Legislature(2005 - 2006)SENATE FINANCE 532
04/05/2005 09:00 AM FINANCE
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SENATE BILL NO. 88 "An Act relating to the policy of the state regarding the source of funding used to cover a shortfall in general fund revenue." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken, the bill's sponsor, informed the Committee that this legislation is an enhanced and updated version of the information that he presented during the June 2004 Legislative Special Session. In addition to the bill, the sponsor statement, and a zero Fiscal Note from the Department of Revenue, Members' packets contain a copy of a March 2, 2005 letter he had received from Chris Phillips, Director of Finance of the Alaska Permanent Fund Corporation. A copy of the "Senate Bill 88 A Bridge to Development A policy on General Fund Revenue Shortfall" power point presentation titled dated April 5, 2005 [copy on file] has also been provided. Co-Chair Wilken read his sponsor statement as follows. Senate Bill 88 A Policy on General Fund Revenue Shortfall Senate Bill 88 reads as follows: It is the policy of the State of Alaska that the amounts necessary to cover a projected shortfall in general fund revenue during a fiscal year be appropriated equally from the Constitutional Budget Reserve fund and the Earnings Reserve Account. These few words adopt a course of action that balances the state budget when a shortfall in general fund revenue exists. Senate Bill 88 · When needed, fills the potential fiscal gap in a way that minimizes the financial impact on Alaska families. · When needed, provides a bridge over the gap between general fund expenditures and general fund revenues until our state's natural resources can be further developed. · Doubles the life expectancy of the Constitutional Budget Reserve fund. · May strengthen the State of Alaska bond rating, and save millions of dollars on future bond offerings. Senate Bill 88 affirms a policy of the state that provides fiscal certainty when the general fund revenue is insufficient to fully fund the state budget. Please join me in support of this legislation. Co-Chair Wilken pointed out that the term "'the bridge' is a metaphor [meaning] to get us from here to there." "There are only nine letters that describe economic development in this State: Oil and Gas … it's not mining, it's not fishing, it's not tourism, and its certainly not taxes." Co-Chair Wilken noted that the aforementioned power point presentation is available on the Internet at "www.akrepublicans.org/Wilken". Co-Chair Wilken stated that were this legislation adopted, it would be a component of the AS 37.07.010 Executive Budget Act as opposed to being incorporated into State Statute. "It's policy and can be ignored as needed". The fact that it would not be mandated is "an important consideration". Co-Chair Wilken stated that the pie chart on page three of the presentation depicts the FY 06 $7,600,000,000 Operating and Capital Budget, as proposed by Governor Frank Murkowski. 75-percent of the State's revenue budget is attributed to three primary things: the Permanent Fund (PF) equating to $1.42 billion or 19 percent of the budget; federal funds of $2.52 billion or 33 percent of the budget; and General Fund (GF) Revenue amounting to $2.63 billion or 34 percent of the budget. The General Fund "is the home of the fiscal gap". He noted that Oil and Gas Tax Revenues typically comprise between 68-percent and 90-percent of the State's GF revenues. It is anticipated that they would amount of 87-percent of the GF revenue in FY 06. It should also be noted that, in FY 06, the federal and GF funding are expected to mirror each other. The State should "be vary of any changes" that might alter federal funding support in the future. Senator Dyson asked for examples of what types of funding comprise the "Statutory Restricted" component, which at $744 million, would equate to ten percent of the proposed FY 2006 budget. Co-Chair Wilken replied that those revenues consists of Department of Fish and Game receipts or federal money that is considered "flow through money" in that it is earmarked to support a specific program. Co-Chair Wilken remarked that the information on page four titled "What's the problem?" presents three variables in graph form: the State's General Fund Budget, the General Fund Baseline, and New General Fund Revenue from the years FY 1990 through FY 2020. As shown, the General Fund Baseline tapers downward as the years advance; the General Fund Budget trends upward two percent per year; and the New General Fund Revenue reflects the insertion of new oil and gas development revenue in approximately FY 2013. Co-Chair Wilken stated that this graph depicts the fiscal gap issue facing the State: the General Fund budget would exceed