Legislature(2003 - 2004)
05/08/2003 07:08 AM House W&M
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
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HB 298-DISTRIBUTIONS OF APPROPS FROM PERM FUND Number 0132 CO-CHAIR WHITAKER announced that the first order of business would be HOUSE BILL NO. 298, "An Act relating to the distribution of appropriations from the Alaska permanent fund under art. IX, sec. 15(b), Constitution of the State of Alaska, and making conforming amendments; and providing for an effective date." CO-CHAIR HAWKER moved to adopt committee substitute (CS) for HB 298, Version 23-LS1075\D, as the working document. There being no objection, Version D was before the committee. Number 0254 ROBERT BARTHOLOMEW, Chief Operating Officer, Alaska Permanent Fund Corporation, Department of Revenue, testified on HB 298. Mr. Bartholomew told the committee in reviewing the original version of HB 298 there were several changes that affected statutes that cover the Alaska Permanent Fund Corporation and the distribution of funds out of the permanent fund. The changes in the CS begin in Section 3, page 3. He explained that there were two concerns that need to be addressed. Number 0353 CO-CHAIR WHITAKER interrupted Mr. Bartholomew and asked him to give the committee a brief explanation of the purpose of HB 298 before delving into the changes incorporated in the CS. Number 0404 MR. BARTHOLOMEW explained that the committee has already passed out HJR 26, which is a constitutional amendment that changes how the [Alaska Permanent Fund Corporation] determines how much [money] should be available from the permanent fund and how to accomplish inflation-proofing [the fund]. Mr. Bartholomew pointed out that some of the provisions in the constitutional amendment affect the existing statutes that cover prior methods that were used for the permanent fund. The legislation amends the statutes to ensure that [the statutes] will work in accordance with the payout of market value [POMV] concept. The statutes have been reviewed to see what needed to be updated, he said. He told the members that the sections he will speak to [in the CS] are those that specifically address how money is appropriated out of the permanent fund. He said he is not familiar with [all] the changes that were made in Sections 1 and 2. REPRESENTATIVE WEYHRAUCH asked if there is a sectional analysis on this bill. CO-CHAIR WHITAKER replied that there is not. Number 0558 MR. BARTHOLOMEW explained that in Section 1 there is a language change in which the reference to the "distribution of Alaska permanent fund income" to [the permanent fund dividend]. MR. BARTHOLOMEW went on to say that Section 2 has the same change where the word "income" is removed and the word "appropriations" is added. These changes to both Sections 1 and 2 make the statutes work with the constitutional amendment that has been proposed [in HJR 26]. Mr. Bartholomew pointed out to the committee that the effective date of HB 298 is tied to the successful passage of the constitutional amendment by the public. CO-CHAIR WHITAKER summarized that Sections 1 and 2 are really housekeeping changes. Number 0716 LARRY PERSILY, Deputy Commissioner, Office of the Commissioner, Department of Revenue, testified on HB 298. He told the committee that Section 1 really only deals with language related to jury duty lists, and assures that it conforms with the new definition of paying the permanent fund dividend based on the new law. Section 2 deals with the new definition of permanent fund appropriations as it applies to the authority of the Legislative Budget and Audit Committee. He commented that both Sections 1 and 2 are merely technical measures. CO-CHAIR WHITAKER noted for the record that Representative Gruenberg had joined the committee. Number 0801 REPRESENTATIVE GRUENBERG pointed out that he does not believe the changes to Sections 1 and 2 need to be conditional on the passage of the constitutional amendment since they are only housekeeping changes. CO-CHAIR HAWKER asked whether these are housekeeping matters as a result of the passage of HJR 26, or would these changes be necessary anyway. Number 0844 REPRESENTATIVE GRUENBERG replied that he believes these changes are still appropriate [whether HJR 26 passes or not]. Furthermore, the language is more understandable to the average Alaskan and the jury clerk. Number 0906 MR. BARTHOLOMEW explained that Section 3 is a new section added to describe how appropriations are made from the permanent fund. He pointed out to the committee that later in the bill the existing provisions are repealed. Section 3 will be the language that the legislature would look at in describing appropriations from the fund. Mr. Bartholomew told the members that as written in the bill, no more than 60 percent of the total amount available under the 5 percent