Legislature(2021 - 2022)BUTROVICH 205

08/27/2021 01:30 PM JUDICIARY

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01:36:16 PM Start
01:37:21 PM SB53
03:00:41 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 53 PERM FUND; ADVISORY VOTE TELECONFERENCED
Heard & Held
**Streamed live on AKL.tv**
                 SB 53-PERM FUND; ADVISORY VOTE                                                                             
                                                                                                                                
1:37:21 PM                                                                                                                    
CHAIR HOLLAND announced  the consideration of SENATE  BILL NO. 53                                                               
"An Act relating  to use of income of the  Alaska permanent fund;                                                               
relating to the  amount of the permanent  fund dividend; relating                                                               
to  the duties  of the  commissioner of  revenue; relating  to an                                                               
advisory vote on  the permanent fund; providing  for an effective                                                               
date  by repealing  the effective  date of  sec. 8,  ch. 16,  SLA                                                               
2018; and providing for an effective date."                                                                                     
                                                                                                                                
[SB  53  was previously  heard  on  4/21/21 and  4/26/21.  Public                                                               
testimony was opened and closed on 4/26/21.]                                                                                    
                                                                                                                                
1:37:38 PM                                                                                                                    
CHAIR HOLLAND stated  his intent to take amendments on  SB 53 and                                                               
hold  the bill  in committee.  He reminded  members that  passing                                                               
this  bill would  change the  statutory  permanent fund  dividend                                                               
formula established by  Senate Bill 26 in 2018. Under  SB 53, the                                                               
permanent fund dividend (PFD) would  receive 2.5 percent, or half                                                               
of the  average 5 percent market  value of the permanent  fund as                                                               
calculated  over the  first  five  of the  last  six years.  This                                                               
calculation would  yield the $2,350  PFD in 2021  currently being                                                               
discussed.                                                                                                                      
                                                                                                                                
1:38:23 PM                                                                                                                    
CHAIR HOLLAND  stated that  this bill is  part of  the governor's                                                               
larger   fiscal  plan.   Further,   it  was   supported  by   the                                                               
legislature's Fiscal Policy Working  Group (FPWG). He pointed out                                                               
that the  legislature has not  followed the existing  PFD statute                                                               
for the past six years. SB  53 would provide the legislature with                                                               
an opportunity  to follow the statutory  provisions when deciding                                                               
the amount of the dividend each  year by aligning the statue with                                                               
the proposed constitutional amendment [SJR 6].                                                                                  
                                                                                                                                
1:38:55 PM                                                                                                                    
CHAIR  HOLLAND acknowledged  that many  Alaskans would  prefer to                                                               
maintain and  follow the historical  formula. However,  the 50:50                                                               
plan in SB  53 is a compromise that meets  the original intent of                                                               
the  historical  formula.  He   stated  his  intent  to  consider                                                               
amendments.                                                                                                                     
                                                                                                                                
1:39:15 PM                                                                                                                    
SENATOR   HUGHES  related   her  understanding   that  additional                                                               
amendments would be considered at the next hearing.                                                                             
                                                                                                                                
CHAIR HOLLAND agreed. He further  indicated that the committee is                                                               
authorizing Legislative Legal Services  to make technical changes                                                               
to meet the intent expressed during this hearing.                                                                               
                                                                                                                                
1:40:14 PM                                                                                                                    
CHAIR HOLLAND moved Amendment 1, work order 32-GS1693\A.13.                                                                     
                                                                                                                                
                                                  32-GS1693\A.13                                                                
                                                         Nauman                                                                 
                                                        8/26/21                                                                 
                                                                                                                                
                          AMENDMENT 1                                                                                       
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                        BY SENATOR HOLLAND                                                                 
     TO:  SB 53                                                                                                                 
                                                                                                                                
     Page 1, lines 3 - 4:                                                                                                       
          Delete "providing for an effective date by                                                                          
      repealing the effective date of sec. 8, ch. 16, SLA                                                                     
     2018;"                                                                                                                   
                                                                                                                                
     Page 2, line 6:                                                                                                            
          Delete "five [5.25]"                                                                                              
          Insert "five"                                                                                                         
                                                                                                                                
     Page 5, line 2:                                                                                                            
          Delete "First"                                                                                                        
          Insert "Second"                                                                                                       
                                                                                                                                