the General Fund Baseline beginning in approximately FY 2007; however, the receipt of New General Fund Revenue is not projected until the year FY 2013. Senator Stedman asked for further information about the General Fund Baseline". Co-Chair Wilken responded that the General Fund Baseline reflects general unrestricted revenues as calculated by the Division of Legislative Finance. As mentioned earlier, 87-percent of the FY 06 General Fund Baseline component would be attributable to Oil and Gas Tax revenue. The General Fund Baseline, as depicted on the graph, is based "on current reserves and current production and their forecast out to the year 2020". Senator Stedman understood therefore that the General Fund Baseline is General Fund revenue. Co-Chair Wilken affirmed. Senator Dyson asked for confirmation that the Division of Legislative Finance based the forecast on oil prices. Co-Chair Wilken confirmed. Co-Chair Wilken stated that he valued the information in the " … and things can change quickly 'For the Good and the Bad'" graph depicted on page five, so much that he had a small wallet size card [copy on file] of the information made for distribution. The graph depicts a variety of fiscal scenarios based on the price of oil ranging from $25 to $50 per barrel. The graph indicates that, given the Governor's FY 06 budget, the State's break even point would be a North Slope Crude Oil price of $42 per barrel. The oil price scenarios are accompanied by projections of the "Unrestricted General Fund Revenue" as well as projected "Surplus" levels. Co-Chair Wilken stated that, as exampled, the State's FY 06 budget "would break even at $42 per barrel"; a price of $50 per barrel would generate a surplus of approximately $450 to $500 million dollars. Co-Chair Wilken pointed out, however, that, "things can change quickly for the good or for the bad." The price of oil on April 1, 2004 was approximately $32 dollars a barrel. The Legislature was ecstatic at the time that the price had surpassed $30 per barrel. "Money was rolling out of our pockets" at that price. However, were that price applied to the Governor's FY 06 budget there would be a $600 million shortfall. "That's how fast" the scenario changes. In 1999, the per-barrel price was ten dollars and the State was $1.3 billion out of balance. Therefore, when people bring up the subject of how much money the State has, showing them the aforementioned card would open the discussion to "what if" scenarios. In response to a question from Senator Stedman, Co-Chair Wilken calculated that the Governor's FY 06 budget would exceed the FY 05 budget by approximately $400 million. The current price of oil is in the $33 range. A price of $42 per barrel would "essentially" generate sufficient revenue to absorb the difference between the FY 05 and the FY 06 budget. Senator Hoffman argued that the information conveys "only half the story" as, while the per-barrel price has increased, oil production has been experiencing "a steady decline" over the years. Continuance of this trend would further increase the fiscal gap. Co-Chair Green asked whether the Division had factored in the reduction in oil production. Co-Chair Wilken affirmed that the decline in production was factored into the projections. The projection is based on a flat 930,000 barrels per day. Were the Trans Alaska Pipeline to operate at full capacity the scenario would definitely change. The fact that things do change is exemplified by the fact that the State has had to withdraw a total of $5.5 billion from the CBR over eight out of the last twelve years, in order to balance the budget. Co-Chair Wilken stated that the information on page six specifies, as authorized by Article IX of the Alaska Constitution, that the CBR was established in 1990 as a separate fund to be used to support the State budget when necessary. Co-Chair Wilken stated that the chart on page seven reflects the draws on the CBR since the initial draw in 1994. The chart depicts, from FY 94 through FY 05, the "CBR Ending Balance", the "Draw" amount, and the "Average Draw". $369,000,000 was drawn in FY 94, a peak draw of $1,042,000,000 was drawn in FY 99, no draws occurred in FY 97 or FY 01, and a low draw of $11,000,000 occurred in FY 04. No draw is expected for FY 05. The "Average Draw" is approximately $320,000,000. The CBR Balance is currently $2.1 billion and the balance is expected to increase to $2.5 billion by June 2005. Senator Bunde asked whether the presentation would address the ERA balance. Co-Chair Wilken assured that ERA information is forthcoming. He reiterated that the current CBR balance is $2.1 billion. Co-Chair Green understood therefore, that contrary to previous projections, the CBR would not be depleted by the year 2006. Co-Chair Wilken affirmed and recalled that, at one time, it was thought that the CBR would be depleted by the year 2002. "It's like the furniture store at the corner, it's been going out of business in the same location for years." "The CBR is pretty healthy" today. 