spending limit would go to the general fund and not more than 40 percent of the total amount available for appropriation would go to the dividend fund. Number 1000 CO-CHAIR WHITAKER commented that this is the meat of bill. MR. BARTHOLOMEW pointed out that the difference between the original bill and the CS is the [clarifying language] that this legislation is about an individual specific fiscal year and that it is not necessary to spend the entire amount, but that not more than 60 percent [for general fund appropriation] and [not more than 40 percent for dividends] will be spent. He summarized that the appropriations could be anything from zero up to those amounts. MR. BARTHOLOMEW told the members that Section 4 is a new section being added at the request of the permanent fund's [legal] counsel. This language clarifies what method the permanent fund is going to use in determining that year-end market value. He added that there has been discussion about how it is determined and this language would clarify that the permanent fund will be computed by market value in accordance with generally accepted accounting principles (GAAP) after the costs to manage the fund have been taken out. He reiterated his comments by saying that the year-end market value is determined after the cost of managing the fund is taken out and before any of the distributions covered in Section 3 occur. Clarifying all of this is the purpose of Section 4, he added. Number 1118 CO-CHAIR HAWKER asked if Section 4 would result in using a mark to market valuation. Number 1135 MR. BARTHOLOMEW responded that is correct. He explained that the current requirement of using generally accepted accounting principles means that at the end of each month, when financial statements are done, all investments of the permanent fund are recorded at their market value. So the mark to market [value] includes all those investments as the market goes up and down. These changes are tracked, reported, and recorded at their market value on June 30. Number 1213 REPRESENTATIVE SEATON asked if it would be better to state that all expenses that are incurred by the [permanent] fund are deducted from the fund before the market value is determined. He said he would not want to see this legislation challenged or in a position in which it is necessary to [continually] explain it. MR. BARTHOLOMEW agreed with Representative Seaton that is a good point. He referred to Section 5 which outlines how this process works and pointed out that the cost to manage the fund and the operating budget for the Alaska Permanent Fund Corporation comes out of revenue that is generated [by investments]. In other words, it comes off the top. He explained that is what is being maintained in Section 5 of HB 298. Mr. Bartholomew told the members that when this law was written many years ago it was done so that if there is no net income, and for example, like last year when the fund incurred a net loss, there would still be funds to pay the expenses of managing the fund. The costs [of running the fund] are coming out of revenue, he said. MR. BARTHOLOMEW went on to say that Section 4 requires that at the end of a year a determination is made as to the net value in accordance with GAAP, which includes several key concepts such as marking all investments to market and deducting the cost to manage and run the [permanent] fund. That is how the value is determined. Mr. Bartholomew summarized that Sections 4 and 5 read together specifies that the intent is for the cost of managing and investing the fund to come out of revenues, and not out of the 5 percent that is based on value. He agreed with Co- Chair Whitaker that these sections of the bill maintain the status quo. Number 1525 MR. PERSILY clarified that the money that Mr. Bartholomew is talking about to manage the fund is subject to appropriation as approved by the legislature every year. It is not a matter of the Alaska Permanent Fund Corporation just taking the funds as it wants; it is part of the budget appropriation process. Number 1546 REPRESENTATIVE GRUENBERG told the committee that he has seen private corporation change the bottom line due to changes in accounting principles. When this happens it can really change the earnings for that particular year. He said he knows that companies always notify stockholders when that happens, and since he is not an accountant he accepts that is the way corporations do business. Representative Gruenberg recalled Mr. Bartholomew's testimony in other meetings where he referred to the way managers of the fund can manipulate earnings which would have a considerable impact on the earnings of the fund and the dividend for that year. He noted that this is the first time he has seen the use of the term GAAP in any state statute, and asked if there is any statute that generally requires the use of the term