Legislature(2019 - 2020)BELTZ 105 (TSBldg)
03/27/2019 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR6 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SJR 6 | TELECONFERENCED | |
| + | TELECONFERENCED |
SJR 6-CONST AM:APPROP. LIMIT; RESERVE FUND
1:33:15 PM
CHAIR HUGHES announced that the only order of business would be
SENATE JOINT RESOLUTION NO. 6, Proposing amendments to the
Constitution of the State of Alaska relating to an appropriation
limit; relating to the budget reserve fund and establishing the
savings reserve fund; and relating to the permanent fund.
CHAIR HUGHES made opening remarks.
1:34:26 PM
CORI MILLS, Senior Assistant Attorney General, Civil Division,
Labor and State Affairs Section, Department of Law, Juneau,
introduced herself.
1:34:40 PM
MIKE BARNHILL, Policy Director, Office of Management and Budget,
Office of the Governor, Juneau, said SJR 6 is one of three
resolutions the governor has introduced seeking to amend the
Constitution of the State of Alaska. Each one is a critical
piece for the governor's plan for fiscal sustainability for the
State of Alaska, he said.
MR. BARNHILL reviewed slide 2, "Current Constitutional Spending
Limit (Article 9, Section 16)."
? Limit set at $2.5 billion, plus inflation and
population growth since 1982
? Calculation for FY20 would be about $10.5 billion
? Spending subject to cap includes all UGF operating
and capital expenditures, most statewide items, plus
some DGF items
? Excludes PFDs, bond proceeds, debt service payments,
non-State sources of revenue, public corporation
revenues, and disaster declarations
At least 1/3 of limit reserved for capital projects
and loans
? Can break the limit for capital projects, if
approved by the voters.
MR. BARNHILL said that SJR 6 seeks to amend Article IX, Section
16. He offered to introduce the current proposal and to defer to
Mr. King and Ms. Mills for more detail.
He provided a brief history that led up to the legislature's
consideration of a spending limit in 1981. Oil had been
discovered, the Trans-Alaska Pipeline System (TAPS) had been
built, and oil began to flow in 1977. The state budget had
increased over 9,000 percent from 1960-1982. During the same
time period, inflation had almost tripled and the population had
nearly doubled. Even when combined, the effects of population
and inflation did not come close to the 9,000 percent increase
in the budget.
MR. BARNHILL continued. By this time other states were
considering adopting constitutional spending limits. The Alaska
legislature found it was an appropriate time to get spending
under control as it attempted to manage the influx of
substantial new revenues. The legislature passed a resolution to
limit spending, which came before the voters and passed by a
wide margin. One provision in the resolution required it to be
resubmitted to the voters in 1986. That vote passed by an even
larger margin, he said.
He stated that the current spending limit has not been an
effective means to control spending. The calculation was based
on $2.5 billion plus inflation and population growth. In FY 2020
this would be about $10.5 billion, he said. The population and
adjustment for inflation has produced a budget substantially
larger than any budget from 1982 until today, so it has not been
an effective means to limit government spending.
MR. BARNHILL explained that SJR 6 would limit the growth of
allowable appropriations. He reviewed the bullet points on slide
2 that supported the need to change the appropriation limit.
1:39:03 PM
ED KING, Chief Economist for the State of Alaska, Office of
Management and Budget, Office of the Governor, reviewed
historical state spending on slide 4, a line graph depicting
unrestricted general fund spending (UGF) adjusted for inflation
and population. He characterized it as the "per capita"
inflation adjusted government spending from FY 1975 to FY 2019.
This data was generated by legislative finance and it represents
unrestricted general fund monies, including agency operations,
statewide items and capital items, but not transfers between
accounts.
He explained that spending increased from FY 1975 to FY 1982 as
revenues increased such that the state was spending over $16,000
per person by 1982. The constitutional amendment was pegged to
the highest level of spending the state had ever experienced.
Following the 1982 constitutional limit, the administration was
seeking ways to limit spending during the state's oil bust and
boom phase so downward pressure was occurring. This created a
gap between what the state was allowed to spend and what it
needed to spend, he said.
1:41:06 PM
MR. KING reviewed slide 5, "UGF Spending History and Different
Limits." This slide presents five spending scenarios to provide
a visual line graph comparison. The black dotted line at the tip
of the slide represents the spending limit under current law,
based on the 1982 constitutional amendment. The spending limit
was pegged to growth and limited to a fixed number in the
Constitution of the State of Alaska of $2.5 billion. In doing
so, it allowed the limit to grow from the previous limit, even
if the state actually spent money to the limit. For example, in
1991 the limit was allowed to grow from the previous year's
limit, not from the previous year's spending. That continued to
allow the spending limit to grow, he said. The administration
considered that the rate of growth was generous when it
developed SJR 6.
He directed attention to the dotted [black] line in the middle
of the slide that depicts the 1982 spending limit based on half
of inflation and population growth. The red dotted line on the
slide represents what the current constitutional limit would
have done had it been pegged to a pre oil level of spending
rather than $2.5 billion. That line shows how spending would
have been allowed to increase just with inflation and
population, irrespective of the amount of revenue being
generated, he said. He reviewed the red line, noting it was a
smaller number through the 80s but caught up in the early 2000s
to a figure that is basically where agency operations are today.
He said the blue layer on the slide represents agency
operations, the orange represents statewide items, including
contributions to retirement, unfunded liability, debt service
payments, and oil tax credit purchases. He said that the gray
portion represents the capital budget. Finally, the dashed
[black] line in the middle represents what the current language
in SJR 6 would have done had it been in place in 1982, he said.
It tracks the actual rate of spending fairly well, updated based
on actual spending rather than on a fixed amount, he said.
1:43:53 PM
MR. KING reviewed slide 6, "Considerations."
? Not all government spending needs to grow with
population
? Teachers and troopers, maybe
? Regulators and auditors, maybe not
? For 20 years, the state did not need inflation
adjustments, even when they were allowed
? A high allowed rate of growth from a record high
spending level leads to an ineffective limit
MR. KING said that slide 5 shows that the current constitutional
language is very generous in its allowance. He reviewed the
bullet points, adding that during the 1990s, the state
experienced a period when inflation-adjustments were allowed but
not taken advantage of. It may call into question whether full
inflation adjustments are actually necessary, he said. Finally,
the level at which the appropriation limit would be pegged is
important. That level should be reset according to actual needs
of the state rather than a fixed point in time or a fixed
reference, he said.
1:45:09 PM
MR. KING reviewed slide 8, "Where does the current Path Lead?"
This bar graph shows that using the PFDs to balance the budget
would lead to turning to savings and eventually to taxes to fund
the state budget. This chart means to say that without a check
in spending, any or all of those tools will become necessary, he
said.
MR. KING reviewed slide 9, "UGF Spending History."
He said that as revenues increased in 2005-2013 as oil prices
spiked, the budget rose alongside those revenues. The current
limit did not limit spending growth when revenues rose.
