Legislature(2021 - 2022)DAVIS 106

05/18/2021 11:30 AM House WAYS & MEANS

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03:28:46 PM Start
03:29:13 PM HB37
04:26:26 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
- Delayed to 15 Minutes Following House Finance -
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 37 INCOME TAX; PERMANENT FUND; EARNINGS RES. TELECONFERENCED
Moved CSHB 37(W&M) Out of Committee
        HB  37-INCOME TAX; PERMANENT FUND; EARNINGS RES.                                                                    
                                                                                                                                
3:29:13 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ announced that the  first order of business would                                                               
be  HOUSE BILL  NO. 37,  "An Act  relating to  deposits into  the                                                               
dividend fund; relating to income  of and appropriations from the                                                               
earnings reserve account;  relating to the taxation  of income of                                                               
individuals,  partners, shareholders  in S  corporations, trusts,                                                               
and estates; relating to a  payment against the individual income                                                               
tax from the permanent fund  dividend disbursement; repealing tax                                                               
credits applied against  the tax on individuals  under the Alaska                                                               
Net Income Tax Act; and providing for an effective date."                                                                       
                                                                                                                                
3:29:31 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:29 p.m. to 3:31 p.m.                                                                       
                                                                                                                                
3:31:48 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ took up amendments on HB 37.                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON moved to adopt Amendment 1 to HB 37,                                                                   
labeled 32-LS0275\A.1, Nauman, 5/14/21, which read:                                                                             
                                                                                                                                
     Page 3, line 17:                                                                                                           
          Delete "20"                                                                                                           
          Insert "10"                                                                                                           
                                                                                                                                
     Page 3, line 20:                                                                                                           
          Delete "80"                                                                                                           
          Insert "90"                                                                                                           
                                                                                                                                
     Page 27, line 25:                                                                                                          
          Delete "under AS 37.13.145(b)"                                                                                        
          Insert "[UNDER AS 37.13.145(b)"                                                                                       
                                                                                                                                