10:43:39 AM Co-Chair Wilken noted that page eight of the presentation provides samplings of press releases pertaining to the State's oil and gas resource opportunities. Reiterating that Oil and Gas Tax revenue would generate 87-percent of the FY 06 General Fund monies, he noted that in order for the State to continue to pay for the demands placed on State government, the State must develop its natural resources. Co-Chair Wilken stated that because new natural resource development would evolve gradually rather than overnight, the State must address the points in time between now and then. This scenario is depicted in the " … a bridge is needed from today to development" chart on page nine. This page projects oil and gas revenues from the years 2006 through 2016. Co-Chair Wilken noted that the General Fund Budget on the chart encompasses a two percent growth factor. The "Unfilled Fiscal Gap" in the General Fund is depicted as is the "onset of the Gas Pipeline" and new oil expected from the development of the Arctic National Wildlife Refuge (ANWR). The projected unrestricted General Fund Revenue is also included. 10:45:03 AM Senator Bunde asked for further information about the "General Fund Budget" variable depicted on the chart, as, oftentimes, the argument is heard that the State's fiscal gap could be addressed by reducing State expenditures. He commented that the inclusion of a two percent per year growth factor in the General Fund Budget would be less than the inflation rate that would be experienced. Therefore, what is depicted in the information "is a very modest budget growth prediction". Co-Chair Wilken agreed. He shared that during his Special Session presentation of this proposal, the General Fund Budget was presented with no growth. "Many people took exception to that and rightfully so". The two-percent growth included in this presentation "is the literary license to just kind of throw a number up there": three percent "is probably too high" and one percent "is probably too low". Senator Bunde pointed out that a two percent growth calculation would be less than that proposed in separate spending limit legislation proposed by Senator Dyson. Co-Chair Wilken expressed that a two-percent growth in general fund spending over a 15-year period would reflect "a great deal of fiscal constraint." Senator Stedman commented that a two-percent general fund growth rate would be a lesser level than that proposed in the FY 06 budget. Co-Chair Wilken agreed. Co-Chair Wilken stated that, as portrayed on page ten, there are seven possible sources or "pots" of money for the State: State spending could be reduced; between $50 and $100 million dollars might be raised through increased Corporate Taxes; between $200 and $300 million might be raised by implementing a State Sales Tax; $400 to $600 million dollars might be generated by a State Income Tax; approximately $30 million could be raised under Other Revenue by increasing such things as Tobacco Taxes, Alcohol Taxes, Fisheries Taxes, Car Rental Taxes, and Studded Tire Fees; the Constitutional Budget Reserve could provide $2.1 billion; and the $2.1 billion in realized earnings of the Permanent Fund, referred to as the Earnings Reserve Account (ERA), could be used, after accounting for the Permanent Fund Dividends and Inflation-proofing. Utilizing the ERA is the focus of this legislation. Co-Chair Wilken stated that, as depicted in the chart titled " … why not just the CBR?" the CBR could be used to sustain State Budget shortfalls for a finite time, as, absent another funding source, the CBR would be deleted by FY 2010. However, at that point, there would still be "a gap to bridge". Co-Chair Wilken stated, therefore, that the question, as written on page twelve, is " … so what if … The Legislature splits the future fiscal gaps with equal contributions from the Constitutional Budget Reserve and the Earnings Reserve Account?" Co-Chair Wilken conveyed that the graph on page thirteen, titled " … and we build a bridge" portrays the scenario were both an ERA and CBR draw to occur. This scenario would provide "a bridge" of funding that would support the State's budget until the time when "Potential Resource Development Revenue" could support the budget beginning in approximately the year 2013. Co-Chair Wilken declared, "so, there's the bridge to development." Senator Hoffman asked how, in this scenario, the capital needs of State would be addressed. Co-Chair Wilken clarified that capital projects are included in the operating budget in the overall State budget. Senator Hoffman understood therefore