growth                                                               
rate is based on population and  inflation.  She pointed out that                                                               
the baseline  did not limit  spending.   She offered that  in the                                                               
proposed resolution,  the baseline  is changed from  $2.5 billion                                                               
to the average of the  previous three years of appropriation plus                                                               
either 50 percent of the  change in population and inflation over                                                               
the course of that year, or 2 percent, whichever is less.                                                                       
                                                                                                                                
MS. MILLS  relayed that the  next decision point is  contained in                                                               
Section 1(a)(1)-(8) - the exceptions  - those appropriations that                                                               
are  outside  of  the  cap,   therefore,  do  not  have  spending                                                               
ceilings.   She referred  to slide  8, entitled  "Illustration of                                                               
Total Budget  and Appropriation  Limit," which  illustrates those                                                               
appropriations  under the  cap and  those outside  the cap.   The                                                               
expenditures outside  the cap  include federal  funding receipts,                                                               
PFDs, and  other constitutional  exceptions.  She  mentioned that                                                               
the appropriations excluded from the  cap are the same that exist                                                               
in  the current  constitution as  exceptions, except  for capital                                                               
spending.                                                                                                                       
                                                                                                                                
CO-CHAIR  FIELDS asked  for an  explanation of  "Capital Subject"                                                               
and "Capital Not Subject" in the slide 8 chart.                                                                                 
                                                                                                                                
MS.  MILLS  responded  by  reviewing  the  exceptions:    1)  the                                                               
permanent  fund;  2)  disasters;  3)  obligations  for  bonds  or                                                               
general   obligation  (GO)   bonds;   4)  re-appropriations;   5)                                                               
duplications;  and  6)  money  held  in trust  by  the  state  or                                                               
received from  the federal government  for a  particular purpose.                                                               
In response  to Representative Fields,  she relayed  that capital                                                               
outside the cap is the revenue  received through GO bonds and the                                                               
payment on  that debt.   She stated  that capital within  the cap                                                               
refers  to the  capital budget  items appropriated  on an  annual                                                               
basis.                                                                                                                          
                                                                                                                                
CO-CHAIR   FIELDS   commented    that   states   with   arbitrary                                                               
appropriation   limits  have   circumvented  the   limit  through                                                               
bonding;  under   certain  fiscal  environments,  such   as  when                                                               
interest  rates are  low, bonding  may be  beneficial, but  under                                                               
other   circumstances,   bonding  may   add   to   the  cost   of                                                               
infrastructure, which is one of  the absurd outcomes of arbitrary                                                               
appropriation caps.                                                                                                             
                                                                                                                                
MS.  MILLS   responded  that   would  be   a  policy   call;  the                                                               
administration  determined  that a  vote  of  the people  for  GO                                                               
bonding  is  the  correct way  to  address  large  infrastructure                                                               
projects.    She  stated  that  the  Senate  [Judiciary  Standing                                                               
Committee] amended the companion  resolution, [SJR 6], to include                                                               
an exception for 10 percent up to the cap.                                                                                      
                                                                                                                                
4:14:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked  Ms. Mills to explain  the types of                                                               
designated general funds (DGF) that would be subject to the cap.                                                                
                                                                                                                                
MS. MILLS said that DGF  generally consists of program receipts -                                                               
such as  fees and licenses  - and most  all would fall  under the                                                               
cap.   She said that they  are not distinguished by  the proposed                                                               
appropriation limit;  they are not  distinguished by  the current                                                               
constitutional  appropriation  limit;  they  are  all  considered                                                               
appropriations.   She said that  DGF not  subject to the  cap are                                                               
payments  of   revenue  bonds  through  corporate   revenues  and                                                               
university tuition  receipts.  She  reiterated that most  DGF are                                                               
designated for a specific purpose  and must be appropriated every                                                               
year; they would be included under the cap.                                                                                     
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS  asked   for   the  motivation   behind                                                               
including DGF under the cap.                                                                                                    
                                                                                                                                
MR.  KING  responded that  the  motivation  behind including  DGF                                                               
under  the cap  is to  ensure the  effectiveness of  the cap  and                                                               
prevent  the legislature  from circumventing  the  cap simply  by                                                               
designating funds.   He gave an  example:  vehicle rental  tax is                                                               
collected, put into a special  account, identified as designated,                                                               
and  can only  be used  for parks  or tourism.   He  asked, "What                                                               
would stop the legislature from  doing that same thing with other                                                               
types of taxes and fees?"                                                                                                       
                                                                                                                                