     Page 28, following line 13:                                                                                                
          Insert new bill sections to read:                                                                                     
        "* Sec. 12. AS 43.23.028(a) is amended to read:                                                                         
          (a)  By October 1 of each year, the commissioner                                                                      
     shall  give   public  notice  of  the   value  of  each                                                                    
     permanent  fund dividend  for that  year and  notice of                                                                    
     the information  required to be disclosed  under (3) of                                                                    
     this  subsection. In  addition,  the  stub attached  to                                                                    
     each individual dividend disbursement advice must                                                                          
               (1)  disclose the amount of each dividend                                                                        
     attributable  to   legislative  appropriations  [INCOME                                                                    
     EARNED  BY THE  PERMANENT  FUND FROM  DEPOSITS TO  THAT                                                                    
     FUND REQUIRED  UNDER ART. IX, SEC.  15, CONSTITUTION OF                                                                    
     THE STATE OF ALASKA];                                                                                                      
               (2)  [DISCLOSE THE AMOUNT OF EACH DIVIDEND                                                                       
     ATTRIBUTABLE  TO INCOME  EARNED BY  THE PERMANENT  FUND                                                                    
     FROM  APPROPRIATIONS  TO  THAT FUND  AND  FROM  AMOUNTS                                                                    
     ADDED TO THAT FUND TO OFFSET THE EFFECTS OF INFLATION;                                                                     
               (3)]    disclose  the amount  by  which  each                                                                    
     dividend  has been  reduced due  to each  appropriation                                                                    
     from the  dividend fund, including  amounts to  pay the                                                                    
     costs  of administering  the dividend  program and  the                                                                    
     hold harmless provisions of AS 43.23.240;                                                                                  
               (3)  [(4)]    include  a  statement  that  an                                                                    
     individual is not eligible for a dividend when                                                                             
               (A)     during   the  qualifying   year,  the                                                                    
     individual was convicted of a felony;                                                                                      
               (B)   during  all or  part of  the qualifying                                                                    
     year, the  individual was incarcerated  as a  result of                                                                    
     the conviction of a                                                                                                        
               (i)  felony; or                                                                                                  
               (ii)  misdemeanor if  the individual has been                                                                    
     convicted  of  a prior  felony  or  two or  more  prior                                                                    
     misdemeanors;                                                                                                              
               (4)  [(5)]    include a  statement  that  the                                                                    
     legislative  purpose  for   making  individuals  listed                                                                    
     under (3) [(4)] of this subsection ineligible is to                                                                        
               (A)    provide  funds for  services  for  and                                                                    
     payments to  crime victims and  operating costs  of the                                                                    
     Violent Crimes Compensation Board;                                                                                         
               (B)   provide funds  to pay  restitution owed                                                                    
     to crime victims;                                                                                                          
               (C)   provide funds  for grants  to nonprofit                                                                    
     organizations for  services for  crime victims  and for                                                                    
     mental  health services  and substance  abuse treatment                                                                    
     for offenders;                                                                                                             
               (D)     provide  funds  for  the   office  of                                                                    
     victims' rights;                                                                                                           
               (E)     provide  funds  to  the   Council  on                                                                    
     Domestic  Violence and  Sexual Assault  for grants  for                                                                    
     the operation  of domestic violence and  sexual assault                                                                    
     programs; and                                                                                                              
               (F)   obtain  reimbursement for  some of  the                                                                    
     costs imposed on the  Department of Corrections related                                                                    
     to incarceration or probation of those individuals;                                                                        
               (5)  [(6)]   disclose the  total amount  that                                                                    
     would have  been paid during  the previous  fiscal year                                                                    
     to   individuals  who   were   ineligible  to   receive                                                                    
     dividends  under  AS 43.23.005(d)   if  they  had  been                                                                    
     eligible;                                                                                                                  
               (6)   [(7)]     disclose  the   total  amount                                                                    
     transferred  or  appropriated  for the  current  fiscal                                                                    
     year  under  AS 43.23.048  for each  of  the  accounts,                                                                    
     funds, and agencies listed in AS 43.23.048.                                                                                
        * Sec. 13.  AS 43.23.045 is amended by  adding a new                                                                    
     subsection to read:                                                                                                        
          (f)  Each fiscal year, the legislature may                                                                            
     appropriate to the dividend fund  an amount equal to 30                                                                    
     percent  of  all   mineral  lease  rentals,  royalties,                                                                    
     royalty  sale  proceeds,  bonuses,  net  profit  shares                                                                    
     under  AS 38.05.180(f)  and  (g), and  federal  mineral                                                                    
     revenue sharing  payments received by the  state during                                                                    
     that fiscal year."                                                                                                         
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 2:                                                                                                           
          Delete "Section 17"                                                                                                   
          Insert "Section 18"                                                                                                   
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "11, 13, and 15"                                                                                               
          Insert "11 - 13, 15, and 17"                                                                                          
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "18 - 20"                                                                                                      
          Insert "20 - 22                                                                                                       
                                                                                                                                
                                                                                                                                
CHAIR SPOHNHOLZ objected for the purpose of discussion.                                                                         
                                                                                                                                
3:32:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON explained that  Amendment 1 would create                                                               
a 90/10  split, as opposed to  an 80/20 split, while  keeping the                                                               
same  income  tax and  replacing  the  other  10 percent  of  the                                                               
percent of  market value  (POMV) draw with  the language  from HB
202.  The  result would be a dividend  amounting to approximately                                                               
$1,000 in the  current year [fiscal year 2021 (FY  21)].  He said                                                               
he likes that  the proposed legislation adopts  the argument that                                                               
royalty is  the true measure  of the state's interest  in mineral                                                               
holdings.  Further, that the bill  combines a portion of the POMV                                                               
with the royalty interest.   He suggested that despite the income                                                               
tax  feature  in  HB  37,   which  makes  the  legislation  self-                                                               
sustainable, a 90/10 split would  ensure that public services are                                                               
not impacted.                                                                                                                   
                                                                                                                                