MR. KING reviewed slide 10, "UGF Spending History." He said that
this slide provides an historical timeline. The impetus of the
1982 constitutional amendment was a 264 percent increase in UGF
spending. Although government spending was not restricted by the
constitutional amendment, it was restricted until 2005, when oil
prices rose. In 1999, oil prices were at the lowest point at $9
per barrel and were at their highest in 2008 at $147 per barrel.
That rapid increase in oil prices led to a tremendous amount of
money flowing into the treasury, leading to a 261 percent
increase in UGF spending from FY 2005-2014. At that point, oil
prices crashed again. Once again, this put pressure on the state
to reduce the budget. However, current government spending is
still $2 billion above what it was before oil prices spiked, he
said.
1:47:32 PM
MR. KING reviewed slide 11, "What if the Proposed Spending Cap
Passed before Oil Prices Spiked?" He suggested that slide 11
shows that a lot of the growth would not have been allowed if
SJR 6 had passed in 2000. A. The financial consequences of those
decisions equaled $29 billion in spending instead of going into
savings accounts to generate additional earnings. If that $29
billion had not been spent, the state would be facing a very
different situation, he said.
MR. KING reviewed slide 12, "Size of Permanent Fund if Proposed
Spending Limit was in Place before Oil Prices Spiked?" He said
that it would have nearly $140 billion versus the current $65-67
billion balance.
1:48:51 PM
MR. KING reviewed slide 13, "What Actually Happened?" Instead,
expenditures have not been reduced to align with revenues and
the state has depleted its savings accounts. The current
constitutional budget reserve account (CBR) balance is $1.7
billion, with the statutory budget reserve account (SBR) at $172
million. He pointed out that the Office of Management and Budget
expects about $300 million to return to the CBR by the end of
2019. Currently the reserves will be $2 billion, whereas in 2013
the state had over $16 billion in savings, he said.
1:49:32 PM
MR. BARNHILL reviewed slide 15, "Governor Constitutional
Amendments."
Three constitutional amendments were introduced to
provide sustainability, predictability, and
affordability for Alaska:
? SJR 6: Set an annual spending and savings rule to
stabilize spending and grow the Permanent Fund.
SJR 5: Changes to the current PFD formula would
require a vote of the people - Alaska is an owner
state.
SJR 4: Require a vote of the people before the
implementation or increase of any tax.
1:50:19 PM
MR. KING reviewed slide 16, "Where Does Governor Dunleavy's Plan
Lead?"
He said that the permanent fiscal plan in SJR 4, 5, and 6 will
achieve goals the governor can build on. One of the primary and
most important aspects is to restrict government growth. SJR 6
may or may not allow the government to grow in the future.
1:51:17 PM
SENATOR SHOWER said the fiscal plan was previously discussed in
the Senate State Affairs Standing Committee. The Senate Finance
Committee today indicated it could not stay within the
governor's proposed budget. He asked whether OMB could model
several alternative plans to illustrate the variables.
MR. KING offered to model alternate scenarios and compare them
to the governor's plan. He pointed out that an infinite number
of combinations of tools could be highlighted. He said that SJR
6 would limit future growth, but the chart also assumes that the
full budget reductions will occur. He cautioned that with
increased budgets, government growth would also be higher, and
savings will be drawn to cover it.
1:53:06 PM
SENATOR KIEHL asked if he could model an estimated period of
economic growth, such as one in which the gas line was built or
if the state decided on greater economic development. He asked
how that would affect services. He noted that earlier Mr. King
posited the services that need to rise with population growth
and those that do not. He suggested it might be helpful to
consider the impact [SJR 6] would have on the Article VIII
obligations.
MR. KING answered that he would be happy to discuss the
relationship between economic growth and government growth and
what restrictions SJR 6 would place on the ability of the
economy to grow when restricting government growth. Besides
economic questions, a number of philosophical questions would
need to be answered as well, he said. He offered to use
different assumptions for inflation and population growth to
demonstrate the divergence between those levels of population
and inflation adjusted figures as compared to what would be
allowed under SJR 6.
SENATOR KIEHL said that would be helpful. He recalled that
Senator Sullivan once suggested that the state ought to be able
to sustain 3-3.5 percent economic growth over the long term.
Obviously economic growth and population growth tends to be
closely related, he said. He said that he had questions about
what effect SJR 6 would have on the state's ability to meet its
other constitutional obligations under normal inflation. He said
that the crux of the Judiciary Committee is to assess what
impact SJR 6 would have on the state's responsibility to meet
its other constitutional obligations.
1:55:41 PM
CHAIR HUGHES said she too would be interested. She referred to
slide 6, that shows that numbers of troopers and teachers may
need to increase, but not the auditors. She asked whether he
could review the budget and tease out a rough estimate of the
percentage that would need to move along with population growth
and inflation and how much could stay static. She referred to
page 2, to the per capita spending in 2008.
MR. KING answered that in 2008, it was $16,000 per person in
2019 dollars whereas today it is about $8,000 per person.
1:57:00 PM
CHAIR HUGHES asked whether the chart on slide 8 accounts for the
effects the pension liability would have on the PFDs or if the
PFDs would run out earlier.
MR. KING said the obligation will increase next year and as a
result the POMV would be completely consumed in FY 2022 with no
remaining funds available for distribution.
CHAIR HUGHES asked for further clarification that there would be
a PFD this year and next year but nothing after that.
MR. KING answered that is an accurate statement in this scenario
based on the only tool the legislature was using to fill the
$1.6 billion budget gap.
1:58:11 PM
CHAIR HUGHES asked how many states have constitutional spending
caps.
MR. BARNHILL answered that the National Conference of State
Legislatures reported in 2010 that 30 states had some form of
spending, appropriation, or revenue limit in their constitution
or in statute.
1:58:39 PM
SENATOR KIEHL referred to the historical charts. He said that
significant spending reductions happened from FY 1985-1989, and
from FY 1994-2000 gradual reductions occurred. He asked what
constitutional provision forced those spending cuts.
MR. KING responded that a constitutional provision did not force
the cuts. He said an economic reality happened in all three
cases as the financial strength of the state deteriorated. In
the 1980s the state faced the greatest recession it had ever
experienced, which drove reductions. In the late 1990s and early
2000s, and again in 2014 to the present, the state had a
significant reduction in oil prices, he said.
1:59:42 PM
CHAIR HUGHES said she agreed that economic realities caused the
budget reductions. There probably was not the same connection to
the legislature because of the lack of technology, she said. She
was unsure of the level of outreach or communication the
legislature had with Alaskans or the number of protests against
budget reductions in the 1980s as compared to now. She said she
understands that people currently track the legislature via
GavelAlaska. Further, the legislature now holds many meetings
throughout the state.
MR. BARNHILL agreed that in the 1980s and 1990s Alaskans did not
have the same technology, but he felt they have always been well
informed. He said the level of reaction is higher today, but
this administration's approach to the budget is also
unprecedented.