that the proposed FY 2006 $2.5 billion budget would include capital expenditures. Co-Chair Wilken affirmed. Senator Hoffman asked regarding the level of capital funding that would be included in the FY 06 budget. Co-Chair Wilken responded that it is embodied in the two percent growth. Senator Hoffman asked whether the amount would be above or below $100 million. Co-Chair Wilken stated that the Division of Legislative Finance would provide specific information in that regard. Co-Chair Wilken stated that the information presented on page fourteen, affirms that the Legislature, by a simple majority vote, could access the earnings of the Permanent Fund. 10:52:05 AM Senator Bunde suggested that consideration be given to obtaining the information that included in the State's voter pamphlet at the time the Establishment of the Permanent Fund was voted on in the early 1970s. That information "clearly" stated that the money would be available "for appropriation and use to support State services when oil revenues have diminished". Co-Chair Wilken assured that that would be done. Senator Hoffman, referencing the graph on page 13, asked whether the total CBR/ERA Draw amount that would be required until new resource development comes on line is known. Co-Chair Wilken stated that that information was included in a Division of Legislative Finance spreadsheet titled "50/50 model", dated Feb 18, 2005 [copy on file] that had been previously distributed. Senator Hoffman asked whether this proposal would deplete the CBR. Co-Chair Wilken replied in the affirmative. Co-Chair Green asked whether CBR growth was included in the projections. Co-Chair Wilken deferred to the Division of Legislative Finance. Senator Hoffman restated his question regarding the total amount of the CBR and ERA draws that would be expected. ROB CARPENTER, Fiscal Analyst, Division of Legislative Finance, Legislative Affairs Agency, clarified that the proposal would split the draws equally between the CBR and the ERA. The total amount required from the ERA and the CBR would exceed $2.1 billion. Earnings of the funds would also be utilized. Senator Hoffman estimated that the total could exceed $4.2 billion. Mr. Carpenter responded that the amount would be approximately $2.4 billion. Mr. Carpenter re-distributed the aforementioned spreadsheet to Members. Senator Stedman suggested that a "sensitivity table" be included in the presentation in order to recognize the changing price of oil as it increases and decreases. This would reflect the expansion and retraction and the price of oil that would be required. Co-Chair Wilken stated that such a presentation could be developed. Continuing, he noted that the thrust of the issue is whether or not the Legislature, after considering all these components, should adopt a policy that would allow joint use of the CBR and the ERA. Co-Chair Wilken stated that the Alaska Permanent Fund, Fund Financial History & Projections as of December 31, 2004 spreadsheet is provided on page 15. It was included as verification that the numbers provided in the presentation have a legitimate basis. This sheet is the source for the forthcoming conclusions reached in this proposal. 10:56:55 AM Co-Chair Wilken voiced the importance of the realization that, as reflected on page 16, there are two pots of money in the Permanent Fund: the principal consisting of 25-percent of oil revenues with the exception of the National Petroleum Reserve-Alaska (NPR-A); "special deposits" authorized by the Legislature; and inflation proofing drawn from the ERA. The Permanent Fund principal is protected in the State's Constitution. While it is highly unlikely, it "would be a dark day" for the State were the time to come that it would be required to ask voters to approve accessing the PF principal to provide for State services. Co-Chair Wilken continued that the second pot of money comprising the Permanent Fund is the ERA, currently valued at $3.3 billion. Money from the ERA is used to provide for annual Permanent Fund Dividends, inflation proofing of the Principal, and, by a simple majority vote of the Legislature, the balance of the fund could be accessed in order to fund a State fiscal gap. He voiced surprise that a large portion of the population are unaware that the ERA could be accessed in this manner. Co-Chair Green commented that the "Other" ERA expenditure, reflected on page 16 as $2.1 billion, could be referred to as "excess earnings". Co-Chair Wilken asserted that Co-Chair Green's term or the word "remaining" would be descriptively appropriate. 