CHAIR SPOHNHOLZ asked Mr. Bell  to describe how Amendment 1 would                                                               
impact dividends in the near  future, questioning the size of the                                                               
permanent fund dividend  (PFD) according to HB 37  if Amendment 1                                                               
were to pass.                                                                                                                   
                                                                                                                                
3:35:40 PM                                                                                                                    
                                                                                                                                
CONOR BELL, Fiscal Analyst,  Legislative Finance Division, shared                                                               
his understanding  that reducing  the dividend  to 10  percent of                                                               
the POMV  draw would result in  a dividend of $430  per person in                                                               
FY22.   If  30 percent  of total  royalties were  to be  added to                                                               
that, the dividend would increase to $950.                                                                                      
                                                                                                                                
3:36:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL,  prime  sponsor  of HB  37,  expressed  his                                                               
support for  Amendment 1.   He  said he  liked that  the dividend                                                               
would be  partially tied  to oil  revenue; consequently,  the PFD                                                               
would  increase  if  oil  performed   well  and  decrease  if  it                                                               
performed poorly.   He noted that the 10  percent POMV, estimated                                                               
at about $500,  is the more predictable  component; therefore, if                                                               
oil were  to decline to zero,  there would still be  a portion of                                                               
the dividend that could be relied upon.                                                                                         
                                                                                                                                
3:37:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  whether   any  language  [in  the                                                               
amendment] listed the amount attributable to royalties.                                                                         
                                                                                                                                
REPRESENTATIVE  JOSEPHSON sought  to confirm  that Representative                                                               
Eastman was  asking whether the  public would be informed  of the                                                               
calculation  on  royalties  as  part  of  their  receipt  of  the                                                               
dividend.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  EASTMAN remarked,  "It says  that we're  going to                                                               
designate the  amount from the  legislative appropriations.   I'm                                                               
just wondering if  we're going to explain to them  where the rest                                                               
of it's coming from."                                                                                                           
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he  was unsure  to what  language                                                               
Representative Eastman was referring.                                                                                           
                                                                                                                                
3:39:08 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:39 p.m. to 3:41 p.m.                                                                       
                                                                                                                                
3:41:37 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ  noted that Emily  Nauman from  Legislative Legal                                                               
Services   was   now   available  for   questions   and   invited                                                               
Representative Eastman to restate his question.                                                                                 
                                                                                                                                
3:41:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN directed attention to  page 1, line 20, of                                                               
Amendment  1,   which  required  the  amount   of  each  dividend                                                               
attributable   to   legislative  appropriations   be   disclosed.                                                               
Additionally,  the  proposed  amendment  included  appropriations                                                               
from  royalties.   He asked  whether there  was similar  language                                                               
that would disclose the amount attributable to royalties.                                                                       
                                                                                                                                
3:42:42 PM                                                                                                                    
                                                                                                                                
EMILY  NAUMAN, Legislative  Legal Services,  Legislative Agencies                                                               
and Offices,  asked whether Representative Eastman  was referring                                                               
to the royalties contributed per Amendment  1 on page 3, lines 9-                                                               
12.                                                                                                                             
                                                                                                                                
REPRESENTATIVE EASTMAN confirmed yes.                                                                                           
                                                                                                                                
MS.  NAUMAN said  the proposed  amendment would  not require  the                                                               
commissioner  to  specifically  break [down]  that  appropriation                                                               
from any  other legislative appropriation  that would  go towards                                                               
dividends.    She  noted  that   this  form  of  contribution  to                                                               
dividends in  the language  in question [page  3, lines  9-12] is                                                               
also any appropriation, which is why it would be included.                                                                      
                                                                                                                                
REPRESENTATIVE JOSEPHSON asked whether  Ms. Nauman was suggesting                                                               
that by the use of the term  "may appropriate" on page 3, line 9,                                                               
that the [30  percent of all royalties]  would become disclosable                                                               
because of page 1, line 20, of Amendment 1.                                                                                     
                                                                                                                                