MS.  MILLS  stated  that  DGF  is  only  mentioned  once  in  the                                                               
constitution;  it was  added in  reference to  the constitutional                                                               
budget  reserve  fund  (CBRF).    She  maintained  that  DGF  and                                                               
unrestricted  general  funds (UGF)  are  not  terms used  in  the                                                               
constitution,  and it  is  a struggle  to  discuss revenue  using                                                               
constitutional and not accounting terms.                                                                                        
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  whether   all  GO  bonds  required                                                               
approval by the people.                                                                                                         
                                                                                                                                
MS.  MILLS   answered,  yes.     She  said   it  is   a  separate                                                               
constitutional provision in Article IX,  Section 8, of the Alaska                                                               
State Constitution, which read as follows:                                                                                      
                                                                                                                                
     No state debt shall  be contracted unless authorized by                                                                    
     law for  capital improvements  or unless  authorized by                                                                    
     law for housing  loans for veterans, and  ratified by a                                                                    
     majority of the qualified voters  of the State who vote                                                                    
     on the question.                                                                                                           
                                                                                                                                
REPRESENTATIVE LEDOUX asked Ms. Mills to address revenue bonds.                                                                 
                                                                                                                                
MS. MILLS stated that a  separate constitutional provision allows                                                               
for revenue  bonds; they  do not  require a  vote of  the people,                                                               
only the revenue to support them.                                                                                               
                                                                                                                                
REPRESENTATIVE LEDOUX asked if the  state uses revenue bonds; she                                                               
asked for an example of a revenue bond.                                                                                         
                                                                                                                                
MS. MILLS  replied, yes, and  that the constitution  defines them                                                               
as  a  public  enterprise  or   public  corporation.    She  gave                                                               
examples:    Alaska  Housing Finance  Corporation  (AHFC)  issues                                                               
mortgage  bonds; and  Alaska  Industrial  development and  Export                                                               
Authority  (AIDEA)  issues revenue  bonds.    She said  that  the                                                               
specific requirement  [for a  revenue bond] is  that the  debt is                                                               
secured  by the  revenues that  the corporation  generates; there                                                               
must be enough revenue stream to pay them off.                                                                                  
                                                                                                                                
4:18:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether  the  exception of  revenue                                                               
bonds -  bonds that would  not require the  vote of the  people -                                                               
constitutes a  loophole "that you  could drive a  truck through"?                                                               
She  asked whether  the  legislature could  initiate  a tax,  and                                                               
before tax money comes in, support it through a revenue bond.                                                                   
                                                                                                                                
MS. MILLS  replied that  the revenues must  be revenues  that the                                                               
public  corporation   is  receiving.    The   legislature  cannot                                                               
surrender  its taxation  power; therefore,  a public  corporation                                                               
could not  tax.   She stated  that there  are methods  of issuing                                                               
revenue bonds for an item  or program that will generate receipts                                                               
to pay  off the bonds.   She conjectured that these  are possible                                                               
opportunities under a stricter spending cap.                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX relayed  that  her point  is  that if  the                                                               
constitutional   amendment  is   driven   by   distrust  of   the                                                               
legislature   not  to   [refrain   from]   spending,  then   that                                                               
legislature  will do  whatever possible  to finance  expenditures                                                               
excluded by the cap.                                                                                                            
                                                                                                                                
MR. KING  noted that  in the  case of revenue  bonds issued  by a                                                               
public corporation,  the corporation  must have the  authority to                                                               
provide a service and generate  revenues in the provision of that                                                               
service.   He  stated that  the revenues  must support  the bond;                                                               
therefore, "you can't just 'force'  the public into the revenues;                                                               
you have to  sell a product that they're willing  to pay for; and                                                               
so,  it  has to  be  self-sustaining."    He  added that  if  the                                                               
government is  subsidizing that public corporation,  that subsidy                                                               
would  be  within  the  cap.     Only  to  the  extent  that  the                                                               
corporation can support itself and  the revenue bonds through its                                                               
own generation of revenue, would it be excluded.                                                                                
                                                                                                                                
4:21:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS suggested  that  under the  revenue bond  model,                                                               
Alaska  could  have  an  Alaska  Pioneer  Home  corporation  with                                                               
revenue bonds covering 50 percent  of the cost with the remainder                                                               
subsidized by the  state; therefore, only 50 percent  of the cost                                                               
would be  under the cap.   He mentioned that all  the states with                                                               
arbitrary  caps  end up  with  convoluted  ways  of taxing.    He                                                               
referred to Colorado's  response to the taxpayer  bill of rights:                                                               
In  Colorado,  local  government  is  much  more  significant  in                                                               
providing   public  services.     Local   metro  districts   were                                                               
established  to tax  outside the  cap.   There  were 1,633  metro                                                               
districts  for a  combined net  of $19  billion in  the State  of                                                               
Colorado.   Many districts  in the same  jurisdiction tax  to the                                                               
cap.  Consequently, the spending was  the same but done in a very                                                               
convoluted manner.                                                                                                              
                                                                                                                                
