Legislature(2021 - 2022)BUTROVICH 205
01/31/2022 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR19 | |
| HB155 | |
| SB119 | |
| 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 155 | TELECONFERENCED | |
| + | SB 119 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SJR 19-CONST. AM: APPROP LIMIT
1:33:39 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.
CHAIR HOLLAND reminded members that the committee worked
extensively on Senate Joint Resolution 301 during the third
special session. The committee substitute (CS) language for
Senate Joint Resolution 301 was incorporated into SJR 19.
[The committee held its first hearing on SJR 19 on 1/28/2022.]
1:34:22 PM
SENATOR SHOWER commented that the committee discussed [Senate
Joint Resolution 301] last year. He asked for a summary of how
the trailing average works and what indicators drive the change
in the spending cap.
1:35:18 PM
SENATOR MYERS, speaking as sponsor, responded that SJR 19 uses a
five-year rolling average for the personal income index for
several reasons. First, he offered his view that this would
provide more stability. Second, if the state experienced a
recession, it would need to ramp up unemployment insurance and
several other things to create a smoothing effect. This means
the economy can drop slightly while the rolling average is still
increasing. The state would not cut off state spending
immediately when it is needed. The state would need to reduce
its spending, but using personal income provides a little
flexibility at the beginning. He offered that this provides some
incentive for the state to pay attention to the private sector
and help get the economy back up and running if the state
experiences a recession.
1:36:51 PM
SENATOR SHOWER related his understanding that the spending cap
could drive spending down. He asked for the curve's starting
point and if it would be based on the current budget and trend
upward.
SENATOR MYERS answered that the spending cap would put downward
pressure on the budget if the state experienced a recession. The
concept of a spending cap is not only to cap spending but to tie
it to the performance of the state's economy as a whole. Second,
one benefit of the spending cap is the structure in SJR 19.
Previous spending caps were based on current spending and
indexed by inflation, population, or both. This creates some
significant problems because it is not necessarily tied to
current events, including state spending and the economy. He
acknowledged that inflation is always an issue, but it is a
driver based on events happening outside of Alaska. He said that
the population largely follows the economy. If the economy is
doing great, more people will come to Alaska, but the population
tends to diminish if the economy is tanking. He offered his view
that using personal income as the statistic would provide a
better tracking overall.
1:39:28 PM
SENATOR KIEHL moved to adopt Amendment 1, work order 32-
LS1353\A.1.
32-LS1353\A.1
Marx
1/27/22
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR KIEHL
Page 2, line 4:
Delete "fourteen"
Insert "fourteen and one-half"
Page 2, line 8:
Delete "fourteen"
Insert "fourteen and one-half"
SENATOR HUGHES objected for discussion purposes.
1:39:46 PM
SENATOR KIEHL explained Amendment 1. He said he discussed SJR 19
with Legislative Finance and Ed King, an economist and committee
staff. It appears a slight upward adjustment to the cap is
necessary to achieve the additional headroom the committee
discussed last fall. He recalled the committee had discussed 14
percent of Gross Domestic Product (GDP), leaving $600 million of
headroom. He referred to charts the committee reviewed at its
last meeting on January 28, 2022. He recalled that the spending
cap based on personal income would provide $100 million in the
current fiscal year and approximately $400 million in the next
fiscal year. He stated that raising the percentage to 14.5
percent would achieve the level of headroom the committee
discussed when it moved Senate Joint Resolution 301 from the
committee.
1:41:30 PM
SENATOR HUGHES referred to slide 1, Current Constitutional
Appropriation Limit (Article IX, Section 16) and Appropriations
Subject to the Limit. She directed attention to the graph on the
lower side of the slide. She said it appears as though the blue
line shows the state had $100 to $200 million of headroom during
the state's highest years of spending [in FY 2009, FY 2012, FY
2013, and FY 2014]. She asked if the light blue line would move
slightly upward if the spending cap was based on 14.5 percent
instead of 14 percent.
1:42:23 PM
SENATOR KIEHL responded that he thought it was the current
status quo spending limit as shown by the dark blue line.
1:42:32 PM
SENATOR MYERS agreed. The graph reflects the current spending
cap established in the early 1980s. He said that the large gap
illustrates that the existing spending cap is ineffective. It
did not curb spending beginning the year after it was adopted.
It potentially could have applied in the last boom in FY 2007 or
FY 2012, but the state is nowhere near that right now.
1:43:31 PM
SENATOR HUGHES asked for confirmation that using either 14
percent or 14.5 percent of the five-year rolling average of the
value of personal income of Alaska residents would mean the
constitutional spending limit would be below the high peaks
shown on the lower chart.