GAAP. Number 1731 MR. BARTHOLOMEW responded that for the last 20 years the Alaska Permanent Fund Corporation has been required by statute to follow GAAP with one exception. That exception was to ignore unrealized gains and losses which is called the mark to market, he said. He explained that the permanent fund has not been required to follow GAAP for purposes of determining how much money can be taken out of the permanent fund and how much to pay for dividends, and that is the exception. Mr. Bartholomew said theoretically how much revenue is recorded could be changed by deciding to buy or not sell certain investments. There is also a financial accounting statement in accordance with GAAP with no exceptions. He reiterated that the permanent fund does two separate sets of accounting records, one for GAAP and one that is required by statute with the one exception to GAAP, and then the dividend is calculated. He told the members that this bill actually simplifies and takes away the ability to theoretically delay or accelerate the taking of gains to affect the formulas. Mr. Bartholomew emphasized that this has not happened except for investment or policy reasons that were discussed. Number 1909 REPRESENTATIVE GRUENBERG turned to AS 37.13.140, which is being repealed in Section 11, page 6, line 15. That statute was the partial implementation of the GAAP for the purposes of determining net income only. Representative Gruenberg said he applauds [the implementation of GAAP]. He asked Mr. Persily if any state statute is in place that requires the use of GAAP. MR. PERSILY replied that he is not familiar with any, but he said he does know that the performance measures which are in statute for the Department of Revenue makes reference to that [in missions and measures]. Number 2023 CO-CHAIR HAWKER informed the committee that GAAP is a term of art by accounting bodies of the United States. There are international accounting principles in which government entities are subject to Governmental Accounting Standards Board (GASB). He explained that enterprise operations operating as public corporations can adopt either business principles or government principles. In the Alaska permanent fund's case it is viewed as an operation that is much better served by GAAP rather than by GASB. He noted that both of these are interactive standards which support the conclusion that the permanent fund is more properly under the auspices of business accounting principles. He pointed out that in order for state financial statements to be certified it must conform to GASB principles. He summarized his comments by saying that in most cases GASB adopts GAAP, and the Financial Accounting Standards Board (FASB) is the basis for GAAP. Number 2304 RON LORENSEN, Attorney, Simpson, Tillinghast, Sorensen, and Longenbaugh, testified as outside counsel to the Alaska Permanent Fund Corporation on HB 298. He clarified that the Alaska Permanent Fund Corporation operates under GASB principles, not under business principles. The reference to GAAP is the generic reference to those principles which are applicable to the fund and those principles are actually GASB, rather than FASB. In response to Representative Gruenberg's question that the committee should not even be discussing GAAP, he replied that GAAP actually refers to both GASB and FASB; it depends on which kind of an entity a corporation is. He reiterated that the lower case [GAAP] generally accepted accounting principles is a generic reference to those accepted accounting principles which are applicable, and emphasized that those which are applicable to the Alaska Permanent Fund Corporation are the GASB principles. Using GAAP in a generic sense is a correct reference, he said. Number 2453 CO-CHAIR WHITAKER point out that the question is whether unrealized losses and gains are accounted for on June 30. MR. BARTHOLOMEW replied that is correct. He said that the main change that is being made is that the current language, which directs the Alaska Permanent Fund Corporation to exclude those unrealized gains and losses when a determination of income available for appropriation, will go away and the fund will comply with generally accepted accounting principles that cover accounting for investments that Co-Chair Hawker referred to as mark to market. That is the industry standard and what the fund will be moving to, he said. CO-CHAIR WHITAKER asked Mr. Bartholomew to put this change in perspective, since this is not just a question of semantics and nomenclature; it is a significant policy change. Number 2554 MR. BARTHOLOMEW replied that in looking at the permanent fund as June 30 approaches, accounting records are kept according to statute, excluding unrealized gains and losses. The earnings reserve of the permanent fund is in two pieces. There is the realized earnings reserve, which currently