MS.  NAUMAN  confirmed  that  is correct.    She  explained  that                                                               
Section 12, appearing on page 1,  line 15, of Amendment 1, is the                                                               
existing  statute   relating  to   a  notice  attached   to  each                                                               
individual dividend,  which sets  out from where  the calculation                                                               
for the dividend  originates.  Therefore, per  the language added                                                               
on page 1,  lines 20-21, the commissioner would  have to disclose                                                               
the amount appropriated for the dividend.                                                                                       
                                                                                                                                
REPRESENTATIVE  EASTMAN  considered  a   scenario  in  which  the                                                               
dividend   was   100    percent   attributable   to   legislative                                                               
appropriations  and  asked  what information  would  be  provided                                                               
through this disclosure.                                                                                                        
                                                                                                                                
MS.  NAUMAN pointed  out that  Section  12 continues  on line  2,                                                               
wherein  adjustments  are considered.    She  explained that  the                                                               
calculation on  the attached notice  would start with  the amount                                                               
attributable  to  legislative   appropriation  and  flow  through                                                               
paragraph (3)-(6)  to lay  out for  the dividend  recipient where                                                               
portions of the total amount appropriated may have gone.                                                                        
                                                                                                                                
3:45:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  sought  to  clarify his  question.    In                                                               
reference  to page  1,  line  20, he  asked  whether "the  amount                                                               
dealing with the royalty is going  to be broken out" or if that's                                                               
at the discretion of the department.                                                                                            
                                                                                                                                
MS.  NAUMAN  responded that  currently,  the  amendment does  not                                                               
require the commissioner to break  that amount out.  She believed                                                               
the  decision to  do  so  could be  made  per the  commissioner's                                                               
discretion, but it's not required under statute.                                                                                
                                                                                                                                
3:46:32 PM                                                                                                                    
                                                                                                                                
CHAIR  SPOHNHOLZ removed  her objection  to the  motion to  adopt                                                               
Amendment 1 to HB 37.                                                                                                           
                                                                                                                                
REPRESENTATIVE  EASTMAN objected.    He said  he appreciated  the                                                               
creativity  of  the  approach;   however,  he  didn't  think  his                                                               
constituents would  see the proposed amendment  as an improvement                                                               
to the statute.                                                                                                                 
                                                                                                                                
3:47:01 PM                                                                                                                    
                                                                                                                                
A roll  call vote  was taken.   Representatives  Wool, Josephson,                                                               
Schrage, Story, and  Spohnholz voted in favor of  the adoption of                                                               
Amendment   1.     Representative  Eastman   voted  against   it.                                                               
Therefore, Amendment 1 was adopted by a vote of 5-1.                                                                            
                                                                                                                                
3:47:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SCHRAGE moved to adopt Conceptual Amendment [2].                                                                 
                                                                                                                                
CHAIR SPOHNHOLZ objected for the purpose of discussion.                                                                         
                                                                                                                                
REPRESENTATIVE SCHRAGE said Conceptual  Amendment [2] would align                                                               
the deductions in  HB 37 with the Internal  Revenue Service (IRS)                                                               
deductions.                                                                                                                     
                                                                                                                                
CHAIR SPOHNHOLZ removed her objection.                                                                                          
                                                                                                                                
3:48:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN objected,  explaining that  he was  still                                                               
processing Conceptual  Amendment [2].  He  questioned whether the                                                               
proposed amendment  was intended  to increase the  tax deductions                                                               
because  under the  federal tax  code,  those deductions  already                                                               
exist.  He asked if that was correct.                                                                                           
                                                                                                                                
REPRESENTATIVE  SCHRAGE  answered  yes.   He  believed  that  the                                                               
benefit  would  be  the  exemption   of  additional  income  from                                                               
taxation  beyond the  original bill;  therefore, it  would reduce                                                               
the amount  of revenue  collected through  this legislation  by a                                                               
nominal amount.                                                                                                                 
                                                                                                                                
