Legislature(2019 - 2020)SENATE FINANCE 532

04/29/2019 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Postponed Until 9:15 a.m. --
<Bill Hearing Canceled>
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved SB 10 Out of Committee
Heard & Held
-- Public Testimony --
SENATE BILL NO. 103                                                                                                           
     "An Act relating to deposits into the dividend fund                                                                        
     and appropriations from the earnings reserve account;                                                                      
     and providing for an effective date."                                                                                      
9:21:18 AM                                                                                                                    
Co-Chair  Stedman shared  that the  bill proposed  modifying                                                                    
the formula used to pay  the dividend. He explained that the                                                                    
dividend was first  put forth in statutes in order  to pay a                                                                    
public  portion of  the royalty  wealth  accumulated by  the                                                                    
state in the  sale of the collectively owned  oil wealth. He                                                                    
thought it  would have been  difficult at that time  to have                                                                    
imagined a  dividend formula on  the corpus of  $65 billion,                                                                    
which was the  current corpus total. He relayed  that as oil                                                                    
production  had   declined  the  state  did   not  have  the                                                                    
reoccurring revenue it  had enjoyed in the past  and now was                                                                    
faced  with the  task  of modifying  the  formula. The  bill                                                                    
would split  the amount that  would be paid from  the funds                                                                     
portfolio, on a 5-year average,  in order to have the amount                                                                    
calculated  well in  advance of  the governor  putting forth                                                                    
the  operating budget  in December.  He  explained that  the                                                                    
numerics of  the amount coming  to the state would  be known                                                                    
in  September  of  each  year.  A  five-year  lookback  also                                                                    
provided  smoothing and  stabilized the  revenue stream  and                                                                    
would not require the corporation  to alter their management                                                                    
9:25:39 AM                                                                                                                    
Co-Chair  Stedman discussed  the 5  percent split,  which in                                                                    
the current year would be  5.25 percent before it dropped to                                                                    
5. He  asserted that the  funds needed  to be split  for the                                                                    
state  to meet  the  core obligations  of education,  public                                                                    
safety, and other basic government  services. The bill had a                                                                    
split of one-half to dividends and one-half to the state.                                                                       
9:27:41 AM                                                                                                                    
Co-Chair Stedman OPENED public testimony.                                                                                       
ADAM  HYKES,  SELF,  HOMER (via  teleconference),  spoke  in                                                                    
opposition  to the  bill. He  thought that  Co-Chair Stedman                                                                    
had  over-estimated the  role of  government in  meeting the                                                                    
needs of the  people. He thought people should  take care of                                                                    
themselves. He addressed  Section 3 of the  bill. He thought                                                                    
the added  words "legislature  may appropriate   were highly                                                                    
troubling, as  he did not  think it was appropriate  for the                                                                    
legislature to  appropriate funds to the  Permanent Fund. He                                                                    
wanted to  be clear  that the legislature  did not  have the                                                                    
authority take, tax, or modify the formula.                                                                                     
9:29:30 AM                                                                                                                    
LYNETTE CLARK, SELF, FOX  (via teleconference), testified in                                                                    
opposition to  the bill. She  thought the co-chairs  were in                                                                    
violation of their offices. She  discussed the bill and bill                                                                    
materials and  back up documents.  She strongly  opposed the                                                                    
bill. She did not think the  members were acting in the best                                                                    
interest  of  constituents. She  thought  the  bill was  not                                                                    
legitimate. She  thought the bill supported  big government.                                                                    
She  wanted  her  full dividend,  paid  under  the  existing                                                                    
9:32:50 AM                                                                                                                    
AT EASE                                                                                                                         
9:32:53 AM                                                                                                                    
CRIS  EICHENLAUB, SELF,  EAGLE  RIVER (via  teleconference),                                                                    
was  opposed to  SB  103.  He was  in  full  support of  the                                                                    
governor's   proposed  budget.   He  thought   changing  the                                                                    
dividend  formula  constituted  a  tax  on  the  people.  He                                                                    
discussed  the  changing of  the  state's  oil and  gas  tax                                                                    
regime. He noticed  former Senator Pete Kelly  was no longer                                                                    
on the committee. He supported the governor.                                                                                    