MR. KING pointed out that to  make such evaluations, one needs to                                                               
understand what  would have happened  without the  spending limit                                                               
in place and  compare outcomes.  He expressed his  belief that in                                                               
all the  states with effective appropriation  or spending limits,                                                               
the  spending  has  been more  restrictive  than  states  without                                                               
limits.   He stated  that even when  rules are  circumvented, the                                                               
spending is still limited.                                                                                                      
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked how  closely the administration has                                                               
analyzed Colorado's Taxpayer Bill of Rights (TABOR) Amendment.                                                                  
                                                                                                                                
4:24:13 PM                                                                                                                    
                                                                                                                                
MIKE BARNHILL, Director of Policy,  Office of Management & Budget                                                               
(OMB),  Office of  the Governor,  in  response to  Representative                                                               
LeDoux,   relayed  that   the   National   Conference  of   State                                                               
Legislatures  (NCSL)  website  lists  23  states  with  either  a                                                               
constitutional  or  statutory  appropriation limit,  dated  2010.                                                               
The  limits  are in  a  variety  of forms.    Some  states use  a                                                               
percentage of  aggregate adjusted  gross income within  the state                                                               
as the limit  - such as 8  percent or 10 percent  of the adjusted                                                               
gross income of individuals; these  are states that use an income                                                               
tax as  a primary  form of  revenue.   Some states,  like Alaska,                                                               
have a base that is adjusted  through inflation.  He relayed that                                                               
in terms  of the Colorado experience,  there is a fair  amount of                                                               
discussion  over  the  efficacy  of the  limit;  one  could  view                                                               
analyses in  a variety of  ways.   The people supporting  TABOR -                                                               
which includes a requirement of a  vote of the people to impose a                                                               
new  tax  as well  as  an  appropriation  limit  - point  to  the                                                               
economic growth  of Colorado since  1992.  He maintained  that it                                                               
is  an absolute  fact that  Colorado has  grown enormously  since                                                               
TABOR was enacted  but acknowledged that it is  not known whether                                                               
that occurred because of TABOR or despite TABOR.                                                                                
                                                                                                                                
MR. BARNHILL offered that the  problem that the administration is                                                               
attempting   to  address   [with   the  proposed   constitutional                                                               
amendment]  is that  Alaska's budgeting  is volatile  because the                                                               
revenue source is volatile.  There  are huge upticks in the price                                                               
of oil; the budget chases the  huge upticks; when oil resets at a                                                               
lower price -  such as in 2015  - it is very  disruptive to reset                                                               
budgeting.   He maintained that  the state has been  in budgeting                                                               
turmoil for  several years, and  the administration  is proposing                                                               
through HJR  5, HJR 6, and  HJR 7 to "smooth  out" the volatility                                                               
by smoothing out spending.                                                                                                      
                                                                                                                                
CO-CHAIR  FIELDS   cited  statistics   of  the  outcomes   of  an                                                               
appropriations  cap  in Colorado  from  an  article, entitled  "A                                                               
Formula   for  Decline:   Lessons   from   Colorado  for   States                                                               
Considering TABOR," by Iris J.  Lav and Erica Williams, published                                                               
by  the Center  on  Budget and  Policy  Priorities [document  not                                                               
provided].  These statistics read in part as follows:                                                                           
                                                                                                                                
     Between 1992 and 2001, Colorado declined precipitously                                                                     
            thth                                                                                                                
       from 35 to 49 in the nation in K-12 spending as a                                                                        
      percentage of personal income. As of 2006, the state                                                                      
     maintained its low ranking among the states at 48th.                                                                       
                                                                                                                                
     Colorado's average teacher salary compared to average                                                                      
                                                  th                                                                            
     pay in other occupations declined from 30 in the                                                                           
                                   th                                                                                           
     nation in 1992 to a low of 50 in 2001, and edging up                                                                       
     only slightly to 49th in the nation as of 2007.                                                                            
                                                                                                                                
     Under TABOR, higher education funding per resident                                                                         
     student dropped by 31 percent...                                                                                           
                                                                                                                                
     Tuitions have risen as a result. Between 2002 and                                                                          
     2005,  system-wide  resident  tuition increased  by  21                                                                    
     percent...                                                                                                                 
                                                                                                                                
                                            rdth                                                                                
     Under TABOR, Colorado declined from 23 to 48 in the                                                                        
     nation in  the percentage  of pregnant  women receiving                                                                    
     adequate access to prenatal care...                                                                                        
                                                                                                                                
                                thth                                                                                            
     Colorado plummeted from 24 to 50 in the nation in                                                                          
     the   share   of    children   receiving   their   full                                                                    
     vaccinations...                                                                                                            
                                                                                                                                