3:49:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   WOOL  expressed   his  support   for  Conceptual                                                               
Amendment [2],  citing its  alignment with  the federal  tax code                                                               
for individuals and  the addition of categories, such  as head of                                                               
household  and joint  filers.   He  noted that  the  bill in  its                                                               
original form  has $10,000 per  individual and $20,000  per joint                                                               
filers;  however, the  proposed  amendment  would increase  those                                                               
figures to $12,500,  $25,000, and $18,800 for  head of household.                                                               
He  shared that  Conceptual Amendment  [2] would  help out  lower                                                               
income people  that are getting  a dividend by exempting  more of                                                               
their income from taxation.                                                                                                     
                                                                                                                                
3:50:15 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ  said she  supported the  idea of  increasing the                                                               
floor; however,  she expressed  her concern  that the  number was                                                               
still low.  She highlighted that  in Alaska, the poverty line was                                                               
16,090.   She suggested  that the  measure could  be viewed  as a                                                               
compromise measure,  as it  would require  low-income individuals                                                               
to participate  in an income tax;  nonetheless, she characterized                                                               
an  individual who  is trying  to live  on $12,500  in Alaska  as                                                               
"untenable."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL clarified  that  he was  not advocating  for                                                               
people to  live on an  income of  $12,000 - $16,000,  adding that                                                               
such circumstances are unfortunate.   However, he reiterated that                                                               
someone in that income bracket would receive a PFD free of tax.                                                                 
                                                                                                                                
CHAIR SPOHNHOLZ  suggested further  defining "head  of household"                                                               
versus "taxpayer."                                                                                                              
                                                                                                                                
3:53:24 PM                                                                                                                    
                                                                                                                                
KEN  ALPER, Staff,  Representative  Adam Wool,  relayed that  the                                                               
goal of  Conceptual Amendment  [2] was  to align  HB 37  with the                                                               
federal standard deduction.   He directed attention to  page 2 of                                                               
the proposed amendment, which adds  a new definition for "head of                                                               
household"  to the  definitions section  of the  underlying bill.                                                               
He  indicated that  head  of  household is  defined  as a  single                                                               
person or  a married  person that  files separately  from his/her                                                               
spouse  who  has  at  least   one  additional  dependent  in  the                                                               
household.  He  continued to explain that "head  of household" is                                                               
different than  a single person  and joint filer with  or without                                                               
dependents because "it's a single  filer with children or elderly                                                               
people that  [he/she] would be  responsible for caring for."   He                                                               
noted  that   within  the  federal  code   there  are  additional                                                               
deductibles  for dependents,  which are  not included  in HB  37;                                                               
nonetheless, the idea of "dependent"  is carried forward into the                                                               
definition of head of household.                                                                                                
                                                                                                                                
3:54:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN inquired about  the plural "dependents" in                                                               
"qualified dependents."   He asked  whether a single  parent with                                                               
one child would qualify.                                                                                                        
                                                                                                                                
MR. ALPER  was certain that all  grammatical technicalities would                                                               
be  "cleaned up"  by drafters,  should  the conceptual  amendment                                                               
pass.  He clarified that the  per the sponsor's intent, more than                                                               
one dependent would not be required to qualify.                                                                                 
                                                                                                                                
CHAIR  SPOHNHOLZ asked  Ms. Nauman  to  speak to  the process  of                                                               
cleaning up conceptual language.                                                                                                
                                                                                                                                
MS.  NAUMAN  said  to  the   extent  that  the  committee  adopts                                                               
Conceptual Amendment [2] and gives  Legislative legal Service the                                                               
authority  to  make conforming  changes,  the  amendment will  be                                                               
aligned  with the  drafting  manual, which  includes  the use  of                                                               
singular rather than plural.                                                                                                    
                                                                                                                                
3:56:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  directed attention to the  bottom of page                                                               
1 of the conceptual amendment and  asked how it would work if the                                                               
federal government were to change its income tax brackets.                                                                      
                                                                                                                                
REPRESENTATIVE WOOL reiterated  that the intent is  to align with                                                               
federal law.   He understood that if the  federal government were                                                               
to change the income exemption  levels on the federal tax return,                                                               
the state would automatically align itself with those changes.                                                                  
                                                                                                                                