     Page 5, lines 13 - 14:                                                                                                     
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 5, line 16:                                                                                                           
          Delete "sec. 12" and the                                                                                              
          Insert "sec. 10"                                                                                                      
          Delete "July 1, 2021"                                                                                                 
                                                                                                                                
                                                                                                                                
SENATOR KIEHL objected for discussion purposes.                                                                                 
                                                                                                                                
1:40:40 PM                                                                                                                    
ED KING, Staff, Senator Roger  Holland, Alaska State Legislature,                                                               
Juneau, Alaska, explained  Amendment 1. SB 53  was debated during                                                               
the  regular legislative  session.  Since this  is  a new  fiscal                                                               
year, some  of the terms  and provisions in  the bill are  out of                                                               
date. For  example, Senate Bill  26 had a delayed  effective date                                                               
from 2018 to  June 30, 2021. When SB 53  was originally discussed                                                               
that  provision  had not  yet  taken  effect.  It has  now  taken                                                               
effect.  Thus, the  phrase "providing  for an  effective date  by                                                               
repealing the  effective date of Sec.  8 ch. 16 SLA  2018;" is no                                                               
longer necessary since it is in effect.                                                                                         
                                                                                                                                
MR. KING  referred to  page 2,  lines 6-7, of  SB 53  to language                                                               
that reduces the POMV rate from  5.25 to 5 percent. This language                                                               
is no longer needed because  the delayed effective date has taken                                                               
effect. The  rest of  the changes are  consistent and  conform to                                                               
the new fiscal year, he said.                                                                                                   
                                                                                                                                
MR.  KING  directed  attention  to lines  19-22  of  Amendment  1                                                               
pertaining  to  the  effective date  clause.  He  explained  that                                                               
Amendment  1 would  delete the  effective  date of  July 1,  2021                                                               
since that date has passed and replace it with July 1, 2022.                                                                    
                                                                                                                                
1:42:28 PM                                                                                                                    
SENATOR HUGHES  asked whether the  date should remain as  July 1,                                                               
2021, since the  legislature would want the bill to  be in effect                                                               
now.                                                                                                                            
                                                                                                                                
MR. KING answered that under Amendment  1 the bill would not take                                                               
effect  until the  first  day of  the next  fiscal  year. To  the                                                               
extent that the legislature wants  changes in this bill to affect                                                               
FY 2022,  the effective date of  July 1, 2022 might  be too late,                                                               
he said.  He deferred to Ms.  Nauman to recommend how  to correct                                                               
it.                                                                                                                             
                                                                                                                                
1:43:34 PM                                                                                                                    
EMILY NAUMAN,  Attorney, Legislative Legal  Services, Legislative                                                               
Affairs Agency, Juneau,  Alaska, answered that to  the extent the                                                               
committee would like  the to bill to take effect  for the current                                                               
fiscal year, the  language could be amended to  read "take effect                                                               
immediately."                                                                                                                   
                                                                                                                                
1:44:43 PM                                                                                                                    
CHAIR HOLLAND  asked whether the  preference would be to  use the                                                               
language "take effect  immediately" or to strike lines  21 and 22                                                               
of Amendment 1.                                                                                                                 
                                                                                                                                
1:44:03 PM                                                                                                                    
MS. NAUMAN  opined that retaining  some amendment to  those lines                                                               
is important. Essentially,  the bill will have  an effective date                                                               
that   has   already  passed   unless   the   committee  adds   a                                                               
retroactivity provision.  She advised that under  Wielechowski v.                                                               
State, the legislature  could appropriate at any  time any amount                                                               
from the Earnings Reserve Account  (ERA) in FY 2022 regardless of                                                               
the effective date in the bill.                                                                                                 
                                                                                                                                
1:44:46 PM                                                                                                                    
SENATOR HUGHES  said one  goal Chair  Holland articulated  in his                                                               
opening  remarks   was  that  the  committee   wants  legislative                                                               
appropriations   to  align   with  the   law.  She   related  her                                                               
understanding  that  if  the  committee   wanted  to  follow  the                                                               
statutes this year, lines 21 and  22 of Amendment 1 should remain                                                               
as written.  She asked for  guidance on the specific  language to                                                               
make it work.                                                                                                                   
                                                                                                                                
CHAIR HOLLAND asked Ms. Nauman  to provide specific language that                                                               
would replace line 22, "Delete July 1, 2022".                                                                                   
                                                                                                                                
MS. NAUMAN responded  that the language should  read "take effect                                                               
immediately." She  opined that language should  be sufficient for                                                               
now.                                                                                                                            
                                                                                                                                