     At one point, from April 2001 to October 2002, funding                                                                     
     got  so low  that the  state suspended  its requirement                                                                    
     that  school  children   be  fully  vaccinated  against                                                                    
     diphtheria,  tetanus,  and pertussis  (whooping  cough)                                                                    
     because  Colorado,  unlike   other  states,  could  not                                                                    
     afford to buy the vaccine.                                                                                                 
                                                                                                                                
CO-CHAIR FIELDS  stated that these  are precisely the  absurd set                                                               
of outcomes that Alaska should seek to avoid.                                                                                   
                                                                                                                                
4:29:05 PM                                                                                                                    
                                                                                                                                
MR. BARNHILL responded that he  has heard two scenarios regarding                                                               
Colorado:  1)  the spending cap is working and  is producing very                                                               
difficult  outcomes, or  2) the  spending cap  is not  working at                                                               
all.   He  maintained that  "you can't  have it  both ways."   He                                                               
stated that it either is working, or it is not working.                                                                         
                                                                                                                                
CO-CHAIR FIELDS  offered that  what has  happened in  Colorado is                                                               
that an  inability to provide  adequate revenue has  produced the                                                               
outcomes  he  cited.    At  the  local  level,  governments  have                                                               
scrambled to adjust to very  real needs, and scrambling to adjust                                                               
results  in   highly  inefficient  and  absurd   structures  like                                                               
multiple metro districts  taxing within a region.   He maintained                                                               
that  both scenarios  can occur  at  the same  time:   inadequate                                                               
support for core infrastructure  investment along with government                                                               
scrambling to do the best it can under impossible circumstances.                                                                
                                                                                                                                
MR. BARNHILL stated that the  administration is looking for a way                                                               
- in the  context of Alaska - to create  control over spending so                                                               
that the volatility in the  budget-making process is reduced.  He                                                               
offered that it  is inarguable that Alaska's budget,  as shown in                                                               
the  charts, has  chased  the price  of oil.    He asserted  that                                                               
fundamentally Alaska needs to "get away from that."                                                                             
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   asked  to   know  the  state   with  a                                                               
constitutional spending limit that is  most comparable to the one                                                               
proposed under HJR 7.                                                                                                           
                                                                                                                                
MR. BARNHILL expressed  his belief that there  are several states                                                               
with bases adjusted by inflation and population.                                                                                
                                                                                                                                
CO-CHAIR KREISS-TOMKINS reiterated that he  is asking for a state                                                               
with a  spending cap  closest to  what is  proposed under  HJR 7,                                                               
assuming the  administration performed comparative  research that                                                               
went beyond looking  just at a basic spending  cap but considered                                                               
all relevant details.                                                                                                           
                                                                                                                                
MR. BARNHILL  stated that he does  not have the answer  but would                                                               
provide  the table  [from  the  website] to  the  committee.   He                                                               
maintained  that  the  intent   of  the  proposed  constitutional                                                               
amendment  is to  update what  Alaska already  has, which  is the                                                               
$2.5 billion base, adjusted by inflation and population.                                                                        
                                                                                                                                
4:32:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE asked  what Alaska's  expenditure would  be                                                               
for FY 20 under the cap proposed by HJR 7.                                                                                      
                                                                                                                                
MR. KING responded that the  spending allowed under the cap would                                                               
about  $5.3-$5.4  billion;  it  includes  all  the  UGF  and  the                                                               
restricted  DGF.   He stated  that the  proposal under  HJR 7  is                                                               
below that limit - a function  of the past three years generating                                                               
a higher average  but with a reduced budget.   He maintained that                                                               
the passage of  the spending limit does not force  budget cuts to                                                               
occur;  that remains  the  prerogative of  the  legislature.   He                                                               
added that  in this scenario,  the limitation would likely  be in                                                               
excess of what the legislature would spend.                                                                                     
                                                                                                                                
REPRESENTATIVE VANCE offered  that there would be  a gradual rise                                                               
in spending - up to the 2  percent - rather than spiking with the                                                               
revenue.                                                                                                                        
                                                                                                                                
MR. KING  responded, "That would  be the  upper limit."   He said                                                               
that  the limit  would not  require  the legislature  to cut  the                                                               
budget, but if  it elected to spend less, the  limit would adjust                                                               
to the lower level of spending.   He added that the limit and the                                                               
spending  would not  be  detached from  each  other as  currently                                                               
occurs.                                                                                                                         
                                                                                                                                
REPRESENTATIVE VANCE  referred to slide  8 and asked why  the PFD                                                               
is not included in the cap.                                                                                                     
                                                                                                                                