10:59:09 AM Senator Bunde shared the suggestion that the excess earnings be put toward Permanent Fund Dividends. It should be pointed out however, that the previous year, Alaskans sent $180 million to the Internal Revenue Service (IRS) as the federal tax on that year's dividend. "A great deal" more money would be sent to the IRS were the Dividend increased substantially. That money, being sent out of State, would not thereby support the building of new roads or schools or some other "State service that people would value". Co-Chair Wilken stressed the importance of clarifying the distinction between the principal of the Fund and the ERA when discussing the Permanent Fund with people. Senator Bunde concurred. Co-Chair Wilken characterized the CBR and the ERA as "Alaska's Crown Jewels" as referenced on page 17. We are the only Legislature in the nation "deciding how to manage $31 billion for 650,000 people". Only a few countries have that sort of wealth. While the State is not at the financial level of major oil producing countries like Qatar or Saudi Arabia, "it is in the next level down". The power of the PF earnings could be a big consideration, and each day, through a variety of avenues such as the financial market, "the world helps build Alaska". Stock market and real estate investments assist in building the State's Permanent Fund holdings. It is a form of economic development for the State. 11:01:47 AM Co-Chair Wilken reminded that the average CBR draw has been $318 million. Under this proposal, a hypothetic $500 million annual fiscal gap for the next ten years would be equally split with $250 million being drawn each year from both the CBR and the ERA. The chart depicted on page eighteen was developed to address the concern about how withdrawing money from the ERA would affect the Permanent Fund Dividend (PFD) check. The $250 million ERA draw specified in this example, would result in a total PFD reduction of $446 for the ten-year period. "This is a very important" chart, "as it brings home" the realization of how much money is in the ERA. In order to communicate this information to the public, the page eighteen chart is duplicated on the flip side of the aforementioned wallet sized card. Co-Chair Green agreed that this is "great" information. Senator Hoffman suggested that, to further alleviate public concern, a column that reflects the expected dividend amount for each of the ten years should be included on the chart. This information would be based upon the "Alaska Permanent Fund History and Projections as of December 31, 2004" information on page 15, and would assure people that their dividends would continue to grow. Senator Bunde stated that the information on page eighteen could address the difficulty that some citizens have in recognizing the fact that, unlike the federal government, the State cannot print more money. State services are supported in a manner somewhat akin to "robbing Peter to pay Paul", in that, through either citizen taxation or other means, the State must raise money to pay for services. While some people opine that a State income tax would be the most fair, others say it would be regressive. Therefore, it might be instructive to develop "a parallel chart" to the one on page eighteen that would reflect what folks might pay were an State income tax in place. Co-Chair Wilken replied that a forthcoming presentation chart might address Senator Bunde's suggestion. Co-Chair Wilken stated that the chart on page nineteen provides, as suggested Senator Hoffman, information regarding the estimated PFD for the next ten years compared to the PFD amount were $250 million withdrawn from the ERA as per this proposal. After his initial review of the numbers, he had asked the Division of Legislation Finance to recalculate them, as they appeared "too good to be true". They are legitimate. Co-Chair Wilken noted that the information on page twenty reflects the potential impact of this proposal to one's PFD in common terms: there would be almost no impact the first year; the amount lost the second year could equate to the cost of a specialty cup of coffee; the amount lost the third year might amount to the price of a movie ticket; the amount the fourth year could equate to the price of a large pizza; the amount lost the fifth year could equate to the price of a woman's haircut, and the amount lost the tenth year would equate to the price of a dinner for two at a fancy restaurant. Co-Chair Wilken stated that the information on page 21 might address Senator Bunde's earlier suggestion as it compares the affect of an ERA draw to that of implementing alternate revenue generating sources such as a State income or sales tax. An income tax would cost a married couple with two children earning an adjusted gross income of $57,000 approximately $1,000 a year; a State sales tax would cost that family approximately $950; and tapping the ERA would cost that family approximately $12. This information is based on the second year of implementation. 