has $1.2 billion and that is where the bond interest, stock dividend, and rental incomes from real estate [are held]. This is a cash flow account and is called the realized earnings reserve [account] based on realized income. MR. BARTHOLOMEW explained that there is a second earning reserve [account], and according to statute when the fund is determining what is available, it excludes the unrealized gains and losses. Those funds are kept in a separate account because the financial statements require that the funds be recorded. That account is for volatility, it has varied from a positive $4 to $5 billion of unrealized gains to over $1 billion in losses, which occurred twice this year. That account does have a lot of volatility, but it is important because it shows what is going on with the value of investments, he said. The permanent fund currently accounts for them separately and there is confusion between the statutes saying to ignore them and GAAP saying the fund is required to record them so the value of investments is known. Mr. Bartholomew explained that this bill would say it is important to recognize both; do not separately account for them. There is one fund and the value of that fund includes the cash flow received and the gain or loss in investments. When the Alaska Permanent Fund Corporation determines the value of fund on June 30 for determining what is available, it will be the true value of the fund, including unrealized gains and losses. He emphasized that is an important change. MR. BARTHOLOMEW, in response to Co-Chair Whitaker, explained that mark to market is accounting nomenclature. Number 2818 MR. LORENSEN commented that it is important to be clear that the permanent fund presently marks to market the value of the fund under GASB principles. The change is that it will no longer be a determination of income. That varies from GASB principles; by deleting [AS 37.13.140 in Section 11 on page 6, line 15 in the bill] there will no longer be a separate statutory earnings reserve account determination which calls for applying GAAP while taking out the unrealized portion. Income in the future will be determined according to GAAP OR GASB and the market value will be determined according to GASB. There will not be a change in the way market value is determined. This [language] clarifies, for the purposes of a constitutional amendment, that is the way it is to be determined. Number 2915 REPRESENTATIVE GRUENBERG noted that this is extremely important because it is the basis for the calculation of the dividend. He asked if these changes could be implemented without a constitutional amendment. MR. BARTHOLOMEW responded that changes in accounting could be done in statute, as it is currently defined. How the determination of what's available from the permanent fund for appropriation is done in statute, he noted. This legislation would amend existing statutes. Both of these are statutory issues, he said. He told the members the change is due to the constitutional amendment which would implement a spending limit based on value. TAMARA COOK, Director, Legislative Legal and Research Services, Legislative Affairs Agency, responded to Representative Gruenberg's question by saying that she is not nearly as certain that the Alaska Permanent Fund Corporation can statutorily achieve the distribution that is setout in the work draft that is being considered. She said her uncertainty is based on the existing language in the constitution. She read [portions of] Section 15 of the Alaska Constitution which says: The principle can be used only for income producing investments designated by law as eligible. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law. MS. COOK told the committee that is all that is in the existing provision of the constitution with respect to uses that can be made of the permanent fund other than investment. She said she does not see how an unrealized gain can be deposited into the general fund. Consequently, an unrealized gain cannot be the kind of income to which this constitutional provision is referring and thus an unrealized loss cannot be the type of income to which the constitution is referring. The constitution is talking about funds that can be physically deposited in the general fund, and if the legislature were silent, that is what would happen, she commented. Number 3334 REPRESENTATIVE GRUENBERG commented that it seems to him that this is not a discussion about deposits to the general fund rather it's really about the basis of the calculation of dividend. He asked if that requires a deposit to the general fund. MS. COOK replied that it does not. However, the reason the existing statute enables the state to have an earnings reserve account is because the sentence [in the constitution] goes on to say, "unless otherwise provided by law this income will be deposited in