MR.  KING  replied  that  the  items listed  under  the  cap  are                                                               
expenditures for  which the governor  wants to limit growth.   He                                                               
wants  to  limit  the  growth of  government;  therefore,  it  is                                                               
included under the cap.  He does  not want to limit the growth of                                                               
the PFD,  because it is  the people's  money, should be  given to                                                               
them, and not be subject to the cap.                                                                                            
                                                                                                                                
MS.  MILLS   clarified  that  the  administration   followed  the                                                               
existing  constitution;  the exceptions  are  based  on what  the                                                               
voters approved in  1982 and reapproved in 1986.   She maintained                                                               
that  the  proposed  constitutional amendment  would  adjust  the                                                               
baseline and change the limit on capital spending.                                                                              
                                                                                                                                
4:35:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX pointed out that  Alaska is included on the                                                               
NCSL list  of states  with spending caps,  [list not  included in                                                               
the committee  packet].  She  asked that the states  with tighter                                                               
spending caps be identified -  as opposed to ones with "generous"                                                               
caps such as Alaska's.                                                                                                          
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  added that identifying the  state with a                                                               
spending cap closest  to what is proposed for Alaska  under HJR 7                                                               
would  present  an  opportunity  for him  to  discuss  with  that                                                               
state's policymakers the outcomes  and challenges of the spending                                                               
cap in that state.                                                                                                              
                                                                                                                                
REPRESENTATIVE LEDOUX  suggested that when  oil prices are  low -                                                               
as  they are  now  - the  state  must forcibly  "go  on a  diet."                                                               
Consequently,  when  prices are  high,  the  pent-up demand  from                                                               
municipalities, non-profit  organizations, and agencies  who have                                                               
been forced to  "go on a diet" results in  excess spending.  When                                                               
the oil  prices go down again,  the state is faced  with the pain                                                               
of budget  cuts again.  She  asked if that is  the motivation for                                                               
the proposed constitutional change.                                                                                             
                                                                                                                                
MR. KING responded,  yes.  He said that the  spending limit would                                                               
provide  stability; the  volatility of  oil revenues  creates the                                                               
dilemma  of  government  spending   following  the  revenues,  as                                                               
Representative LeDoux  described.  He maintained  that a spending                                                               
limit would  eliminate the upswing  in spending;  therefore, when                                                               
oil revenues fall, the state does  not have to make the difficult                                                               
cuts because it  did not increase spending originally.   He added                                                               
that stability  also comes  from the state  being able  to afford                                                               
its level of spending:  when  times are good, the money goes into                                                               
the savings  account; when times are  bad, the state can  draw on                                                               
the  savings account.   He  said  that the  proposed limit  would                                                               
smooth  out the  volubility to  avoid  having to  make the  tough                                                               
decisions.                                                                                                                      
                                                                                                                                
4:38:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS pointed  out that  a degree  of volatility  with                                                               
respect to  capital spending is  not a bad  thing:  1)  the state                                                               
may want  to make counter-cyclical capital  investments to reduce                                                               
the negative  impacts of  unemployment; most  capital investments                                                               
tend  to last  a  long  time, such  as  the  Loussac Library  [in                                                               
Anchorage] built in  the 80s.  He offered that  building a needed                                                               
structure  that  lasts 40  years  is  not  an indicator  of  poor                                                               
discipline, but of good economic policy.                                                                                        
                                                                                                                                
CO-CHAIR FIELDS  stated that his  office has received  calls from                                                               
the  [Charles and  David] Koch  brothers' organization  Americans                                                               
for  Prosperity  (AFP)   and  asked  whether  that   was  at  the                                                               
suggestion or direction  of the governor's office  or whether AFP                                                               
made the calls independently.                                                                                                   
                                                                                                                                
MR. KING responded that he has no information on that issue.                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS relayed that  the people making the calls                                                               
were very confused and would  benefit from additional information                                                               
on HJR 7.                                                                                                                       
                                                                                                                                
MR. KING  stated that there  is nothing under the  spending limit                                                               
that   would   prevent  counter-cyclical   capital   investments;                                                               
however, they would need to occur  through bonding.  He said that                                                               
the  bonding process  would smooth  out  the construction  cycle.                                                               
There are fixed  payments on the bonds, and the  bonds are issued                                                               
according to need.                                                                                                              
                                                                                                                                
CO-CHAIR  FIELDS  relayed  that   he  would  support  GO  bonding                                                               
currently due  to the [low]  interest rates but pointed  out that                                                               
GO bonding  has a much  longer timeframe,  because it must  go to                                                               
the  voter  for  approval.   Some  environments  are  financially                                                               
prudent  for  GO  bonding  given low  interest  rates;  in  other                                                               
environments, borrowing  money would not  be prudent due  to high                                                               
interest rates.  He maintained that flexibility is important.                                                                   
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  mentioned  that  there  is  a  robocall                                                               
service  generating  automatic  voice  mails  to  the  email  and                                                               
message boxes  of the members of  the committee.  The  emails are                                                               
being sent  from an "alaska.gov" domain.   He stated that  he has                                                               
never  experienced  this before  from  the  executive branch  and                                                               
wants more information at the  next hearing on how the governor's                                                               
office is engaging on the  proposed constitutional amendments and                                                               
how this activity is being funded.                                                                                              
                                                                                                                                