CHAIR HUGHES recalled reading the daily newspaper and the
nightly news years ago, but she did not recall a constant
connection to the legislature. She said it makes it more
difficult to make changes with the current pushback the
legislature is experiencing. She pointed out that Senator Kiehl
related that years ago, the budget cuts naturally occurred when
the economics called for it. She did not wish to speak for
Senator Kiehl, but she thought his point was that if it took
care of itself then, it should take care of itself now. However,
she does not think it can because people have become dependent
on certain services and spending and it is so much easier to
organize groups to oppose the cuts. She did not think the
response to cut the budget would happen as readily as it did in
the 1980s.
2:02:35 PM
SENATOR SHOWER asked the record to reflect his belief that if
the state continues down the path of passing larger budgets, the
permanent fund will be gone in a few years. Some people think
that the current budget level is acceptable and that it could
increase, he said. He related his understanding that if SJR 6
were to start on that baseline, the charts in today's
presentation on SJR 6 show that outcome. He remarked that he saw
some nods of assent in the audience. He said he did not think
people understand the urgency of the situation. In the last five
years, the state has depleted the permanent fund's earnings
reserve account. Essentially, the legislature has maintained a
higher standard of living in Alaska by drawing down its savings
accounts, he said. The legislature and administration did not
hold the hard discussions it is currently having, he said. He
argued that [past] budget reductions were not naturally
occurring ones. Instead, the legislature ran out of options [in
the 1980s]. Currently the legislature has an option to protect
the permanent fund savings or to use them. In recent years the
legislature chose to use them, he said. Now the legislature must
do something different.
2:04:29 PM
MR. KING responded that Senator Shower's comments were accurate,
and that if the state continues to spend at the current level of
the FY 2019 budget, it would require a reduction in the
permanent fund dividend, implementation of some form of tax, or
withdrawal from savings [to fund the budget]. Those "tools" or
options would eventually run out. He predicted that the option
to cut the PFD would run out next year and the spending option
would run out within the next eight years. At that point, in
order to maintain its current level of budget spending, the
legislature would need to pass a tax to raise revenues because
there is no other option. The legislature has proactively
reduced spending in the last five years to counter reduced state
revenues.
He said that SJR 6 would seek to prevent increases in spending
in the first place, so that reductions would not be necessary.
He characterized it as the difference between allowing the
situation to solve itself versus proactively managing the long-
term fiscal situation by adopting a permanent fiscal plan.
2:06:00 PM
CHAIR HUGHES summarized Mr. King's comments, that if the
legislature stays on the current trajectory and does not reduce
spending, that the PFD will run out in two years and the
legislature would need to implement taxes in eight years. She
asked if that was an accurate summary.
MR. KING verified the information on the slide. He said that
using a combination approach, the PFD would be gone in two
years. However, because of the timing, he predicted that it
would take about 20 years before the state ran out of savings.
If the legislature only leaned on the permanent fund savings and
did not cut the PFD, the savings would be depleted in about
eight years, he said.
2:06:41 PM
SENATOR MICCICHE commented, "There's a lot of semantics in that
question" and it's a misleading answer because of the choices
that are given. He said that the previous committee discussed
this at length as did the Finance committee, but he would not
get into those discussions today.
He offered his belief that slide 8 represents the worst-case
scenario, which no one was talking about implementing.
Conversely, slide 16 represents "the best of the best." Nothing
would go wrong and everything would go perfectly. The
legislature would support full budget cuts, people would not
rise up against cuts to government services, and oil prices
would not drop. He posited that the state was probably somewhere
in the middle. Aside from these scenarios, what is imperative
about passing SJR 6, with some slight adjustments, is that if
the legislature had reset spending to a reasonable curve, it
would have shaved off billions in excess spending from FY 2008-
2010 and FY 2011-2015. The state would have been over any
conservative measure of a reasonable spending slope, he said.
SENATOR MICCICHE said that passing the resolution is imperative.
He offered his support for SJR 6 because it would set an
appropriation limit, one that must also use a reasonable level
of inflation. He acknowledged that the committee could continue
to argue about when savings would run out or on the price of
oil. However, the details are less important than the overall
picture, he said. He said that the current constitutional
spending limit is inadequate. Further, what happened was that
during times of high revenues, constituents demanded that
legislators overspend, so they did. Some of these same people
are now asking the legislature to "slash and burn," he said.
Adopting an adequate appropriation limit could avoid the tension
that occurs during times of high or low state revenues and it
would regulate a long-term sustainable budget. He asked whether
the administration agreed with his high-level assessment.
2:09:39 PM
MR. KING said he agreed that the two scenarios highlight what
would happen if the legislature does nothing or if it does
everything. The presentation provides the bookends to show what
the future may look like, but as Senator Micciche stated the
reality might be somewhere in the middle, he said.
CHAIR HUGHES said it was important for people to realize what
could happen if the state does not do anything. The two
scenarios presented as bookends were important to understand,
she said.
2:10:33 PM
CORI MILLS, Senior Assistant Attorney General, Labor and State
Affairs Section, Civil Division, Department of Law, presented
the sectional analysis of SJR 6.
MS. MILLS reviewed slide 18, "Appropriation Limit (SJR 6/HJR
7)."
Big picture:
Current appropriation limit is so high that the limit is
never met
? Constitutional Amendment changes the current appropriation
limit to be more meaningful and impactful over time
? Deposits excess revenues annually into savings
? Changes the Constitutional Budget Reserve Fund to the
Savings Reserve Fund and limits spending and fund size
She said that the current appropriation limit was never
effective. She explained the point of SJR 6 is that the
administration seeks to bring the appropriation limit down to an
effective level. It would also create a different savings rule
than the current Constitutional Budget Reserve Fund (CBR) and
change the name of the CBR to a Savings Reserve Fund. It would
also limit the spending from the fund in certain ways, she said.
MS. MILLS reviewed slide 19, "Appropriation Limit: Section
1(a)."
? Appropriation Limit -- ppropriations made for a
fiscal year shall not exceed the average of the
appropriations made in the previous three fiscal years
by more than fifty percent of the cumulative change in
population and inflation since January 1 of the
previous calendar year, derived from federal indices
as prescribed by law, or two percent, whichever is
less."
o Provides a list of exceptions for spending that
falls outside the appropriation limit cap
o Examples: permanent fund dividends and money placed
in the fund; money for disasters; obligations and
proceeds from G.O. bonds and revenue bonds
o Most substantial change from existing exceptions--
capital spending is not an exception and falls within
the appropriation limit cap
MS. MILLS characterized the appropriation limit as the crux of
SJR 6, since it would determine the glide path moving forward.
It would start with a baseline of $2.5 billion and add in
population and inflation [adjustments]. It would take the
average of the last three fiscal year appropriations to create
the baseline. Appropriations shall not exceed 50 percent of
population growth and inflation over the previous year or two
percent, whichever is less, she said. This means the
appropriation would never exceed two percent growth rate in any
given year. Those are the two main changes in Section 1(a), she
said.