the general fund." [The legislature] has provided a law that the income will be deposited into the earnings reserve account of the permanent fund. If no law were in place, these funds would go into the general fund. Ms. Cook explained that in order for the court to agree that the word income in this context includes market value analysis, the court must agree that an unrealized gain or loss would automatically flow into the general fund. Ms. Cook noted that she is not an accountant, but neither are the justices of the supreme court. She explained that the justices tend to look at the language in the same way a common person would. Ms. Cook said that those who have witnessed fluctuations in retirement accounts well know there is no income until the income is realized. She pointed out that unrealized gains are just not there when moving money from one pot to other. Once income is moved into the general fund there is the implication that it is immediately available for expenditure. How can the legislature immediately expend unrealized income in the general fund, she asked. The present constitution, at the very least, creates a question as to whether it would be possible to go to a market value approach in the use of money from the permanent fund. Number 3602 REPRESENTATIVE GRUENBERG asked if Mr. Lorensen agrees with Ms. Cook. MR. LORENSEN responded that he does agree with Ms. Cook. He said the issue that Ms. Cook just described is the subject of an attorney general's opinion that is being written. Until the opinion is issued, he said he does not know what the real answer is. However, he told the members his own view is similar to that of Ms. Cook. He said he does not believe a market value based distribution can be implemented under the current form of the constitution. Number 3648 REPRESENTATIVE GRUENBERG commented that this is important because there may be a requirement to have a constitutional amendment and a conditional effective date. The other way of approaching this issue is with a standard or no effective date, which would mean it would be 90 days after the governor signs the bill. Representative Gruenberg offered that one way to approach this is to provide two effective dates. MR. LORENSEN remarked that he does not believe [this can be done without amending the constitution.] Number 3818 MR. BARTHOLOMEW said he believes that HB 298 was written on the premise that HJR 26 would pass and then HB 298 would be effective and if it did not pass, then it would not be effective. He explained that when changing to the market value approach, instead of an income-based approach for determining what is available from the permanent fund, the 5 percent spending limit that the board of trustees is proposing is a very essential part of the protection. When there is a high stock market, as was the case in 1998 and 1999, the permanent fund could go up by billions of dollars; under market value that amount of money over principle is available. Mr. Bartholomew added that in the past there has been $5-6 billion available for appropriation. The fund's [managers] believe that the fund cannot be invested in long-term assets, such as stocks and real estate, if there is a risk that large amounts of money could be appropriated. That is the driving force for the need for stability and predictability with regard to what's going to come out of the fund, he said. The 5 percent spending limit is very important when changing what comes out of the fund. Mr. Bartholomew summarized his comments by saying he would be very hesitant to support anything in HB 298 without understanding that this all came from the concept of being partnered with the constitutional amendment [HJR 26]. He emphasized that everything being considered needs to be tied to the successful passage of the constitutional amendment. Number 4026 CO-CHAIR WHITAKER pointed out that the manner in which the value of the fund is determined, the mark to market, is part of the discussion and is a significant change. This legislation is saying that at a certain point in time this is the value of the fund. This approach is different than the option and policy of not recognizing the swing in the market, or unrealized gains and losses. He asked if this would be considered a big policy shift. MR. BARTHOLOMEW responded that it is a change, but he hesitated to say it is a big shift because it is really a timing difference. He commented that over time, realized and unrealized [income] will equal, but those timeframes can be very long. CO-CHAIR WHITAKER asked if he is correct in assuming that by passing HJR 26 and HB 298 the legislature would preclude a [scenario in which there aren't adequate funds to pay a dividend]. Number 4351 MR. BARTHOLOMEW replied that is correct. The intent of HJR 26 and HB 298 would be to ensure an annual distribution each year. Currently there