1:45:44 PM                                                                                                                    
CHAIR  HUGHES  ask for  clarification  that  the amendment  would                                                               
delete  "July  1,   2022"  and  replace  it   with  "take  effect                                                               
immediately."                                                                                                                   
                                                                                                                                
MR.  KING  pointed  out  that   the  language  "take  effect"  is                                                               
currently  in  SB  53  so adding  the  word  "immediately"  would                                                               
suffice.                                                                                                                        
                                                                                                                                
CHAIR  HOLLAND stated  that Legislative  Legal  is authorized  to                                                               
make conforming changes to the bill.                                                                                            
                                                                                                                                
1:46:18 PM                                                                                                                    
SENATOR HUGHES  asked if the remedy  would be to delete  the date                                                               
on line 21 of Amendment 1 and insert "immediately."                                                                             
                                                                                                                                
CHAIR HOLLAND reiterated the language.                                                                                          
                                                                                                                                
MS. NAUMAN  cautioned members that  it is difficult  to determine                                                               
what effect  specific language changes made  during the committee                                                               
meeting will have on the rest  of the bill. For example, [on page                                                               
5,  line  15 of  SB  53,]  Section  12 establishes  an  immediate                                                               
effective date  for Section  9. She opined  that the  entire bill                                                               
should be included  in that change. Since  this language provides                                                               
a more  technical change than the  committee likely contemplated,                                                               
she suggested the committee adopt  a conceptual amendment to make                                                               
the entire bill effective immediately.                                                                                          
                                                                                                                                
1:47:40 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:48:08 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.                                                                                           
                                                                                                                                
1:48:16 PM                                                                                                                    
SENATOR HUGHES noted that during  the break the committee learned                                                               
a forthcoming  amendment contains  a provision that  would delete                                                               
Section 12, if passed.                                                                                                          
                                                                                                                                
SENATOR  HUGHES   moved  to  adopt  Conceptual   Amendment  1  to                                                               
Amendment  1,  on  line  22,  delete  July  1,  2022  and  insert                                                               
"immediately."                                                                                                                  
                                                                                                                                
CHAIR  HOLLAND   found  no   further  objection,   so  Conceptual                                                               
Amendment 1 to Amendment 1 was adopted.                                                                                         
                                                                                                                                
SENATOR  HUGHES asked  Legislative Legal  to make  any conforming                                                               
changes necessary.                                                                                                              
                                                                                                                                
1:49:18 PM                                                                                                                    
SENATOR KIEHL removed his objection.                                                                                            
                                                                                                                                
CHAIR HOLLAND  heard no  further objections  and Amendment  1, as                                                               
amended, was adopted.                                                                                                           
                                                                                                                                
1:49:39 PM                                                                                                                    
CHAIR HOLLAND moved Amendment 2, work order 32-GS1693\A.8.                                                                      
                                                                                                                                
                                                   32-GS1693\A.8                                                                
                                                         Nauman                                                                 
                                                        8/26/21                                                                 
                                                                                                                                
                          AMENDMENT 2                                                                                       
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                        BY SENATOR HOLLAND                                                                 
     TO:  SB 53                                                                                                                 
                                                                                                                                
     Page 2, line 19, following " AS 43.23.045,":                                                                               
          Insert "not less than                                                                                             
                                                                                                                                
     Page 2, line 22, following "fund,":                                                                                    
          Insert "up to"                                                                                                    
                                                                                                                                
SENATOR HUGHES objected for discussion purposes.                                                                                
                                                                                                                                
1:49:59 PM                                                                                                                    
MR. KING  explained that  Amendment 2  would align  SB 53  to the                                                               
changes this  committee made  to SJR  6. The  committee discussed                                                               
ensuring  that  the  permanent fund  dividend  (PFD)  calculation                                                               
would be based on the  full calculation. Thus, if the legislature                                                               
opted to  appropriate an amount  less than that,  the calculation                                                               
for the dividend would not change.  On page 2, line 19, "not less                                                               
than" would be  inserted in relationship to  the PFD calculation.                                                               
On page 2, line 22, the  language "up to" is inserted to indicate                                                               
that the  government's portion of  the POMV  can be less  than or                                                               
equal to that amount.                                                                                                           
                                                                                                                                
CHAIR   HOLLAND   asked   Senator   Shower   (participating   via                                                               
teleconference)  to  confirm  that  he   is  online  and  has  no                                                               
objections to the actions taken thus far.                                                                                       
                                                                                                                                
