Legislature(2021 - 2022)BUTROVICH 205
01/28/2022 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR19 | |
| SB129 | |
| HB3 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 19 | TELECONFERENCED | |
| += | SB 129 | TELECONFERENCED | |
| += | HB 3 | TELECONFERENCED | |
| *+ | HB 155 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SJR 19-CONST. AM: APPROP LIMIT
1:31:36 PM
CHAIR HOLLAND announced the consideration of SENATE JOINT
RESOLUTION NO. 19, Proposing amendments to the Constitution of
the State of Alaska relating to an appropriation limit.
1:32:09 PM
SENATOR MYERS, speaking as the sponsor, stated that the
committee heard Senate Joint Resolution 301 during the third
special session. He noted that SJR 19 incorporated the identical
language from that resolution.
1:32:26 PM
MICHAELLA ANDERSON, Staff, Senator Robert Myers, Alaska State
Legislature, Juneau, Alaska, on behalf of the sponsor, stated
that as SJR 19 is identical to the language in committee
substitute (CS) Senate Joint Resolution 301 (JUD) that passed
out of committee in the third special session.
MS. ANDERSON summarized SJR 19. This appropriation limit would
effectively be 14 percent of the five-year rolling average of
the personal income of Alaskan private employees. The income of
state and local government employees would not contribute to the
calculation, nor would the limit include permanent fund dividend
income.
MS. ANDERSON stated the exceptions to the limit:
Exceptions to the limit would include appropriations
for payment of permanent fund dividends,
appropriations to the Alaska Permanent Fund,
appropriations from federal funds, appropriations from
other nonstate sources and trusts such as corporate
receipts, appropriations to oblige a disaster
declaration, appropriations to pay off revenue bonds,
appropriations to state accounts or funds that have
subsequent appropriations from the accounts, such as
the constitutional or statutory budget reserve
accounts, and general obligation bonds. The limit
could be exceeded to fund capital projects with a 2/3
vote of each body.
1:33:54 PM
MS. ANDERSON explained that the spending cap would need to pass
by constitutional amendment standards in both bodies and
subsequently require voter approval. If approved by the voters,
the legislature could approve the spending cap by a simple
majority vote of the legislature. However, the spending limit
could never exceed 14 percent.
MS. ANDERSON stated that the purpose of the spending limit is
not to ratchet down current spending but rather to create a
meaningful spending cap when the state has additional revenue,
such as oil revenue. It would smooth out future spending to
prevent overspending and save those excess funds for a rainy
day. It would also smooth out capital budget expenditures and
prevent spikes for infrastructure maintenance when the state may
not have the funds to do so. SJR 19 would also help create
predictability for the construction industry.
MS. ANDERSON noted that Alexei Painter was online to answer any
technical questions.
1:34:49 PM
CHAIR HOLLAND stated his intention to set aside SJR 19 until
next week after committee discussions.
1:35:03 PM
SENATOR SHOWER noted that three Fiscal Policy Working Group
(FPWG) members also serve on this committee. He asked him to
compare the proposed constitutional spending limit in SJR 19 to
the Fiscal Policy Working Group's recommendations for a spending
cap.
1:36:04 PM
SENATOR MYERS said he did not have the FPWG report in front of
him. Still, he recalled that the report recommended the state
institute a reasonable spending cap without specifying details.
He stated that Representative Kaufman suggested the original
concept. He expressed his preference for SJR 19's approach for a
spending cap because it would not immediately put pressure on
the state's budget. He noted the legislature has appropriating
authority for the budget. The point of the cap is to avoid a
run-up in future spending. He said if the state experienced
another boom similar to the one from 2006 to 2014, it would
force the state to save more revenue and constrain spending to
diminish issues when the boom is over. He highlighted that the
state's economy has been based on oil revenue historically.
Since that industry tends to be boom or bust, it has resulted in
boom or bust state spending, with the bust portion challenging
to navigate.
1:37:31 PM
SENATOR MYERS explained that the state's constitutional
appropriation limit or spending cap was initially based on Gross
Domestic Product (GDP). He stated that this proposal uses
personal income tied directly to the state's economy. He
predicted the state will face a dilemma because a substantial
amount of the state's budget would be based on Alaska Permanent
Fund income. However, the state no longer has a direct tie to
the states' economy. Other states' tax revenue provides links to
their economies. If these states suffer a downturn, their tax
revenue diminishes. This provides these states with an incentive
to ensure that their economies do well. As Alaska becomes more
removed from any ties to its economy, the state's spending
correlates more with what is happening in the stock market. He
and Representative Kaufman wanted to ensure that Alaska has
incentives to ensure that state government finances are doing
well and that Alaskans prosper.
1:38:59 PM
SENATOR MYERS explained that under SJR 19, if the state's
economy does not grow, it will limit state government spending.
As the state's economy grows, the state can grow with it. As
Alaska's economy grows, especially during resource booms, the
state could add state services such as more police and schools
needed because of population growth. Thus, the tie between
personal income and the state's economy is necessary.
1:39:49 PM
SENATOR SHOWER asked how closely he had followed the Fiscal
Policy Work Group (FPWG). He offered to talk offline with the
sponsor to tie the structure in SJR 19 to the FPWG's
recommendations.
1:41:03 PM
SENATOR HUGHES acknowledged that the FPWG's recommendations
included adopting a meaningful spending cap. She said that
"meaningful" meant that the spending cap would need to endure
over time. She appreciated that this proposal was a
constitutional amendment rather than a statutory change. She
noted some colleagues were leaning towards a statutory fix. She
expressed concern that allowing the legislature to change the
percentage may conflict with the Alaska Constitution's express
authority for legislative appropriation. She asked whether the
sponsor consulted with Legislative Legal Services or the
Department of Law on whether the legislature would need to
adhere to the 14 percent if SJR 19 were to pass, and that it
could not veer away from it.
SENATOR MYERS said the committee addressed that issue last fall
in Senate Joint Resolution 301. The committee passed an
amendment to ensure that the legislature could adjust the
percentage under two conditions. First, it would need to pass a
bill that is not an appropriation bill. This would prevent the
legislature from overriding the spending limit by passing the
budget. Second, the current 14 percent in SJR 14 creates an
upper limit. The legislature could ratchet it down, but it could
never exceed the 14 percent limit.
1:43:35 PM
SENATOR HUGHES asked how he arrived at the 14 percent limit.
1:43:52 PM
SENATOR MYERS referred to a PowerPoint, slide 2, Proposed
Constitutional Appropriation Limits Based on State Private
Personal Income. He explained that Representative Kaufman
originally suggested tying the 14 percent limit to the Gross
Domestic Product (GDP). He offered his view that using 14
percent gave the state a fair amount of headroom. However, the
vast majority of the headroom disappeared when SJR 19 was based
on personal income. Although the spending limit was tighter than
initially planned, it is still above last year's spending and
this year's proposed spending.
1:44:31 PM
SENATOR KIEHL stated that he compromised on the spending cap
during the FPWG deliberations when the committee changed the
proposed state spending limit in the third special session when
discussing Senate Joint Resolution 301. He characterized the
amendments adopted in that legislation as putting the state in a
"not debilitating" position. That language was incorporated into
SJR 19. He recalled the overall effect would give the
legislature an estimated "headroom" of $600,000 to $700,000. He
asked if that was correct.
1:46:19 PM
SENATOR MYERS responded that it sounded right, but he offered to
double-check the figures.
SENATOR KIEHL suggested that the committee tweak it a little
since the spending cap could never exceed the 14 percent upper
limit.
1:46:47 PM
CHAIR HOLLAND held SJR 19 in committee.