SJR 6 would capture the exceptions in the current constitutional
appropriation limit, but enumerate them for clarity
MS. MILLS said that the most substantial change from existing
exceptions is for capital spending. Under the current
appropriation limit, one-third must be for capital spending and
the legislature can go outside the appropriation cap with voter
approval and if the projects are of a similar scope and purpose.
That exception was not included in the appropriation limit.
Instead, the administration's approach was to use General
Obligation (GO) bonds for capital projects since that process
requires voter approval, she said.
2:13:49 PM
SENATOR KIEHL asked for the size of the state's current deferred
maintenance backlog.
MR. KING said he recalls it is in the $2 billion range, but he
would need to confirm that and report back to the committee.
SENATOR KIEHL said that unless the state incurred bonding costs
and bond interest payments, that any [appropriations for]
deferred maintenance would need to fall under the cap.
MS. MILLS answered that is correct.
2:14:31 PM
MR. KING reviewed slide 20, "Illustration of Total Budget
Appropriation Limit." He explained that the graphic listed on
the slide highlights that the state's budget is in excess of the
general fund spending commonly discussed. He said that the total
state budget is $11-12 billion, which includes federal funds and
several other items that would not be considered part of the
spending limit.
He directed attention to the blue bars, which illustrate what
would be subject to the cap while the orange bars illustrate
what would be excluded from the cap. These include all federal
funds, the permanent fund dividend payment, some designated
general funds (DGF), and specifically those designated funds
that are program receipts generated from public corporations,
including revenue bond proceeds. He said some other items in the
budget would be excluded from the cap. For example, debt service
payments, capital items issued by general obligation (GO) bonds
and transfers between accounts would be outside the cap. He said
the spending limit did not mean that the state was reduced from
$12 billion to $5 billion. Instead, those items subject to the
cap would need to remain under the cap.
CHAIR HUGHES referred to the DGF not subject to the cap. She
said some discussion has occurred with respect to how the state
could continue Alaska Marine Highway System services. For
example, one option would be to move it to a public corporation.
She asked whether charges to customers traveling on the ferries
would fall under the cap. She further asked whether tuition
increases at the University of Alaska would fall under the cap
as DGF monies.
MS. MILLS answered that the exceptions were specific to revenue
bonds, that is the obligations and proceeds on revenue bonds or
the debt service as well as the proceeds received. State
revenues received in other ways, such as fees or tuition would
fall under the cap.
2:17:25 PM
MR. KING reviewed slide 21, Calculation of Appropriation Limit."
He stated that this slide provides a mathematical calculation
for the spending cap. Effectively, over time given the
population and inflation assumptions, over time there would be a
growth rate of approximately 0.8 percent. The population
assumption used is one percent growth and the inflation
assumption used is 2.25 percent, he said.
2:18:51 PM
MR. KING reviewed slide 22, "Comparison of Current Limit to
Proposed Limit."
He said that this illustrates visually the legislative finance
data set for unrestricted general funds (UGF). He said that the
red bars represent the next three budgets assuming that the
legislature were to pass something in line with the budget the
governor proposed. The first year would be the FY 2022 budget.
The calculation for the spending limit would include the FY 2019
budget, which is higher than the proposed budgets, while the FY
2022 budget would be below the cap. The allowable spending
growth converges to less than one percent growth.
2:19:46 PM
MS. MILLS, in response to an earlier question from Chair Hughes,
said she was remiss in not pointing out an exception under the
current constitutional appropriation limit. She said it was a
little broader than revenue bonds. She read, "appropriations of
money received from a non-state source in trust for a specific
purpose, including revenues of a public enterprise or public
corporation of the state that issues revenue bonds." She said an
argument could be made that the language is a little broader, so
if the state created a public corporation for the Alaska Marine
Highway System, it may fall outside the cap. She specified that
SJR 6 only speaks to revenue bonds.
CHAIR HUGHES asked if the University of Alaska would be
considered a public enterprise.
MS. MILLS answered that she was unsure, but she would think
about it and respond back to the committee. She said that that
the university is in a special status in the Constitution of the
State of Alaska but still part of the executive branch. She
thought that it might fall under a specific status as a public
enterprise, but she wanted to confirm that.
2:21:16 PM
CHAIR HUGHES reviewed paragraph (7), on page 2, lines 10-12,
which read "of money received by the State from a source other
than the State or federal government that is restricted to a
specific use by the terms of a gift, grant, bequest, or
contract; and". She said that dedicated funds are not allowed
per the Constitution of the State of Alaska. She asked for an
example of when this provision would apply.
MS. MILLS pointed out that this pertained to determining what
would be calculated, not whether it was subject to
appropriation. In fact, that was the reason it would be outside
the cap, she said. For example, someone could donate money to
the state or through "Pick.Click.Give." She noted that some
options allow the person to donate to a state fund. These funds
must be used for a specific purpose but that does not mean that
the funds would not still be subject to appropriation by the
legislature. The funds just cannot be used for any other
purpose, she said.
CHAIR HUGHES asked if the legislature could use funds elsewhere
if the funds were donated for a specific purpose.
MS. MILLS responded that if the state were to do so, it would
probably be in violation of the purpose the donor put forward.
She agreed that this could get complicated. She added that it
would fall under a non-state source.
2:23:07 PM
MR. BARNHILL stated that a number of small funds currently exist
in statute, including the Arctic Winter Games Fund and the
Veterans Memorial Fund. He said that anyone is permitted to
donate to those funds. When the state receives the funds, it
receives them in trust, and it would be placed in the fund for
that purpose. He said that those types of revenue sources would
be excluded from the cap.
MS. MILLS recalled that "Killed in the Line of Duty" was another
fund.
SENATOR KIEHL said he would like follow-up on the University of
Alaska because it is explicit in the Constitution of the State
of Alaska that it is the state university. He asked for further
clarification on whether the Alaska Mental Health Trust Fund or
the Public School Trust Fund would be subject to the cap.
MS. MILLS referred to page 2, lines 8-9, to paragraph (6), which
read, "of money held in trust by the State or received from the
federal government for a particular purpose;". She said that the
Alaska Mental Health Trust Fund would be outside the cap.
MR. BARNHILL answered that the Public School Trust Fund was a
trust fund established in state law that predates statehood. He
said that it was money held in trust by the state for a
particular purpose.
2:24:55 PM
SENATOR KIEHL asked if this language includes moving the corpus
of these trusts or if it covers the earnings of these trusts
being spent for the purposes of the trusts.
MR. BARNHILL referred to page 1, line 12, and read "an
appropriation". He referred to page 2, lines 8-9 of SJR 6, to
paragraph (6), which read, "of money held in trust by the State
or received from the federal government for a particular
purpose;". He said that when the legislature appropriates money
from the Public School Trust, it is appropriating from money
held in trust so it would be excluded from the cap. In response
to the question on the University of Alaska, Article VII,
[Section 2] reads:
Section 2. State University
The University of Alaska is hereby established as the
state university and constituted a body corporate. It
shall have title to all real and personal property now
or hereafter set aside for or conveyed to it. Its
property shall be administered and disposed of
according to law.