1:51:18 PM                                                                                                                    
SENATOR SHOWER  responded that  he did not  have any  issues thus                                                               
far.                                                                                                                            
                                                                                                                                
1:51:29 PM                                                                                                                    
SENATOR HUGHES asked  the record to reflect  that legislators can                                                               
participate remotely and vote on amendments.                                                                                    
                                                                                                                                
1:51:47 PM                                                                                                                    
SENATOR  KIEHL stated  that he  was  not 100  percent clear  that                                                               
Amendment  2  is  necessary.  The   legislature  always  has  the                                                               
authority to deposit  extra general fund monies  in the permanent                                                               
fund. He asked whether Amendment 2 was symbolic.                                                                                
                                                                                                                                
MR.  KING  stated that  as  Legislative  Legal counsel  mentioned                                                               
earlier,  the  legislature has  the  power  of appropriation  and                                                               
regardless  of the  current or  future  statutory language,  that                                                               
power is not diminished.                                                                                                        
                                                                                                                                
1:52:29 PM                                                                                                                    
CHAIR HOLLAND asked if Amendment  2 would symbolically align this                                                               
bill  with the  proposed third  special session's  constitutional                                                               
language in SJR 6.                                                                                                              
                                                                                                                                
MR.  KING answered  yes. He  related his  understanding that  the                                                               
committee's  intent  is  to  align  the  law  with  the  proposed                                                               
constitutional amendment.  Although it is not  necessary to align                                                               
SB 53 with the proposed  constitutional amendment, it is symbolic                                                               
to do so.                                                                                                                       
                                                                                                                                
1:53:07 PM                                                                                                                    
SENATOR MYERS  related his  understanding that  the intent  is to                                                               
tie  SB 53  to the  constitutional amendment.  Thus, Amendment  2                                                               
provides  the  language to  match  SB  53 to  the  constitutional                                                               
amendment, SJR 6.                                                                                                               
                                                                                                                                
1:53:34 PM                                                                                                                    
SENATOR   SHOWER   commented   that   three   committee   members                                                               
participated  in  the  Fiscal Policy  Working  Group  (FPWG).  He                                                               
stated that part of the challenge  is to restore the public trust                                                               
in the legislature's  ability to follow the law.  While he viewed                                                               
Amendment  2   as  symbolic,   it  is   important  in   terms  of                                                               
accountability  to the  public that  this legislature  and future                                                               
legislatures intend to follow the law.                                                                                          
                                                                                                                                
1:54:33 PM                                                                                                                    
CHAIR HOLLAND  highlighted the importance  of aligning SB  53 and                                                               
the   proposed  constitutional   amendment.  He   emphasized  the                                                               
necessity for the legislature to follow the law.                                                                                
                                                                                                                                
1:54:53 PM                                                                                                                    
SENATOR HUGHES observed that Section  2, AS 37.13.145 (b) on page                                                               
2, line  16 of SB  53 reads,  "Each fiscal year,  the legislature                                                               
may  appropriate"  rather  than   "shall"  appropriate  from  the                                                               
earnings  reserve   account.  She   suggested  that   if  today's                                                               
amendments do  not fix  this, the  committee should  address this                                                               
language at the next meeting.                                                                                                   
                                                                                                                                
MR. KING deferred to Ms. Nauman.                                                                                                
                                                                                                                                
MS.   NAUMAN  agreed   with  Senator   Hughes.   She  said   "may                                                               
appropriate"  is  retained  because  it is  consistent  with  the                                                               
decision under  Wielechowski v. State.  She opined  that changing                                                               
the  law to  say "shall  appropriate"  would be  unconstitutional                                                               
because  the   constitutional  amendment  has  not   yet  passed.                                                               
Therefore,  the term  "may" is  retained in  subsection (b),  she                                                               
said.                                                                                                                           
                                                                                                                                
1:56:23 PM                                                                                                                    
SENATOR  HUGHES  asked if  the  committee  could add  contingency                                                               
language   to   change  "may"   to   "shall"   if  the   proposed                                                               
constitutional amendment were to pass.                                                                                          
                                                                                                                                
MS. NAUMAN answered yes.                                                                                                        
                                                                                                                                
1:56:42 PM                                                                                                                    
SENATOR  MYERS advised  members that  a forthcoming  amendment to                                                               
tie  SB  53 to  the  proposed  constitutional amendment  contains                                                               
"shall."                                                                                                                        
                                                                                                                                