REPRESENTATIVE EASTMAN  inquired about the impact  of the federal                                                               
government changing the income tax brackets.                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL stated that HB  37 would implement a flat tax                                                               
of 2.5 percent  rather than a bracketed tax.   He reiterated that                                                               
if the  state would track  federal changes to  income exemptions,                                                               
but not income tax brackets.                                                                                                    
                                                                                                                                
3:58:36 PM                                                                                                                    
                                                                                                                                
MR.  ALPER conveyed  that the  underlying bill  had the  standard                                                               
deduction of  $10,000 and $20,000  that was indexed  to inflation                                                               
based on  Alaska-specific inflation;  however, in the  section of                                                               
the  Amendment   referenced  by  Representative   Eastman,  those                                                               
references are being deleted in  favor of the IRS's definition of                                                               
standard  deduction for  which a  new number  is published  every                                                               
year.  He  added that as the IRS updated  those numbers annually,                                                               
Alaska's  income  tax  would  use   the  IRS  standard  deduction                                                               
figures.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  SCHRAGE spoke  to  the level  of deductions  with                                                               
respect  to lower  income households  and the  idea that  someone                                                               
making  $13,000  would  be  above   the  exemption  levels.    He                                                               
explained  that of  the $13,000  in  income, only  $450 would  be                                                               
taxed at 2.5 percent.  Therefore,  the tax would be less than $20                                                               
for that individual.                                                                                                            
                                                                                                                                
4:00:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  asked whether unused deductions  could be                                                               
carried over to the next tax year.                                                                                              
                                                                                                                                
REPRESENTATIVE  SCHRAGE  offered  his understanding  that  unused                                                               
deductions could not be carried over.                                                                                           
                                                                                                                                
4:00:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN maintained his  objection to the motion to                                                               
adopt Conceptual Amendment [2].                                                                                                 
                                                                                                                                
4:01:04 PM                                                                                                                    
                                                                                                                                
A roll  call vote  was taken.   Representatives  Wool, Josephson,                                                               
Schrage, Story,  Prax, and Spohnholz  voted in favor  of adopting                                                               
Conceptual Amendment  [2].  Representative Eastman  voted against                                                               
it.   Therefore, Concept Amendment [2]  was adopted by a  vote of                                                               
6-1.                                                                                                                            
                                                                                                                                
CHAIR SPOHNHOLZ invited question from the committee.                                                                            
                                                                                                                                
4:02:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   STORY  expressed   her  appreciation   for  both                                                               
amendments.   She believed  the 90/10  split recognizes  the need                                                               
for services,  such as senior  benefits, while still  providing a                                                               
dividend  of  around  $1,000.    Further,  she  appreciated  that                                                               
Conceptual Amendment  [2] acknowledges the  stress of being  on a                                                               
limited income.  She reiterated her support for both changes.                                                                   
                                                                                                                                
4:03:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN shared  his belief  that there's  popular                                                               
support for  the considerable compensation received  by those the                                                               
who  manage  the permanent  fund  investments.   He  argued  that                                                               
currently, the investors'  work is largely done on  behalf of the                                                               
state  and the  public;  however,  under HB  37,  as amended,  90                                                               
percent of their work would be  done on behalf of the state while                                                               
10 percent  would be  for the  people.   He wondered  whether the                                                               
public's support  of the investors'  salaries might wane  if this                                                               
bill were to become law.                                                                                                        
                                                                                                                                