He said that the university is a public corporation that is
established in the Constitution of the State of Alaska.
2:25:54 PM
SENATOR KIEHL referred to the lands of the Alaska Railroad
Corporation (ARRC) governed by federal rules. He said it has
been likened to trust responsibility. He asked for the status of
the Alaska Railroad Corporation (ARRC) in terms of SJR 6.
MS. MILLS explained that the Alaska Railroad Corporation (ARRC)
is a public corporation that received lands in a land grant, and
it manages those lands. The ARRC has been seen as an exception
since it does not come to the legislature for an appropriation
unless the corporation has a specific item that cannot be funded
by its own revenue. The appropriation limit wouldn't have any
effect because it specifically speaks to making an
appropriation.
SENATOR KIEHL suggested that if the ARRC was not specifically
exempted, the constitutional amendment could raise a significant
question about whether a state corporation must fall under the
cap.
MS. MILLS said that SJR 6 would not fundamentally change what
requires an appropriation under the Constitution of the State of
Alaska. This language would require the legislature to follow
the guidelines when an appropriation is made. The calculation
would consider everything that is appropriated and subtract the
enumerated items. She related her understanding that the ARRC
does not typically receive appropriations. The ARRC's revenues
are not part of the appropriation bill, so the limit would not
apply.
SENATOR KIEHL offered his belief that it would create a loophole
to work around funds not being subject to future appropriations.
2:28:22 PM
CHAIR HUGHES recalled work being done on the Canada rail link
from Alberta to Alaska, which could be a gamechanger. She said
if the ARRC earned substantial revenue, it is possible the
legislature could make adjustments to allow those revenues to
assist the state. She asked whether that would change anything
since the state would not be appropriating funds to the ARRC.
MS. MILLS answered that SJR 6 would not affect revenues. If the
state created another line of revenue, it would not increase the
appropriation limit. It would just be mixed in with general
funds to be spent. She said she would have to examine whether it
would change how the ARRC is treated. The Department of Law does
not currently represent the railroad. She said she was unsure
because it is very complicated corporation due to the historical
impact of federal laws.
CHAIR HUGHES said she wanted to be sure the committee thinks
that through.
2:30:13 PM
MS. MILLS reviewed slide 23, "Appropriation Limit: Section 1(b)
and (c)."
Section 1(b) and (c) ? Excess revenues would
automatically be deposited into savings accounts in
priority order
Total amount in general fund that is "unexpended,
unobligated, and unappropriated" (i.e., excess
revenues)
Priority 1: Pay back the permanent fund principal 50%
of the income that was deposited into the ERA that
fiscal year
Priority 2: [if money remains after priority 1] Get
savings reserve fund balance up to appropriation limit
(formerly the CBR)
Priority 3: [if money remains after priority 2] Put
money into permanent fund principal to continue
growing the fund
MS. MILLS said that Section 1(b) and (c) are new subsections
added to the appropriation limit. Excess revenues would be
deposited into savings accounts in priority order. She explained
that using priority number 1, money would be moved into the
permanent fund principal equal to 50 percent of the income that
was deposited into the Earnings Reserve Account for that year.
This would basically mean paying back the principal for money
that was earned in income about equal to what was usually
expended for dividends.
She explained that the second priority would be to the savings
reserve fund, currently the constitutional budget reserve, up to
the appropriation limit. The idea is to always have enough money
in the savings account to pay for a full year of government
expenditures. The third priority would be to deposit any
remaining money into the principal of the permanent fund to
continue to grow the fund.
2:31:54 PM
CHAIR HUGHES asked for further clarification on the recommended
amount of savings to have in a reserve balance.
MR. BARNHILL said he was unsure if there is a best practices on
reserve funds. He offered to check with the National Council of
State Legislatures (NCSL) for recommendations.
CHAIR HUGHES said it would be helpful to know if the
recommendation is to have more than one year in reserves.
2:32:30 PM
MR. KING said the amount of funds needed in the savings account
to ensure sufficient liquidity to meet cash flow needs is a
function of several things. First, it would depend on the amount
of money flowing into the account. Second, it would depend on
the volatility of other revenues. Third, it would also depend on
the balance of the fund. If ways to stabilize revenues could be
found, such as the ones that Senate Bill 26 provided last year,
or if oil revenues could be stabilized, a smaller balance could
be held in the reserve account. Further, if additional ways to
refill the fund were found, the account balance could be lower.
This proposal makes the savings reserve fund a second priority.
Given the current volatility of revenue streams, his analysis
showed that the CBR would not satisfy the requirement for
liquidity and it would be necessary to use the ERA to balance
the budget. This was especially true, he said, in his modeling
through 2009 and again in 2016. He said that this issue has a
lot of moving pieces and it isn't possible to provide an in-
depth review today, but he would do so in the future.
2:33:58 PM
SENATOR MICCICHE pointed out that SJR 6 would limit the ability
to spend to 1.9 percent below projected inflation. This would
mean that the state would spend more money addressing the $2
billion in deferred maintenance at times when available cash
could allow it to catch up, such as during the spending spikes
shown in the past. The state would need to bond, but it would no
longer be able to bond, and it could no longer spend its
earnings or revenue, even when excess revenue could allow it to
catch up. Even though the building and roofing material costs
continue to rise due to inflation, the state would be stuck at
1.9 percent below that inflation. However, the state would be
saving at the permanent fund growth rate of 6.7 percent. It
doesn't make sense, he said.
He argued that the state should strive to have an adequately
growing permanent fund and healthy PFDs, but SJR 6 would
exacerbate and accelerate the growth of the permanent fund while
it would "choke" the ability to respond to inflation. At some
point the savings would become unusable. The [permanent fund] is
perpetually and adequately funded through a POMV with a growth
rate that would allow it to pay all future bills. However, the
state would not be able to keep up with needs it must deliver
per the Constitution of the State of Alaska.
SENATOR MICCICHE said he strongly supports the appropriation
limit, but the trick would be to find the right slope to meet
those requirements and have an adequate level of savings growth,
but limit excess spending when earnings are high. He did not
think that SJR 6 built in the right balance. However, he agreed
with the overall philosophy, he said.
2:36:41 PM
CHAIR HUGHES said the volatility of oil prices is one reason she
wondered whether the savings would be adequate because during
low prices when savings were not adequate, it would mean using
the earnings reserve. She said her question is whether it is the
right order or amount.
2:37:14 PM
SENATOR KIEHL asked for the rationale behind only dropping
windfalls to the permanent fund and not to other funds that
generate investment earnings that would offset state spending,
reduce the need for general fund revenues, and the potential tax
on resources or Alaskans. He said the Public School Trust Fund
came up earlier, and there is a Higher Education Fund, which are
used to fund the state program. Earnings from the Power Cost
Equalization Fund are used instead of Alaska's dollars.