11:10:10 AM Senator Bunde suggested that a comparison reflecting the costs to someone earning $30,000 a year be developed, as that was the minimum income baseline utilized during income tax proposal discussions. Co-Chair Wilken stated that the graph depicted on page 22 indicates how adopting this policy would extend the life of the CBR to the time when resource development revenues would come online. Co-Chair Wilken stated that "unlike" the Percent of Market Value (POMV) budgeting concept legislation that had been recently considered, the policy proposed in SB 88 would only be implemented when there were a fiscal gap. Years might pass without there being the need to tap the CBR or the ERA or they could be tapped one year and not the next. This legislation would establish a "unique accountability" between the Legislature and the electorate because the affect of the decision could be quantified. As presented on page 23, this legislation "demands spending accountability because … (1) the Earnings Reserve Account is the people's money and (2) each legislator must answer to the public on how much was spent from the Earnings Reserve to fund state services." Co-Chair Wilken read the summary of the presentation, as presented on pages 24 and 25. The Bridge to Development Plan · Bridges the State of Alaska revenue needs until development can occur · Recognizes Alaska's natural resource potential and opportunity for jobs · Recognizes the power of the Earnings Reserve - the crown jewel of a fiscal plan · Establishes accountability by forming a investment partnership will all voters … and … · When needed, minimizes the financial impact on Alaska families · Doubles the life of the CBR · Strengthens the Alaska's bond rating and saves millions of dollars · Provides Alaska with a stable and dependable long term fiscal plan Senator Bunde pointed out that, were this legislation adopted, the CBR and the ERA would not be utilized in FY 06 as oil price projections indicate that sufficient revenue would be generated to support that year's budget. In addition, were those who are more optimistic than him about oil prices and production correct, this might be the scenario for the next several years. Co-Chair Wilken agreed, but cautioned that oil prices could decrease as quickly as they had increased. He voiced the belief that the State "has a structural deficit" in that over a ten-year period, State revenues would be inadequate more often than they were "flush". "We need to be ready." Senator Stedman "liked the presentation and the concept" of "a bridging mechanism" that could be utilized until the time that new resource revenues came on line, but opined that further discussion should occur on a couple of issues. To that point, he suggested that "some sidebars" or a maximum limit on the amount that could be drawn from the ERA be considered. This would address the concern that there might be budget increases of five, ten, or twelve percent were no limits placed on the revenue side. The objective would be include "sidebars" in order to prevent the occurrence of "ballooning budgets". "This year's a good example." Senator Hoffman declared that, "this year is a really good example". To that point, however, he opined that, "when it's all said and done, we would find that we were the sideboards". 11:18:08 AM Co-Chair Green applauded the presentation, and reminded the Committee that regardless of the outcome of this legislation, the ability for the Legislature to access the ERA, via a simple majority vote, has always been an option. She agreed with Senator Hoffman that the Legislature does play the roll of the sideboards. She doubted that the Legislature "would limit, under any circumstances", the amount that could be withdrawn as that could jeopardize appropriate action in the case of an emergency. 11:18:53 AM Senator Bunde stated that while the Legislature could have exercised its ability to access the money in the ERA "many times" that has not occurred. There is a "huge political dike between" the Legislature and its ability to spend the ERA. Therefore, the question is were a mechanism such as the one provided by this legislation available, would future Legislators take "more political courage" and utilize it. Senator Bunde also noted that, in order to further the spending limit goal as previously proposed in separate legislation by Senator Dyson, provisions could be included in this legislation that would allow this ERA/CBR mechanism to be utilized only were the budget no more than perhaps a three percent increase over the previous year's budget. Co-Chair Green remarked that such a provision would prohibit this CBR/ERA funding mechanism from being utilized in regards to the FY 06 budget. Senator Bunde continued that, while such legislation could be modified, it would put in place "pretty serious sideboards