REPRESENTATIVE  LEDOUX maintained  that she  has no  problem with                                                               
the legislature or governor asking  people to send in support for                                                               
an issue.   She said that she does have  problems with voicemails                                                               
from people  claiming to be  her constituents  who are not.   She                                                               
stated  that it  would  be  more effective  for  those people  to                                                               
contact their own legislators.                                                                                                  
                                                                                                                                
CO-CHAIR  FIELDS  asserted  that  he  has  no  objection  to  the                                                               
governor using  a "bully  pulpit" but does  have an  objection to                                                               
the  function  [of  contacting  legislators  for  support]  being                                                               
controlled by an outside dark money-funded organization.                                                                        
                                                                                                                                
4:42:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE  asked, "Could we please  remember that they                                                               
are representing  the Department  of Law  (DOL) and  probably not                                                               
communications of the governor?"                                                                                                
                                                                                                                                
CO-CHAIR KREISS-TOMKINS expressed that  he recognized that no one                                                               
present has the  answer but would like more  understanding on the                                                               
question.                                                                                                                       
                                                                                                                                
MS.  MILLS referred  to slide  9, entitled  "Appropriation Limit:                                                               
Section 1(b) and (c)," to explain  the two new sections under the                                                               
proposed  constitutional   amendment.    She  stated   that  when                                                               
volatility in  government spending is  reduced and a  more stable                                                               
sustainable level of government  spending is achieved, the excess                                                               
revenues  would  go into  savings.    She reviewed  the  "savings                                                               
waterfall" described on slide 7, which 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                                                                                                        
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked for  clarification of  Priority #1                                                               
of the savings waterfall and asked for an example.                                                                              
                                                                                                                                
MS.  MILLS gave  an  example:   The  permanent  fund produced  an                                                               
income of $4  billion in the last  year.  Out of  that amount, $2                                                               
billion of  the excess  revenues -  or 50  percent of  the income                                                               
earned  by the  permanent  fund  - would  be  transferred to  the                                                               
principle of  the permanent fund.   The intent is to  replace the                                                               
income that was expended, because  the calculation for the PFD is                                                               
50 percent of statutory net income.                                                                                             
                                                                                                                                
4:46:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  for confirmation  that under  the                                                               
proposed  constitutional  spending  limit,  if  high  oil  prices                                                               
resulted  in surplus  UGF, the  extra revenue  would go  into the                                                               
principle of the permanent fund up to $2 billion.                                                                               
                                                                                                                                
MS. MILLS  replied, "That's accurate."   She added that  if there                                                               
was even  greater excess, the  state would execute Priority  #2 -                                                               
transfer money to  the savings reserve fund - then  Priority #3 -                                                               
transfer any amount left over to the permanent fund.                                                                            
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  relayed  that most  years  the  [stock]                                                               
market is  favorable; under the proposed  constitutional spending                                                               
limit,  almost  all  surplus  revenue  would  go  back  into  the                                                               
principle  of  the  permanent  fund,  resulting  in  ever  bigger                                                               
dividends.                                                                                                                      
                                                                                                                                
MR. KING concurred.                                                                                                             
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked what the  size of dividend would be                                                               
under projected market conditions 20 years from now.                                                                            
                                                                                                                                
MR. KING  stated that the  question is challenging  because there                                                               
are  so  many  variables.    He  said  that  under  the  baseline                                                               
assumption,  the  principle  would   grow  only  with  inflation,                                                               
because there  is not a projected  surplus in any of  the next 20                                                               
years.    He added  that  only  with  volatility would  there  be                                                               
occasional additional  revenues subject to the  waterfall; and in                                                               
most  of those  instances there  would be  insufficient funds  to                                                               
advance beyond Priority #1.                                                                                                     
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  restated that  under the  model proposed                                                               
by HJR  7, water never  "spills" through the  waterfall described                                                               
on slide 9.                                                                                                                     
                                                                                                                                
MR.  KING agreed  that it  would  be very  rare.   Only when  oil                                                               
prices are high  and investment returns are low would  there be a                                                               
deposit in the CBRF.                                                                                                            
                                                                                                                                
4:49:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE  asked  why  putting money  back  into  the                                                               
corpus is  prioritized before  putting money  into savings.   She                                                               
mentioned that  often surplus years  are followed by  lean years.                                                               
She  suggested  that  if  savings   are  replenished  only  under                                                               
Priority  #2, the  state  would not  have  adequate savings  from                                                               
which to draw during multiple lean years.                                                                                       
                                                                                                                                