MS. MILLS said the funds he mentioned were statutory funds and
could change. She said it would be constitutionalizing another
fund if they were specifically identified. She cautioned against
constitutional language that includes statutory references.
MR. KING pointed out that SJR 6 was an introductory proposal.
The administration would expect it to change as it goes
throughout the legislative process.
2:39:20 PM
CHAIR HUGHES asked if it was possible to identify another fund
that has not been constitutionalized or if a separate
constitutional amendment would be necessary.
MS. MILLS said she thought Chair Hughes was referencing the Bess
v. Ulmer case and the question of whether it would be considered
an amendment or a revision and if a new fund would create more
risk. She offered her belief that it would be permitted, but the
legislature must be careful about how it is done. The
legislature must also decide if it was something that should be
memorialized forever in the Constitution of the State of Alaska.
2:40:13 PM
SENATOR KIEHL said that the existing limit mentions permanent
fund dividends. The PFD is not in the Constitution of the State
of Alaska either, he said. He said he was unsure that the
argument would apply. He suggested considering language related
to trust funds but not to mention them explicitly. He pointed
out that they are funds that generate investment earnings and
there was a lot of "DFMH" in the Mental Health Trust
appropriation that could be offset by more Mental Health Trust
receipts.
MS. MILLS agreed that it was possible. She cautioned the
committee to avoid referencing the statutes. She said Senator
Kiehl is correct that the current appropriation limit mentions
the PFD. It does not guarantee the permanent fund dividend, or
constitutionalizing it, but it does mention it as an exception.
SENATOR REINBOLD said she loves the limitations in SJR 6. She
was unsure why the current constitutional spending limit did not
work. She said the state does not need to spend billions on
education, the university, or medical care. She supports a
spending limit and would like to pass SJR 6 so the voters can
decide. She offered her belief that government spending is out
of control and needs restraint and limitations.
2:43:21 PM
MS. MILLS reviewed the flowcharts on slide 24, "Appropriation
Limit: Sections 2,3, and 5. She said that this would replace the
existing CBR with a new Savings Reserve Fund with limits. Tax
and royalty settlements would flow in the Savings Reserve Fund
(SRF) based on the priorities to fill up the SRF to the
appropriation limit. It would change how funds could be spent.
The CBR can be accessed by a three-fourth vote for any public
purpose, but it has not been done because of Hickel v. Cowper,
that determined that the amount available for an appropriation
included the Earnings Reserve Account (ERA). Since the ERA
contains so much money, it was not possible to reach the level
where the amount available for appropriation was under the
previous year's budget.
2:44:51 PM
CHAIR HUGHES said that since Senate Bill 26 passed, she wanted
clarification on whether it related to the entire Earnings
Reserve Account and not just the earnings reserve Percent of
Market Value (POMV) draw.
MS. MILLS answered yes. The court ruled that the entire amount
in the ERA must be counted. Therefore, the legislature was
restricted to use the three-fourths vote. Under the resolution,
the Savings Reserve Fund (SRF), would eliminate the need for the
three-fourths vote. It would repeal that provision and allow
spending by majority vote, taking into account the amount
available for appropriations from the general fund, but not the
CBR. Thus, if revenues were much lower, the legislature could
use a majority vote only to fill the gap between revenues in the
general fund and the appropriation limit. Lastly, because of the
excess savings rule created in the appropriation limit, it would
remove the repayment provision. Instead of repaying the CBR, the
legislature would use excess revenues to fill the permanent fund
and the CBR. The remaining provisions are transition provisions
for applicability and to place it on the ballot.
2:46:33 PM
CHAIR HUGHES asked whether she would discuss the legal memos
from the Department of Law and Legislative Legal Services.
2:46:57 PM
MS. MILLS said that when amending the Constitution of the State
of Alaska, language is added so constitutional issues do not
typically arise. One legal question that arose was whether the
change can be made by amendment, such as SJR 6. The amendment
would go through the legislature and must pass by a two-thirds
vote of both houses. It would then be placed on the ballot for a
vote. A majority vote of the people would approve it. Another
way the Constitution of the State of Alaska could be amended is
by revision. Revision must be done by a constitutional
convention. The Alaska Supreme Court has only ruled on one case
to determine the difference between an amendment and a revision.
This relates to which process must be used to change the
constitution, either the legislative process to amend it or the
constitutional convention to revise it, she said. The Alaska
Supreme Court ruled on three different constitutional amendments
that passed the legislature in one year under Bess v. Ulmer.
This ruling provides some guidance on how the court applies this
test. The court ultimately determined that it would focus on the
qualitative aspects or "how it changes the substance" and
quantitative or "how many times it touches it."
2:48:44 PM
MS. MILLS said she found it helpful to frame the issue the way
the court did, such as whether the proposed amendment was
changing the powers, the authorities, the relationships created
by the original framers by fundamentally changing the organic
whole of the Constitution of the State of Alaska and the way it
works. The court found it to be a hybrid approach, a balancing
test, so something may quantitatively be minimal. This would
mean the qualitative effect would need to be higher or vice
versa. If the qualitative effect was minimal, the quantitative
would need to be higher in order for it to be considered a
revision.
2:49:26 PM
MS. MILLS reviewed the three other constitutional amendments
that the court considered under Bess v. Ulmer. First, the court
considered the rights of prisoners and ruled that the proposed
constitutional change would be a revision. Thus, it could not go
on the ballot, she said. Basically, the court found that the
rights of prisoners in Alaska would always be the same as those
under the U.S. Constitution. This meant that any case law under
the U.S. Constitution would also apply in Alaska. The court's
logic was that the proposed constitutional amendment would
substantially alter the substance and the integrity of the
Constitution of the State of Alaska. The court said that the
Constitution of the State of Alaska is a document of independent
force and effect. The court also considered other provisions and
determined it would alter as many as 11 separate sections of the
Constitution of the State of Alaska.
2:50:27 PM
MS. MILLS explained that the Alaska Supreme Court also
considered the marriage amendment, which was later found
unconstitutional under the U.S. Constitution, but at the time
the court allowed it to go to a vote of the people. The court
considered that the proposed constitutional change was limited
in both its scope and effect, so it allowed this measure to be
placed on the ballot for a public vote.
MS. MILLS turned to the last one, which was Legislative Resolve
74. Prior to this constitutional amendment, the executive branch
had the sole authority to set the legislative district
boundaries. This constitutional amendment changed it to a
neutral board, appointed by the governor, the legislature, and
the chief justice. Thus, the board consisted of all three
branches of government, she said. The court ruled that it would
only be an amendment despite that it changed most of Article VI
of the Constitution of the State of Alaska. The court considered
it to be quantitatively minimal, stating that it would not
fundamentally change the constitutional role of any branch of
the governmental process.