REPRESENTATIVE  SCHRAGE, in  response to  Representative Eastman,                                                               
pointed  out  that the  majority  of  the Alaska  Permanent  Fund                                                               
Corporation's  (APFC's)   work  has   gone  toward   funding  the                                                               
government with  a relatively small  portion going  to dividends.                                                               
He contended that  HB 37 wouldn't be implementing  a large change                                                               
in that regard.   He posited that the  proposed legislation would                                                               
maintain the status  quo of the last 5 to  6 years; further, that                                                               
the public wouldn't  have cause to forego their  support of APFC.                                                               
He commended  the committee  for tying  the dividend  to resource                                                               
production in  Alaska in a  tangible way while still  retaining a                                                               
link to the permanent fund in  case of fluctuating oil revenue in                                                               
variant  years.   Additionally,  he  highlighted  the benefit  of                                                               
providing sustainability  for Alaska.   He emphasized that  HB 37                                                               
would maintain  the dividend program  and increase the  amount to                                                               
nearly  $1,000  in addition  to  balancing  the budget  to  avoid                                                               
overdrawing the ERA.   He believed it would allow  Alaska to meet                                                               
its  basic needs  as a  state and  ideally, increase  the capital                                                               
budget while  still providing for  a dividend.   He characterized                                                               
the  proposed legislation  as  the  best of  both  worlds, as  it                                                               
offers  a comprehensive  solution that  presents as  a compromise                                                               
between HB 202 and various flat tax proposals.                                                                                  
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he is  mystified as  to how  some                                                               
Alaskans  have   struggled  with  [the   legislature's]  "current                                                               
position" and  think that there is  a conspiracy of some  sort or                                                               
that [the  legislature] is  hiding the money.   He  asserted that                                                               
[some Alaskans] seem  to believe that "all can be  the way it was                                                               
in    FY 12  or FY 13,  which isn't possible,  he indicated.   He                                                               
mused that  a dividend  of $3,000  would be  fine if  one million                                                               
barrels of  oil was being generated  per day at $130  per barrel.                                                               
He argued that if  HB 37 were to pass, "the  glass is easily half                                                               
full  and then  some,"  as  Alaska is  the  only  state that  can                                                               
sustainably  draw $3,000  in perpetuity.   He  shared his  belief                                                               
that the  dividend needs  to be  reformed; however,  he expressed                                                               
his intent to  oppose any major reforms until revenue  is part of                                                               
the package.  Given that  circumstance, he stated his support for                                                               
the proposed legislation.                                                                                                       
                                                                                                                                
4:11:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX  conveyed  his  opposition to  HB  37  as  a                                                               
solution  to  the  revenue  problem.   He  said  the  legislation                                                               
includes  several factors  to which  he philosophically  objects.                                                               
He argued that  the bill would change the PFD  into a royalty, as                                                               
opposed  to   a  dividend,   which  is   conceptually  different.                                                               
Further, he posited that it  would put the income volatility risk                                                               
on  private  citizens.     He  reiterated  his   objection  on  a                                                               
conceptual level,  arguing that  the people should  be considered                                                               
the sovereigns  as opposed  to the  state.   He alleged  that the                                                               
resistance  to  the  governor's previously  proposed  budget,  in                                                               
which public services  were significantly reduced, was  less of a                                                               
public  outcry and  more so  organized by  groups that  primarily                                                               
benefit from state spending.                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL,  in  response to  Representative  Eastman's                                                               
comments regarding 90  percent of the POMV going to  the state as                                                               
opposed to the public, argued  that the public benefits from some                                                               
of that  percentage in  terms of  public schools,  public safety,                                                               
and public health.  He pointed  out that without public safety or                                                               
education, Alaska  would be a tough  place to live.   In response                                                               
to Representative Prax, he contended  that a 10 percent POMV draw                                                               
is  not volatile;  however,  the royalty  could  be perceived  as                                                               
volatile,  he  said.    Further,   he  argued  that  contrary  to                                                               
Representative Prax's  assertion, the public responded  in "mass,                                                               
unorganized, organic  fashion" to the governor's  proposed budget                                                               
cuts, adding that  he had never received more emails  in his life                                                               
in such a  short amount of time.   He pointed out  that without a                                                               
PFD,  the current  budget is  balanced, arguing  that there's  no                                                               
sustainable way to pay for  the dividend without drawing down yet                                                               
another state  account, the  ERA.   Consequently, he  opined that                                                               
any  PFD  proposal  should  include  a  funding  mechanism.    He                                                               
reiterated that HB 37 would allocate  10 percent of the POMV draw                                                               
and 30  percent of royalties  towards the dividend while  the tax                                                               
revenue would  go directly  into the general  fund along  with 90                                                               
percent of  the POMV  draw.   He remarked "I'm  not sure  you can                                                               
have your  cake and  eat it  too, where  we can  pay for  all our                                                               
state services, everyone  in the state gets a check  ... and yet,                                                               
we're not  taxed."  He acknowledged  that it was possible  in the                                                               
"glory days"  of oil, but those  days are less prevalent  now, he                                                               
said.   Additionally,  he recalled  that the  permanent fund  was                                                               
created to sustain the state  when its finite resource started to                                                               
dwindle, which  it has.   He  believed it  should continue  to be                                                               
used  for that  purpose and  preserved without  overdrawing.   He                                                               
opined that HB 37 solves that problem.                                                                                          
                                                                                                                                