MR.  KING responded  that  it  was a  policy  decision to  return                                                               
excess revenues  to the permanent  fund, since the PFDs  would be                                                               
paid out  of the permanent fund.   He said that  his calculations                                                               
reveal  that  very often  the  CBRF  is insufficient  to  weather                                                               
volatility and suggested that  the administration would entertain                                                               
an amendment on that point.                                                                                                     
                                                                                                                                
REPRESENTATIVE  VANCE  asked  for  confirmation  that  under  the                                                               
proposed constitutional  amendment, any  excess revenue  would be                                                               
subject to the savings waterfall;  it would be the only mechanism                                                               
for putting money into savings.                                                                                                 
                                                                                                                                
MR. KING answered  that the prerogative of  the legislature would                                                               
still prevail; if  it chose to put money into  savings, it could,                                                               
and transfers to savings accounts are  excluded from the cap.  To                                                               
the  extent that  there are  additional  funds in  excess of  the                                                               
limit  and the  legislature did  not voluntarily  put money  into                                                               
savings,  the  excess  funds  would be  subject  to  the  savings                                                               
waterfall.                                                                                                                      
                                                                                                                                
REPRESENTATIVE VANCE asked for  confirmation of her understanding                                                               
as follows:   the legislature spends to the cap;  there is excess                                                               
money; the legislature could put  money into the savings account;                                                               
any additional money would by subject to the savings waterfall.                                                                 
                                                                                                                                
MR. KING concurred.                                                                                                             
                                                                                                                                
MS. MILLS referred to page 2,  line 13-14, of HJR 7, which states                                                               
in  part "of  money  to  a State  savings  account  or fund  that                                                               
requires a subsequent appropriation."                                                                                           
                                                                                                                                
REPRESENTATIVE   LEDOUX   asked   for   confirmation   that   the                                                               
legislature could put any amount  into the savings account before                                                               
putting it into the corpus.                                                                                                     
                                                                                                                                
MS. MILLS answered, "Correct."  She  added that doing so would be                                                               
one of  the exceptions and  could be done before  determining the                                                               
amount of excess revenues.                                                                                                      
                                                                                                                                
4:52:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS relayed the top  solutions identified by business                                                               
leaders for balancing  the state budget as  ascertained through a                                                               
recent  poll  by  the  Southeast  Conference  ["Southeast  Alaska                                                               
Business  Climate  Survey  Results  2019," not  included  in  the                                                               
committee  packet]:     1)reduce  oil  tax   credits;  2)  reduce                                                               
individual PFD payments; 3) increase  the POMV from the permanent                                                               
fund used  to pay for  state services; 4) institute  a state-wide                                                               
income tax; and 5) increase corporate taxes.                                                                                    
                                                                                                                                
CO-CHAIR FIELDS  referred to a  memo from the  Anchorage Economic                                                               
Development Corporation  (ADEC) to Governor Michael  J. Dunleavy,                                                               
Speaker of  the House Bryce  Edgmon, and President of  the Senate                                                               
Cathy  Giessel  (dated  4/3/19, not  included  in  the  committee                                                               
packet), which read in part as follows:                                                                                         
                                                                                                                                
     We  strongly   support  a  balanced   approach  between                                                                    
     targeted  necessary cuts,  new  board-based sources  of                                                                    
     revenue,  and  the  Permanent Fund.    The  AEDC  Board                                                                    
     believes this is the only  way that the state and local                                                                    
     economy will achieve the  fiscal stability required for                                                                    
     promoting  new  investment  and expansion  of  existing                                                                    
     business and ask for your consideration.                                                                                   
                                                                                                                                
CO-CHAIR  FIELDS noted  that  HJR 5,  HJR  6, and  HJR  7 do  not                                                               
represent  a  balanced  approach,  do not  align  with  what  the                                                               
business groups have requested, and  are not consistent with what                                                               
the legislature has heard from  Alaskans who have participated in                                                               
the process of reaching out to the House finance committees.                                                                    
                                                                                                                                
MS. MILLS clarified  that HJR 7 does not  prevent the legislature                                                               
from  taking a  POMV  approach; it  supports the  [legislature's]                                                               
policy  goal of  growing  the  permanent fund  to  fund PFDs  and                                                               
government; and it does not address taxes.                                                                                      
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  for  clarification regarding  the                                                               
use of the permanent fund to pay for government expenditures.                                                                   
                                                                                                                                