MS. MILLS said that the Department of Law was very comfortable
that SJR 6 would constitute an amendment and not a revision. She
said that the spending limit is already an amendment to the
Constitution of the State of Alaska. This would merely change
existing amendments and furthering the original intent of those
amendments.
2:52:21 PM
MS. MILLS explained that the people voted on an appropriation
limit because they wanted spending to be capped in some way. The
spending limit was not effective and SJR 6 aimed to put in a
meaningful and impactful appropriation limit, which is very much
in line with the amendment voters originally voted on when they
passed the constitutional spending limit. This could be said
about the constitutional budget reserve (CBR) fund. She
characterized it as a reaction and desire to save during any
state windfalls. It would ensure that revenues were removed from
the general fund and locked away in a manner that allowed for
spending with a higher vote, but it would primarily be deposited
as savings.
The department used the same purpose and goal in constructing
SJR 6, so the department views SJR 6, when taken as a whole, to
make neither quantitative nor qualitative changes. It touches on
just two sections and it furthers the impact and intent of
amendments already in place in the Constitution of the State of
Alaska. In its current form, the department believes the court
would likely deem SJR 6 as an amendment, she said.
2:53:57 PM
MS. MILLS said she cannot speak for Legislative Legal Services
who issued a differing opinion, but she would point out that the
court's test cites to a Florida Supreme Court test. The court
was citing it to show how the states distinguish between
amendments and revisions. She said that Florida uses a four-part
test, but ultimately the Alaska Supreme Court did not adopt that
test. Instead, it adopted the qualitative and quantitative test
as a hybrid approach, she said
CHAIR HUGHES pointed out the Legislative Legal services memo [of
March 29, 2019] refers to four best factors. She asked for
further clarification that Ms. Mills considers them as four
Florida factors.
MS. MILLS stated that in her opinion she did not view them as
best factors, or Alaska Supreme Court factors, but as ones
related to Florida Supreme Court factors that apply to the
Florida constitution.
2:55:06 PM
CHAIR HUGHES referred to the DOL memorandum on reapportionment.
She viewed it as a considerable change since it changed
reapportionment from being solely assigned to the executive
branch to a board that encompassed all three branches of
government. She suggested that seemed to be a much higher
qualitative level than the amendments in SJR 6.
2:55:41 PM
SENATOR KIEHL asked whether Legislative Legal Services could
provide a response.
CHAIR HUGHES said that the committee could ask Meghan Wallace,
Director, Legislative Legal Services to respond to questions.
SENATOR KIEHL pointed out that he would like a response to the
idea that the memorandum does not cover the Bess v. Ulmer test.
He said he thought it would be relevant to understand what test
was being applied and the relevance. He characterized them as
dueling memos.
2:56:46 PM
SENATOR MICCICHE said that the four-part test in 1999 seemed to
set precedent. He asked for further clarification on why it was
not being used in Alaska law.
MS. MILLS said she would be interested in hearing the reasoning
for Ms. Wallace citing it. In Bess v. Ulmer, the court discussed
the difference between an amendment and a revision. The court
cited a number of treatises and provided a general discussion.
She read, "The case law of other states, which have similar
constitutional provisions that distinguish between amendments
and revisions, is in accord with the scholarly writing." She
said that the scholarly writing basically acknowledged the
fundamental difference so they must be treated differently.
She read, "The Supreme Court of Florida described one aspect of
the distinction by stating " It goes on to say, "The same court
later held that the power to amend the constitution as distinct
from the power to revise it includes " The decision lists the
four-factor test, but not because the Alaska Supreme Court
wanted to adopt it as its test. The court was just showing what
other states had done, she said. The court speaks to how
California's test was applied. One section in the decision was
identified as "The Alaska Rule and its application to the three
challenged ballot measures." Under Section C of the opinion, the
court said, "In deciding whether the proposal is an Amendment or
a revision, we must consider both the quantity and quality of
the proposed constitutional changes. We agree with the reasoning
of the California Supreme Court ." It then listed three
California cases, but it never cited the Florida case again. She
said she was unsure of the import given to the Florida case
because she did not view the Alaska Supreme Court as adopting
it, she said.
2:59:18 PM
SENATOR MICCICHE pointed out that the Senate State Affairs had a
different focus than the Senate Judiciary Committee when it
considered SJR 6. He referred to the qualitative aspect in SJR
6. For example, if it plotted out what would happen to an
interest rate of .08 percent over 30 years, it would result in
life changing outcomes. He did not agree with Ms. Mills, he
said. He suggested that taking that amount of dollars and
locking away revenue earned in boom years with a flat growth
rate would change the very fabric of how the state would
operate. He predicted it would have a more dramatic effect than
any change in the state, even pre-oil. He said he was unsure it
was possible to operate with a 1.9 percent inflation rate for
forty years. He heard the analysis and took it at face value,
but he thought that the impact over time crossed over to a very
different place. It would be one that would impact the state's
ability to meet constitutionally required services, he said.
3:01:33 PM
MS. MILLS agreed that significant policy questions arise
especially given the impact and growth curve the legislature
would like to see over time. Bess v. Ulmer relates to the
Constitution of the State of Alaska as a whole and the powers
and authorities, she said. It does not mean that changing those
won't have a significant impact, but the state already has a
constitutional appropriation limit, which was meant to limit
government. She said it is important to consider how it would
impact government spending and government overall.
CHAIR HUGHES also agreed. As Senator Reinbold indicated, it was
important to have a spending limit, so she would like to see it
hold up constitutionally.
3:02:55 PM
SENATOR KIEHL referred to her memo of March 25, 2019. He said he
did not see much discussion of the court decision in Bess v.
Ulmer, despite the second half of the proposed marriage
amendment. He said that it was one sentence but qualitatively
colossal.
MS. MILLS agreed. She said that the court struck the language.
In terms of the analysis, the [marriage amendment] was something
that could be reviewed and considered. It just did not seem
foundational to the test the court adopted. She said it also
demonstrated that the court has the power to strike certain
portions. She said she had no other comment. She said it is
difficult to look into a crystal ball and determine what the
court would do to a specific amendment, in terms of striking
language. She commented that she may have missed his point.
3:04:23 PM
SENATOR KIEHL said it is important to the analysis. As she
previously stated, Bess v. Ulmer addressed three proposed
amendments. He said he was trying to assess how important this
is to the administration. He stated that the constitutional
framers put on the popular direct election of representatives in
a participatory government. Constraints on the power of
appropriation are pretty different than changing the decennial
redrawing of lines. In fact, given the number of cases related
to the power of appropriation, he would be surprised if the
court did not think so, too.
3:05:51 PM
MR. BARNHILL related his understanding that SJR 6 was the most
important piece of legislation in Governor Dunleavy's plan for
fiscal stability for the state. He offered his belief that the
attorney general stated that yesterday. He reiterated that it is
of paramount importance. He suggested members review the
historical slides that demonstrate a distinct correlation
between the price of oil and the amount of government spending.