MR. KING confirmed it was  in a forthcoming amendment. He offered                                                               
to raise the issue when the amendment is offered.                                                                               
                                                                                                                                
1:57:20 PM                                                                                                                    
SENATOR HUGHES removed her objection.                                                                                           
                                                                                                                                
CHAIR  HOLLAND found  no further  objection and  Amendment 2  was                                                               
adopted.                                                                                                                        
                                                                                                                                
1:57:42 PM                                                                                                                    
SENATOR  MYERS  moved  to  adopt  Amendment  3,  work  order  32-                                                               
GS1693\A.11.                                                                                                                    
                                                  32-GS1693\A.11                                                                
                                                         Nauman                                                                 
                                                        8/27/21                                                                 
                          AMENDMENT 3                                                                                       
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                          BY SENATOR MYERS                                                                 
     TO:  SB 53                                                                                                                 
                                                                                                                                
     Page 1, lines 3 - 4:                                                                                                       
          Delete "relating to an advisory vote on the                                                                         
       permanent fund; providing for an effective date by                                                                     
      repealing the effective date of sec. 8, ch. 16, SLA                                                                     
     2018;"                                                                                                                   
                                                                                                                                
     Page 2, line 6:                                                                                                            
          Delete "five [5.25]"                                                                                              
          Insert "five"                                                                                                         
                                                                                                                                