that a future Legislature would be changing at its own political peril." Senator Dyson suggested that the passage of this legislation could be contingent on the passage of a Constitutional spending limit. Co-Chair Wilken, in response to Senator Bunde's comment, stated that his recent bid for re-election to his Senate seat had provided him the opportunity to discuss this ERA/CBR concept with a variety of people. Although he had been initially "afraid" to discuss this plan, which his opponent painted as a raid on the PF, the public response to it was gratifying. The opportunity proved successful in enlightening people about the power of the earnings of the PF. He encouraged people who might run for a public office to continue the dialogue of positioning the earnings "as an asset". Co-Chair Wilken commented that the idea of imposing a spending limit of two or three percent above the previous year's budget could be doable provided the Legislature "could define what goes into the two or three percent increase". Senator Bunde commented that, "the groundwork has been established". Senator Hoffman asked Co-Chair Wilken's position in regards to placing this proposal on a Statewide ballot. Co-Chair Green interjected that this proposal would not require voter approval. Co-Chair Wilken stated that this issue is not addressed in the proposal. Senator Hoffman agreed. Co-Chair Wilken expressed that the Legislature should not request voter permission to spend the ERA. "That's our job". Senator Hoffman argued that, rather than the issue being whether the Legislature could access the ERA, the issue is whether this proposal, rather than a State sales tax, income tax, or user tax, would be the mechanism through which to fill the State's fiscal gap. Rather than his concern being that voter permission should be required to spend money from the ERA, his concern is whether this proposal should be the long-term solution. He surmised that upon voter review of the various options, this option "would have a high potential of passing." 11:24:43 AM Co-Chair Wilken characterized this legislation as "soft policy" which future Legislators could either use or ignore. Future legislators would continue to have the opportunity to pursue other options if needed to raise revenue. The ramifications of implementing a sales tax or income tax would include placing pressure upon corporations and families. He opined that were this legislation in place and used, it would work. At that point, "it would become the standard". He voiced discomfort at the thought of asking the voters whether this should be "the" fiscal plan. Senator Hoffman questioned the reason for Co-Chair Wilken's unwillingness to allow the people to vote on the issue since he had previously mentioned that after discussing the proposal with people during his re-election campaign, they had recognized its worth. Therefore, they would support it. Co-Chair Wilken stated that it would be a challenge to discuss this issue with 640,000 citizens. In response to a comment from Co-Chair Green, Senator Hoffman re- stated Co-Chair Wilken's remarks about how, during his bid for re- election, he had broached the subject of this bill and that, as a result, people had warmed up to the idea. The other options had drawbacks; this proposal "is markedly different". Senator Bunde questioned the reason for there being such a thing as the Senate Finance Committee, were the Legislature "to accept what State law says" regarding the availability of the ERA for appropriation, but nonetheless putting that action to a vote of the people. Were that to occur, perhaps all spending of State funds should be put before a vote of the people. There is no difference between the ERA, "corporate income tax, and any other source of funds that the State has access to". Senator Olson recognized there to be "a lot of difference" between a State income tax and corporate income tax, and the spending of the ERA. He echoed Senator Stedman's concern that, were a "bigger and bigger and more swollen budget" to evolve, few individuals would possess the ability to hold a budget in line. He praised the work conducted by the chair of the Senate Finance Committee Department of Natural Resources subcommittee, who, in an earlier presentation, had held that Department's budget down. Co-Chair Wilken clarified, in response to Senator Stedman's and Senator Olson's concerns, that the only time this policy would be necessary would be when State revenue were insufficient to support the State's budget. "That automatically dampens the desire to spend, spend, spend". It is not something that would occur every year. Senator Olson respectively disagreed by commenting that, "when somebody spends someone else's money, there is always a shortage of money". The bill was HELD in Committee.