He highlighted that the problem is that the state ends up in
spending traps created by a high price of oil. The whole point
of SJR 6 is to help the state to avoid [overspending]. If oil
prices were to rise above $100, a spending limit in this form
would force the state to save for when oil prices go down again.
It would help the legislature avoid these very disruptive
legislative sessions when the price of oil drops and it becomes
very difficult to cut spending.
SENATOR KIEHL said that the substantive effect on four different
provisions of Article XI, along with the significant impact on
the Article II powers of the legislature, and Mr. Barnhill's
statement that this was critically important, fails the best
test, because it is an attempt at a revision.
3:08:04 PM
SENATOR REINBOLD said she did not think that Court of Appeals
Judge Burgess had the authority to do what he did at the federal
level. She disagreed with the decision. She said the
constitutional amendment was the will of the people. She offered
her belief that the decision undermined Alaskans and the
Constitution of the State of Alaska.
She offered her belief that every dime for state government
comes from the private sector. In FY 2016, the legislature spent
$16 billion, of which $3 billion was for capital projects and $3
billion was for the Public Employees Retirement System and the
Teachers Retirement System. She said it was the largest budget
in the state's history. She acknowledged the Constitution of the
State of Alaska prohibits dedicated funds, except Section 15 and
for a federal government program. She reiterated that government
needs to be restrained. She said that she thinks SJR 6 is good
for the private sector and for government since it may result in
innovation.
3:10:58 PM
CHAIR HUGHES referred to the Legislative Legal Services
memorandum [of March 23, 2019], in which four factors were not
adopted in Bess v. Ulmer. She asked whether the sweeping change
was referring to the qualitative test. She noted that Senator
Kiehl mentioned reapportionment and redrawing of district lines,
which has huge ramifications. She referred to Ms. Wallace's
statement that read, "The Court also suggested in Bess, that if
a fundamental power of one of the branches of state government
is significantly altered, this could result in the type of
'sweeping change' that is not permitted to be accomplished in an
amendment to the state constitution." After reading that, she
wondered if the constitutional amendment related to
reapportionment should have been a revision. It did alter the
fundamental power of all three branches, she said.
MS. MILLS said one of the quotes that she found most helpful
was, "We conclude that a revision is a change which alters the
substance and integrity of our constitution in a manner measured
both qualitatively and quantitatively." She said that the
sweeping change could be one way to think of it qualitatively
and quantitatively. The court went on to develop a hybrid
approach but considering how many sections it touched and the
types of fundamental changes it made. She identified these as
all factors, that sweeping change could be one way to describe
it, but in going back to the court's language, it found that
there were two amendments. These concepts of having an
appropriation limit and the Constitutional Budget Reserve (CBR)
were adopted by a majority vote. That never really materialized
due to the good savings in the ERA, she said. She characterized
her comments as a global comment on how Bess v. Ulmer approached
these issues.
3:13:41 PM
CHAIR HUGHES said that Ms. Mill's presentation indicates that
she does not believe SJR 6 makes any "sweeping changes." She
said that she does not think so either. She acknowledged that
SJR 6 would make some considerable tweaks. She said she thought
back to when the [original spending limit] amendment was put
forward and voters passed it. It was a matter of what was more
important, people's immediate gratification or putting away for
Alaskans' grandchildren. She said that she laments that the
state does not have the $29 billion it spent. She wondered
whether in 20-30 years if the state will have frittered away
billions of dollars that could alleviate a serious bind her
granddaughter could face as an adult. She said that she does not
think it passes a "sweeping change" but rather that it would
just adjust the existing spending limit.
3:14:49 PM
SENATOR MICCICHE remarked that he normally would agree, but he
totally disagrees that this would not be a "sweeping change." In
fact, the changes in SJR 6 would be a major revision, he said.
He offered his support for an appropriation limit. However,
noting it would go from an appropriation limit that has almost
no effect to one that would severely limit almost anything,
especially using a 1.9 percent below projected inflation rate,
was not a mathematically reasonable approach. He remarked that
SJR 6 would make sweeping changes and dramatically change the
legislature's ability to appropriate, even when those changes
were requested by the people.
He offered his belief that SJR 6 would not pass the legislature
in its current form. He would like a spending limit, but without
a reasonable rate and approach the legislature would not pass an
appropriation limit. He reminded members that last year a
resolution was introduced for a spending limit using a
reasonable approach, but it did not receive a single hearing in
the other body. He said he would like to see a very strict
appropriation limit that could pass the legislature. Further, it
should be based on math that works, that could pass
constitutional muster and limit future growth and spending. He
remarked that he may have a couple of amendments to offer.
3:16:36 PM
CHAIR HUGHES said she has some concerns, but when she was
speaking in general about tweaking amendments, it was at the
30,000-foot level. She said she also wants a constitutional
amendment that could pass the legislature. She acknowledged that
a robust economy requires a certain amount of infrastructure.
She expressed concern that the capital budget was so low at the
same time that the legislature cannot reduce the operating
budget. She has wondered about the calculation on the inflation
rate growth.
3:17:22 PM
SENATOR REINBOLD argued that SJR 6 would pass based on the
support the State Affairs Standing Committee heard when it took
public testimony. She said she thought that the committee would
be defying the people by saying it would not pass and the
legislature would not be representing them fairly to say it
won't pass. She said she thinks the voters would pass it because
the majority of people support it.
3:17:52 PM
SENATOR MICCICHE said he refuses to make statements like that
one. He said that he was very interested in limiting government
growth. However, it would require a two-thirds vote of both
bodies to get to a vote of the people. He offered his belief
that SJR 6 was the most important bill to pass since it will
define the economic future of Alaska.
CHAIR HUGHES said she thought if it were to go to voters it
would pass. However, the legislature has a process. She said
that the legislature must obtain two-thirds of the votes in the
building. She said she firmly believes in infrastructure for
economic growth, so she has concerns about that piece.
3:18:59 PM
SENATOR REINBOLD said the Constitution of the State of Alaska
does prioritize one-third of the permanent fund for capital
projects.
MR. BARNHILL said that would refer to the existing spending
limit, which provides a one-third reservation for capital
projects. This proposal would eliminate that provision.
SENATOR REINBOLD said she would like to hold further discussions
on the one-third provision for capital projects in the current
spending limit.
[SJR 6 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR 6 Version A.pdf |
SJUD 3/27/2019 1:30:00 PM |
SJR 6 |
| SJR 6 Transmittal Letter.pdf |
SJUD 3/27/2019 1:30:00 PM |
SJR 6 |
| SJR 6 Sectional Analysis.pdf |
SJUD 3/27/2019 1:30:00 PM |
SJR 6 |
| SJR 6 Fiscal Note GOV-DOE.pdf |
SJUD 3/27/2019 1:30:00 PM |
SJR 6 |
| SJR 6 Slide Show Presentation & Analysis.pdf |
SJUD 3/27/2019 1:30:00 PM |
SJR 6 |