4:19:23 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ  applauded the committee for  its important work.                                                               
In response  to Representative Eastman's characterization  of the                                                               
bill "turning  the permanent  fund into  working for  the state,"                                                               
she said  the state is designed  to provide services for  which a                                                               
profit cannot be  made, and capitalism cannot  deliver.  Further,                                                               
she  highlighted the  constitutional obligations  to provide  for                                                               
public  education, health,  and  safety of  Alaskans.   She  also                                                               
noted several ways in which  the state supports commerce, such as                                                               
resource development,  business licensing, and the  court system.                                                               
She remarked, "We  cannot buy enough public safety  with a $3,000                                                               
dollar dividend to  make up for the difference.   I couldn't take                                                               
... the difference between the  statutory PFD and a $1,000 dollar                                                               
PFD and buy all the public education  and safety that I get as an                                                               
Alaskan  citizen."    She  emphasized   that  government  is  not                                                               
inherently evil, adding  that it simply provides  for things that                                                               
cannot be achieved  individually.  She went on to  point out that                                                               
the  structural  deficit  has  persisted  for  seven  years  now,                                                               
sharing her belief  that "it [Alaska] won't be able  to drill our                                                               
way out  of this problem  any time soon."   She said  that Alaska                                                               
has become an  investment state and contemplated how  to build an                                                               
Alaska that is  prosperous for future generations.   She recalled                                                               
that when  the governor  had introduced his  budget in  2019, she                                                               
received over 4,000 emails from  people who were terrified of how                                                               
gutting  state services  would  impact the  state.   She  thanked                                                               
Representative Wool  for having the  courage to introduce  HB 37,                                                               
as it  would help  balance the  budget, create  fiscal certainty,                                                               
fund  a  reasonable  PFD,  fund capital  budgets,  and  start  to                                                               
rebuild the  state's fiscal situation.   Additionally,  she noted                                                               
that the  proposed legislation would  increase the CBR  to nearly                                                               
$8 billion by  FY 30 and allow  the permanent fund to  grow.  She                                                               
concluded by reiterating her support for the bill.                                                                              
                                                                                                                                
4:23:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SCHRAGE moved to report  HB 37, as amended, out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.    There  being no  objection,  CSHB  37(W&M)  was                                                               
reported out of the House Special Committee on Ways and Means.                                                                  
                                                                                                                                
CHAIR   SPOHNHOLZ   offered   closing  remarks   and   authorized                                                               
Legislative  Legal  Services  to make  technical  and  conforming                                                               
changes to CSHB 37(W&M).                                                                                                        

Document Name Date/Time Subjects
HB 37 Amendment #1.pdf HW&M 5/17/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Sponsor Statement.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Sectional Analysis.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 ITEP Flat Tax Report 12.2020.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Note DOA-OAH 5.7.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Note DOR-TAX - Updated 5.11.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Presentation 5.13.21.pdf HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Model.pdf HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Testimony - AML Resolution 2019-06.pdf HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Testimony - Opposition as of 5.15.21.pdf HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Note DOR-TAX-PFD 5.18.21.pdf HW&M 5/18/2021 11:30:00 AM
HB 37