9:34:53 AM                                                                                                                    
HERMAN MORGAN,  SELF, ANIAK (via  teleconference), testified                                                                    
in  opposition  to  the  bill. He  was  concerned  that  the                                                                    
legislature  was  not   following  the  governor's  proposed                                                                    
budget.  He   lamented  that  funds  were   being  spent  on                                                                    
education and the University rather  than on full dividends.                                                                    
He  questioned the  motivations of  the legislature.  He did                                                                    
not   support  big   government   or  increased   government                                                                    
spending. He mentioned a message  he sent to Senator Wilson.                                                                    
He did not  support increased funding to  the University. He                                                                    
expressed great sadness with current state affairs.                                                                             
9:38:48 AM                                                                                                                    
ROSE  HUBBARD, SELF,  ANCHORAGE (via  teleconference), spoke                                                                    
in opposition  to the  bill. She thought  there was  a right                                                                    
and wrong  way to approach  changes to the PFD.  She thought                                                                    
it felt as though the  legislature was stealing the people's                                                                    
money.  She felt  strongly  that the  public  should have  a                                                                    
chance to learn  about any changes to the  PFD. She believed                                                                    
that Alaskans should have a  chance to testify on the issue.                                                                    
She relayed  her understanding of  the history  and function                                                                    
of the  PFD. She felt  that more information of  the process                                                                    
should  be  made  available  to  the  public  so  that  they                                                                    
understood what was going on with their PFD.                                                                                    
9:40:59 AM                                                                                                                    
CATHERINE FELT, SELF,  KENAI (via teleconference), testified                                                                    
in opposition  to SB 103  since it was not  a constitutional                                                                    
amendment. She thought a 50-50  split was a good compromise,                                                                    
but thought the public needed to vote on the matter.                                                                            
9:41:51 AM                                                                                                                    
AT EASE                                                                                                                         
9:46:42 AM                                                                                                                    
VIKKI JO KENNEDY, SELF, JUNEAU,  was glad that the committee                                                                    
was  taking   public  testimony.   She  asserted   that  the                                                                    
Permanent  Fund  belonged  to  the  people.  She  hoped  the                                                                    
legislature  protected the  fund.  She  thought people  were                                                                    
lining up  to move to  the state  because of free  money and                                                                    
free Medicare. The thanked the committee for their work.                                                                        
Co-Chair Stedman CLOSED public testimony                                                                                        
9:49:43 AM                                                                                                                    
Co-Chair Stedman informed that  the committee would consider                                                                    
the bill's fiscal note at a later meeting.                                                                                      
9:49:55 AM                                                                                                                    
Co-Chair von  Imhof appreciated the committee  considering a                                                                    
statute change for  the calculation of the  PFD. The thought                                                                    
that  the  dividend  should reflect  the  move  from  annual                                                                    
earnings to  a percent  of total  market value.  She pointed                                                                    
out  that the  50-50  split yielded  about  $700 million  in                                                                    
surplus with a modest capital budget.  In order to pay out a                                                                    
full dividend of $2,300 would  require an $861 million draw.                                                                    
She referenced the Earnings Reserve  Account (ERA) and noted                                                                    
that  the unstructured  draw, outside  the POMV,  would mean                                                                    
that future  POMV draws  would be  less. She  referenced the                                                                    
Constitutional Budget  Reserve (CBR)  and reminded  that the                                                                    
fund  had several  recent draws  for earthquake  damage. She                                                                    
worried  about  the  probability  of forest  fires  and  the                                                                    
subsequent cost. She referenced  the Power Cost Equalization                                                                    
Fund and  noted the  consequence of  drawing from  that fund                                                                    
would result in less money  for rural energy assistance. She                                                                    
highlighted the importance of  considering all the financial                                                                    
consequences of a 50/50 split.                                                                                                  
9:52:41 AM                                                                                                                    
Co-Chair Stedman discussed housekeeping.                                                                                        
SB 103 was HEARD and HELD in committee for further                                                                              

Document Name Date/Time Subjects
SB 103 Opposition Letter - Goode.pdf SFIN 4/29/2019 9:00:00 AM
SB 103