MS.  MILLS responded  that the  assumption  under HJR  7 is  that                                                               
there would  be a  statutory POMV draw  from the  permanent fund,                                                               
and  any draw  from the  permanent fund  would be  transferred to                                                               
general  funds  (GF)  and  subject  to the  spending  cap.    She                                                               
maintained that  HJR 7  would not restrict  money spent  from the                                                               
CBRF.                                                                                                                           
                                                                                                                                
4:55:03 PM                                                                                                                    
                                                                                                                                
MS. MILLS  referred to slide  10, entitled  "Appropriation Limit:                                                               
Sections  2, 3,  and 5,"  and relayed  the process  by which  the                                                               
proposed resolution would  change the CBRF.  It  would change the                                                               
name to "savings reserve fund";  the sources of payments into the                                                               
fund  would be  tax and  royalty settlements  and the  portion of                                                               
excess  revenues based  on priorities  in  the new  appropriation                                                               
limit; the "sweep"  - return of remaining GF money  every year to                                                               
CBRF pursuant to  Article IX, Section 17(d), of  the Alaska State                                                               
Constitution  - would  be  repealed; and  the  "reverse sweep"  -                                                               
deposit  of that  money right  back into  GF by  a three-quarters                                                               
vote -  would be  unnecessary.   She explained  that HJR  7 would                                                               
repeal the  sweep, because  there would  be a  new way  of saving                                                               
through the  savings waterfall,  and it  would repeal  the three-                                                               
quarters vote  allowance for any  public purpose.   She continued                                                               
by saying that alternately, HJR  7 would allow the legislature to                                                               
access the  savings reserve fund  by majority vote to  the extent                                                               
necessary  to  fill  the  gap  between revenues  in  GF  and  the                                                               
appropriation limit;  the goal would  be to have enough  money to                                                               
pay  for one  year's budget  and avoid  the massive  cuts of  the                                                               
previous few years.                                                                                                             
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  referred to  slide 5  and asked  for the                                                               
distinction between "base operations" and "operations growth."                                                                  
                                                                                                                                
MR. KING  relayed that  base operations  are the  operations that                                                               
were  in  effect  in  FY  05 and  growing  with  inflation.    He                                                               
explained that in  the chart, the black bars represent  the FY 05                                                               
operations spending  plus inflation  over time [FY  05 -  FY 19],                                                               
and the red bars represent the  spending that did occur in excess                                                               
of the inflation-adjusted amount.                                                                                               
                                                                                                                                
CO-CHAIR FIELDS  asked for  the percentage  of the  spending that                                                               
was due to the simple growth in the cost of healthcare.                                                                         
                                                                                                                                
MR. KING responded that a  significant amount of the spending was                                                               
attributable  to  healthcare,  although  he  does  not  know  the                                                               
percentage.                                                                                                                     
                                                                                                                                
5:00:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  referred to  slide 5 and  asked to  know the                                                               
trend  of  the   average  per  capita  income   over  the  period                                                               
represented in the chart.                                                                                                       
                                                                                                                                
MR. KING acknowledged that both  salary and benefits increased by                                                               
more  the rate  of  inflation over  the period.    He offered  to                                                               
provide a chart demonstrating the  distinction between the growth                                                               
of income versus the growth  in the number of employees, relative                                                               
to population.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  VANCE  asked to  know  what  could happen  if  no                                                               
spending cap were enacted.                                                                                                      
                                                                                                                                
MR. KING replied that the  greatest fear is that government would                                                               
continue to grow faster than  revenues, and without limitation on                                                               
the growth  of government, the  savings reserve fund and  the PFD                                                               
would disappear.                                                                                                                
                                                                                                                                
CO-CHAIR KREISS-TOMKINS stated that HJR 7 would be held over.                                                                   
                                                                                                                                
5:03:34 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The House  State Affairs Standing Committee  meeting was recessed                                                               
at 5:03 p.m. to a call of the chair.                                                                                            
                                                                                                                                
[The meeting never reconvened.]                                                                                                 

Document Name Date/Time Subjects
Property Disposal Presentation to House State Affairs Comm 5.2.2019.pdf HSTA 5/2/2019 3:00:00 PM
HJR005 Amendment A.2 4.30.19.pdf HSTA 5/2/2019 3:00:00 PM
HJR 5
HJR005 Amendment A.2 Legal Opinion 5.1.19.pdf HSTA 5/2/2019 3:00:00 PM
HJR 5
HJR007 Amendment A.1 5.1.19.pdf HSTA 5/2/2019 3:00:00 PM
HJR 7
HJR007 Amendment A.1 Legal Opinion 5.1.19.pdf HSTA 5/2/2019 3:00:00 PM
HJR 7
HJR007 Supporting Document - DOL Memo on SJR 6 re Amendment vs. Revision 5.1.19.pdf HSTA 5/2/2019 3:00:00 PM
HJR 7
SJR 6