SENATOR MYERS directed attention to slide 2, to the bar chart
shown in orange, Proposed Constitutional Appropriations Limits
Based on State Private Personal Income. The bars representing
state spending in FY 2009 and FY 2013 would be significantly
above the proposed spending cap in SJR 19.
1:44:08 PM
SENATOR SHOWER asked for confirmation that the chart on slide 2,
Proposed Constitutional Appropriations Limits Based on State
Private Personal Income means that the state could have saved a
significant portion of the funds. He acknowledged that some of
the spending was for capital budgets. He recalled Mr. King
briefed members that the permanent fund would be $115 to $130
billion if not spent. He asked if this would create a true
downward pressure. He asked how the constitutional spending
limit of 14.5 percent would affect the chart. He wondered if the
spending limit would be about 20 percent.
1:45:38 PM
SENATOR KIEHL answered that it is difficult to predict what
prior legislatures would have done since legislators could have
increased the balances in the permanent fund, constitutional
budget reserve (CBR), or statutory budget reserve (SBR). The
referenced chart with orange bars and the blue line indicates
that it would have resulted in less spending. He said the
spending limit based on the 1980s era percentage of personal
income was about $10 billion. He estimated ballpark figures of
25 percent.
1:46:40 PM
SENATOR MYERS said he believed Senator Kiehl was correct. He
said the current spending cap was 23 percent of GDP.
1:47:27 PM
At ease
1:48:06 PM
CHAIR HOLLAND reconvened the meeting.
1:48:13 PM
SENATOR HUGHES stated that using the appropriation for this
budget, there would be about $500 million headroom at 14
percent.
SENATOR MYERS answered that using the governor's budget for FY
2023, SJR 19 at 14 percent, would provide $467 million headroom.
1:49:01 PM
SENATOR SHOWER responded that he did not mind providing some
wiggle room. He acknowledged that it was pertinent for the next
committee of referral. He said he agreed, but he was concerned
about raising the percentage.
1:49:58 PM
SENATOR HUGHES said she realized that this would provide $500
million in headroom, so she is comfortable using a spending cap
based on 14 percent.
1:50:40 PM
SENATOR KIEHL explained the underlying constitutional language
provides the absolute hard ceiling. He spoke in favor of giving
a little more flexibility to the spending limit.
1:51:22 PM
SENATOR HUGHES maintained her objection.
1:51:27 PM
A roll call vote was taken. Senator Kiehl, Myers, and Holland
voted in favor of Amendment 1 and Senators Shower and Hughes
voted against it. Therefore, Amendment 1 was adopted by 3:2
vote.
1:52:01 PM
CHAIR HOLLAND opened public testimony on SJR 19.
1:52:37 PM
EDWARD MARTIN, JR. representing self, Kenai, Alaska, stated that
SJR 19 was an interesting resolution. He said he thought that as
an American, he was secure in his person, paper and effects. He
expressed concern that using personal income would not be
available since Alaska does not have a personal income tax. He
asked whether the state would use the federal tax rolls to spy
on Alaskans. He suggested it might be intrusive.
MR. MARTIN said he appreciated the sponsor's concern about
government spending. He shared his viewpoint on another bill,
not before the committee and the need to cut government
spending.
CHAIR HOLLAND asked testifiers to speak to the bill before the
committee. He asked his staff to provide insight to address Mr.
Martin's concerns.
1:56:39 PM
ED KING, Staff, Senator Roger Holland, Alaska State Legislature,
Juneau, Alaska, stated that the US Bureau of Economic Analysis
publishes federal metrics and those metrics were used to
generate the charts. The IRS provides federal data that is
available for states, even those without a personal income tax.
1:57:23 PM
MIKE COONS, representing self, Palmer, Alaska, (via
teleconference) said the sponsor mentioned the five-year rolling
average in terms of a recession. He said that going back to the
governor's proposal of 2.5 with a 10 percent cap would provide
more money to address a recession. He highlighted that the real
function of government is not to provide social welfare. He
offered his view that the SJR 19 language would confuse voters.
He surmised they would vote no. He favored the governor's
amendment with a 2.5 percent cap. He said he does not support
SJR 19.
1:59:47 PM
SENATOR HUGHES asked Mr. Coons to repeat his last sentence.
MR. COONS stated that he would like a clearcut 2.5 percent
spending cap and that the legislature should let the voters
decide. He does not support SJR 19, but he supports the
governor's proposed constitutional spending cap.