is the risk that the distribution formula could lead to a zero distribution from the permanent fund dividend, he said. CO-CHAIR WHITAKER stated that this is a significant policy change. Number 4431 REPRESENTATIVE WEYHRAUCH turned attention to an opinion prepared by Legislative Legal and Research Services that indicated that there were certain IRS implications if the permanent fund were to be structured as a guaranteed dividend and thus the fund could be subject to taxation. He asked if she would comment on this point. Number 4507 MS. COOK replied that she believes Representative Weyhrauch is referring to the concern expressed by the trustees of the Alaska Permanent Fund Corporation. The tax-exempt status of the permanent fund is determined by it being viewed as a governmental fund that is of a public nature. The test that the IRS uses tends to look at whether it is a private versus a governmental benefit. Currently, the permanent fund has been used to pay dividends to individuals in Alaska, but that is been the result of a decision that the legislature makes when it appropriates money each year. It does satisfy a public purpose. Ms. Cook went on to say the question is whether the legislature has eroded the governmental nature of that fund if a constitutional provision were setup so that a private right is created in the fund. She reiterated that she is not a tax attorney and does not know how intense the danger is regarding whether the IRS would determine that all or a portion of the income of the fund is subject to taxation. Ms. Cook said the heart of the problem is at what point does the legislature change the nature of a public fund so radically that there is a risk that the fund will lose its tax-exempt status because of the private benefit associated with the fund. TAPE 03-24, SIDE B MR. BARTHOLOMEW agreed that's the issue. Number 4527 REPRESENTATIVE WEYHRAUCH asked for a copy of Ms. Cook's opinion on this matter. He said he would like to meet with her and the administration to review the analysis of Section 3(2) to see if it "invades" the IRS concern. Number 4432 REPRESENTATIVE HEINZE asked if some visual tools could be developed to help legislators explain this [concept] to the public. CO-CHAIR WHITAKER assured Representative Heinze that information would be made available. Number 4302 MR. BARTHOLOMEW turned attention to Section 6 of the CS. The Permanent Fund Corporation handles investments for several other funds, including the Alaska Mental Health Trust Fund (AMHTF) and the Alaska Science and Technology Fund (ASTF). This section brings in sync how the permanent fund would do the accounting for the investments of the Alaska Mental Health Trust Fund. Mr. Bartholomew explained that there needs to be a discussion with the managers and board of AMHTF in order to ensure they understand the proposal made in Section 6. That discussion has not yet taken place, he said. MR. BARTHOLOMEW explained that Section 7 covers the Alaska Science and Technology Fund which has been the subject of a lot of discussion in the legislature this year. Section 7 would change the statutes such that ASTF would be accounted for in a way that is similar to the permanent fund. Section 8 addresses the Alaska International Trade and Business Fund. CO-CHAIR WHITAKER noted that these funds are of concern because the permanent fund manages these three funds. Number 4041 MR. PERSILY commented that Section 9 is a technical [change related to the change] in Sections 1 and 2. Section 9 deals with paying the dividend each year so instead of defining income of the permanent fund, it is defining money appropriated from the permanent fund. The same change is found in Section 10 where there is technical change from "income" to "amount." These changes conform the sections with the new method and language. Number 3955 CO-CHAIR WHITAKER inquired as to the reason for repealing Section 11. MR. BARTHOLOMEW responded that in Section 11 AS 37.13.140 and .145 are being repealed because they are replaced by Sections 3 and 4 in the existing bill. The third statutory noted, AS 37.13.300(c), is a technical amendment complying with the [Alaska Mental Health Trust]. He said Section 12 covers the conditional effect. Number 3847 CO-CHAIR WHITAKER said that the CS proposes that 60 percent of the amount of money available be appropriated to and for purposes of government. REPRESENTATIVE WILSON recalled that according to the graphs shown to the members, it was determined that this would be the best way to approach this issue in the long run and keep the fund as stable as possible. She told the members she does not have the graphs in front of her, and asked if someone would summarize the three options that were highlighted. Number 3705 CO-CHAIR WHITAKER provided the members with a copy of the graphs. He explained that by looking at the graphs from a