2:00:23 PM
SENATOR MYERS stated he was unsure whether he understood his
point. The committee previously reviewed the governor's proposed
constitutional amendment, and it did not use a percentage, so he
was uncertain about the reference to the 2.5 percent cap.
MR. COONS responded that was his understanding of the governor's
spending cap.
2:01:08 PM
SENATOR HUGHES clarified for the public that comparing the two
constitutional amendments was not comparing 2.5 percent to 14 or
14.5 percent of growth.
2:01:56 PM
SENATOR MYERS summarized the governor's constitutional amendment
[SJR 5] for a spending cap to SJR 19. The governor took the
current spending and indexed it to inflation and population
growth. As inflation and population grows, the legislature's
amount to spend would increase.
SENATOR MYERS explained that SJR 19 proposes a different
mechanism. Rather than taking current spending, the spending
should reflect the economy. The 14 percent spending limit is not
a measure of growth but how much of the economy comes from the
government. Thus, if the economy shrinks, the budget will
shrink; if the economy grows, the government will grow. As he
mentioned when he presented SJR 19, one would expect the
government to grow as the economy grows. He emphasized that
while the goal is to limit spending and excess, the mechanism
used in the two proposals is very different.
2:03:23 PM
CHAIR HOLLAND summarized that under SJR 19, as the economy
shrinks, there would be downward pressure to shrink state
spending. As the economy grows, there would be more
opportunities for state spending to increase. However, it would
do so by increasing the cap.
SENATOR MYERS answered that he was correct.
2:03:40 PM
SENATOR HUGHES related a scenario where the economy could
shrink, the population could grow, and inflation could rise. The
legislature would like to avoid the predicament where it cannot
afford government spending. She said she believed that tying it
to the economy would be better than using population and
inflation factors.
2:04:10 PM
CHAIR HOLLAND closed public testimony on SJR 19.
2:04:23 PM
SENATOR MYERS made closing remarks. The point of a spending cap
is not to put downward pressure on the legislature during a
spending crisis but to limit growth and excess spending. The
legislature has discovered it is effortless to increase
expenditures but challenging to reduce them. It's better to keep
spending from going up in the first place. Last year, he did the
math when he introduced the resolution for a spending cap using
GDP. Even without addressing inflation or investment, the state
would have an extra $15 billion in the bank. He surmised that
economic modeling using personal income, as SJR 19 does, would
likely be similar. A significant part of the fiscal solution is
ensuring that the state does not go on a spending spree again
when revenue increases.
2:05:43 PM
SENATOR SHOWER moved to report SJR 19, work order 32-LS1353\A as
amended, from committee with individual recommendations and
attached fiscal note(s).
CHAIR HOLLAND heard no objection, so SJR 19 was reported from
the Senate Judiciary Standing Committee.
2:06:06 PM
At ease
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 119 Sponsor's Statement Final.pdf |
SEDC 4/23/2021 9:00:00 AM SJUD 1/31/2022 1:30:00 PM |
SB 119 |
| CS SB 129 version O.pdf |
SJUD 1/28/2022 1:30:00 PM SJUD 1/31/2022 1:30:00 PM |
SB 129 |
| HB 155 Sponsor Statement v. B 4.5.2021.pdf |
HJUD 4/5/2021 1:00:00 PM HJUD 4/7/2021 1:00:00 PM SJUD 1/31/2022 1:30:00 PM |
HB 155 |
| HB 155 Sectional Analysis v. B 4.5.2021.pdf |
HJUD 4/5/2021 1:00:00 PM HJUD 4/7/2021 1:00:00 PM SJUD 1/31/2022 1:30:00 PM |
HB 155 |
| HB 155 Supporting Document - Office of Public Advocacy Letter 3.31.2021.pdf |
HJUD 4/5/2021 1:00:00 PM HJUD 4/7/2021 1:00:00 PM SJUD 1/31/2022 1:30:00 PM |
HB 155 |
| HB 155 Additional Document - Alaska Court System Response to HJUD Committee Questions on April 5, 2021 4.7.2021.pdf |
HJUD 4/7/2021 1:00:00 PM SJUD 1/31/2022 1:30:00 PM |
HB 155 |
| SB119 TESTIMONY FOR SENATE ED COMM.pdf |
SEDC 4/28/2021 9:00:00 AM SJUD 1/31/2022 1:30:00 PM |
SB 119 |
| SJR 19 Amendment A.1.pdf |
SJUD 1/31/2022 1:30:00 PM |
SJR 19 |
| SB 119 Sectional 1.25.22.pdf |
SJUD 1/31/2022 1:30:00 PM |
SB 119 |