purely governmental fiscal perspective the preferential option is [60 percent for governmental purposes and 40 percent for dividends]. The 50-50 [percent option] has less stability. The 40-60 [percent] option with 40 percent for governmental purposes and 60 percent for dividend distribution leads the state on a short course to continued deficient spending with no constitutional budget reserve. This is a policy and economic call, he stated. Number 3500 REPRESENTATIVE GARA inquired as to Ms. Cook's legal opinion regarding the use of a severability clause in the constitution that would be triggered if a tax consequence were to come about. For instance, if the dividend is constitutionally protected and that causes a tax implication then the severability clause could ensure the state avoids the problem that way. MS. COOK explained that severability clauses work in statute. However, this kind of clause would not be a severability provision, rather it would be an alternative constitutional provision that would take effect only if certain conditions are met. Ms. Cook said she does not see why there could not be any number of alternative provisions that are triggered, given that each one in itself would be an amendment to the constitution. Number 3300 REPRESENTATIVE GARA posed a hypothetical situation in which an amendment to the constitution on the dividend were put in place and caused a tax implication. If amending the constitution in this way meant this would be a problem for the IRS, would a provision in the constitution allowing for a three-quarters vote of the legislature, as is provided in other sections of the constitution, solve the IRS' concern. MS. COOK responded that it might. She said she does not know how the IRS would respond; they are a mysterious force. There may be enough legislative discretion because the legislature can only appropriate money for a public purpose. Ms. Cook pointed out that the Alaska Supreme Court has already acknowledged that the permanent fund dividend appears to serve a public purpose. Maybe the IRS would agree, she commented. Number 3116 REPRESENTATIVE GARA told the members that he does not understand why the public purpose versus private purpose issue raises questions [with the IRS]. He asked if that issue is discussed in her [opinion]. MS. COOK said she has not discussed that issue because she does not understand it and thus she strongly urged the legislature to obtain an independent view from a tax attorney. She noted that there have been states that have set up funds that the IRS determined created enough of a private benefit to have taxed them. She summarized her comments by saying there is the theoretical potential to be a problem. Number 2958 REPRESENTATIVE OGG commented that the [Constitutional Budget Reserve Fund] CBRF End-of-Year Balance chart reflects that the two proposals on one end or the other buys the state about 3 years. He asked if it is possible to have more flexibility in Section 3 so that the legislature could decide in any given climate which option of 60 percent to select; either 60 percent to the general fund [or 60 percent to the dividend]. He asked if that flexibility is desirable. CO-CHAIR WHITAKER commented that Representative Ogg raises a good point. He asked if the legislature has the consensus to do that and determine the dividend on a yearly basis. REPRESENTATIVE OGG reiterated his question as to the advisability of putting that kind of flexibility in the bill. REPRESENTATIVE WILSON commented that this premise would raise a big fight every year. It would also extend the time spent on this issue. Number 2654 CO-CHAIR WHITAKER agreed with Representative Wilson. This bill will allow the legislature to go to the voters and define the split, rather than saying every year the legislature will decide. There may be a "trust me" factor [connected to that flexibility]. REPRESENTATIVE OGG offered that inserting language up to 60 percent allows the legislature [to look at the fiscal climate] and decide what percent to appropriate for dividends and the general fund. CO-CHAIR WHITAKER said Representative Ogg's suggestion sounds like he would like to run government like a business. In a business environment one could look at the fiscal situation, say it's a difficult time, and since the books can't be balanced, not give a dividend. That would be purely a business decision, he commented. REPRESENTATIVE WILSON said if the public realizes what that [change] would do, she said she believes they would want more of a guarantee that [a dividend] would be there rather than have that option [come and go] from year to year. Number 2349 CO-CHAIR WHITAKER asked the members to give some thought to this subject. He said he hopes to move the bill from committee at the next meeting. [HB 298 was held over.]
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