     Page 2, following line 14:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  2. AS 37.13.140,  as amended  by sec.  1 of                                                                
     this Act, is amended to read:                                                                                              
          Sec. 37.13.140. Income. (a) Net income of the                                                                   
     fund includes  income of  the earnings  reserve account                                                                
     established under AS 37.13.145. Net  income of the fund                                                                
     shall be  computed annually as  of the last day  of the                                                                    
     fiscal  year  in  accordance  with  generally  accepted                                                                    
     accounting principles,  excluding any  unrealized gains                                                                    
     or losses. Income available  for distribution equals 21                                                                
     percent  of the  net income  of the  fund for  the last                                                                
     five  fiscal  years,  including the  fiscal  year  just                                                                
     ended, but  may not exceed  net income of the  fund for                                                                
     the  fiscal year  just ended  plus the  balance in  the                                                                
     earnings reserve account described in AS 37.13.145.                                                                    
          (b)  The corporation shall determine the amount                                                                       
     available  for  appropriation  each  year.  The  amount                                                                    
     available  for appropriation  is  five  percent of  the                                                                    
     average market value of the  fund for the first five of                                                                    
     the preceding  six fiscal  years, including  the fiscal                                                                    
     year  just ended,  computed  annually  for each  fiscal                                                                    
     year in  accordance with generally  accepted accounting                                                                    
     principles. In  this subsection, "average  market value                                                                    
     of  the  fund" includes  the  balance  of the  earnings                                                                    
     reserve  account  established under  AS 37.13.145,  but                                                                    
     does  not   include  that  portion  of   the  principal                                                                    
     attributed to the settlement of  State v. Amerada Hess,                                                                    
     et   al.,  1JU-77-847   Civ.  (Superior   Court,  First                                                                    
     Judicial   District).   [THE   AMOUNT   AVAILABLE   FOR                                                                    
     APPROPRIATION  MAY  NOT  EXCEED   THE  BALANCE  IN  THE                                                                    
     EARNINGS RESERVE ACCOUNT DESCRIBED IN AS 37.13.145.]"                                                                    
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 2, following line 23:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 4. AS 37.13.145(b), as  amended by sec. 3 of                                                                
     this Act, is amended to read:                                                                                              
          (b)  At the end of each [EACH] fiscal year, the                                                                   
     corporation    shall    transfer    [LEGISLATURE    MAY                                                                
     APPROPRIATE] from the earnings reserve account to the                                                                      
               [(1)]  dividend fund established under                                                                           
     AS 43.23.045,  50   percent  of  the   income  [AMOUNT]                                                                
     available   for   distribution  [APPROPRIATION]   under                                                                
     AS 37.13.140 [AS 37.13.140(b); AND                                                                                     
               (2)  GENERAL FUND, 50 PERCENT OF THE AMOUNT                                                                      
     AVAILABLE FOR APPROPRIATION UNDER AS 37.13.140(b)]."                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, following line 10:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 6. AS 37.13.145(c), as  amended by sec. 5 of                                                                
     this Act, is amended to read:                                                                                              
          (c)  After the transfer [APPROPRIATIONS] under                                                                    
     (b)  and an  appropriation under  (g) of  this section,                                                                
     the   corporation  shall   transfer  [LEGISLATURE   MAY                                                                
     APPROPRIATE] from  the earnings reserve account  to the                                                                    
     principal of  the fund an  amount sufficient  to offset                                                                    
     the effect  of inflation on  the principal of  the fund                                                                    
     during that  fiscal year. However,  none of  the amount                                                                    
     transferred shall  be applied to increase  the value of                                                                    
     that  portion  of  the   principal  attributed  to  the                                                                    
     settlement of  State v. Amerada  Hess, et  al., 1JU-77-                                                                    
     847 Civ.  (Superior Court, First Judicial  District) on                                                                    
     July 1,  2004.  The  corporation  shall  calculate  the                                                                    
     amount  to   transfer  to  the  principal   under  this                                                                    
     subsection by                                                                                                              
               (1)  computing the average of the monthly                                                                        
     United  States  Consumer  Price  Index  for  all  urban                                                                    
     consumers for each of the two previous calendar years;                                                                     
               (2)  computing the percentage change between                                                                     
     the first and second calendar year average; and                                                                            
               (3)  applying that rate to the value of the                                                                      
     principal of  the fund  on the last  day of  the fiscal                                                                    
     year  just   ended,  including  that  portion   of  the                                                                    
     principal  attributed to  the  settlement  of State  v.                                                                    
     Amerada Hess, et al.,  1JU-77-847 Civ. (Superior Court,                                                                    
     First Judicial District)."                                                                                                 
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, following line 21:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 8. AS 37.13.145(d), as  amended by sec. 7 of                                                                
     this Act, is amended to read:                                                                                              
          (d)  Notwithstanding (b) of this section, income                                                                      
     earned on money  awarded in or received as  a result of                                                                    
     State  v.   Amerada  Hess,  et  al.,   1JU-77-847  Civ.                                                                    
     (Superior  Court, First  Judicial District),  including                                                                    
     settlement,  summary  judgment,   or  adjustment  to  a                                                                    
     royalty-in-kind contract  that is  tied to  the outcome                                                                    
     of this  case, or interest  earned on the money,  or on                                                                    
     the earnings of the money  shall be treated in the same                                                                    
     manner as  other income of  the Alaska  permanent fund,                                                                    
     except  that  it  is  not  available  for  distribution                                                                
     [APPROPRIATIONS]  to the  dividend fund,  for transfers                                                                
     [UNDER AS 37.13.140(b)  OR] to the principal  under (c)                                                                    
     of this section,  or for an appropriation  under (g) of                                                                
     this section, and shall be  annually deposited into the                                                                
     Alaska capital income fund (AS 37.05.565).                                                                                 
        *  Sec. 9.  AS 37.13.145  is amended  by adding  new                                                                  
     subsections to read:                                                                                                       
          (g)  The legislature may not appropriate from the                                                                     
     earnings reserve  account to  the general fund  a total                                                                    
     amount   that   exceeds   the  amount   available   for                                                                    
     appropriation under AS 37.13.140(b) in a fiscal year.                                                                      
          (h)  The combined total of the transfer under (b)                                                                     
     of this section and an  appropriation under (g) of this                                                                    
     section  may  not  exceed   the  amount  available  for                                                                    
     appropriation under AS 37.13.140(b)."                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, following line 25:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec.  11. AS 37.13.300(c), as amended  by sec. 10                                                                
     of this Act, is amended to read:                                                                                         
          (c)  Net income from the mental health trust fund                                                                     
     may not  be included in  the computation of  net income                                                                
     or   market   value    [THE   AMOUNT]   available   for                                                                
     distribution   or   appropriation  under   AS 37.13.140                                                            
     [AS 37.13.140(b)]."                                                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                              
     Page 4, following line 1:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Sec.  13. AS 37.14.031(c), as amended  by sec. 12                                                                
     of this Act, is amended to read:                                                                                           
          (c)  The net income of the fund shall be                                                                              
     determined by the Alaska  Permanent Fund Corporation in                                                                
     the  same manner  the  corporation  determines the  net                                                                
     income of the Alaska  permanent fund under AS 37.13.140                                                                
     [AND SHALL BE  COMPUTED ANNUALLY AS OF THE  LAST DAY OF                                                                    
     THE FISCAL  YEAR IN ACCORDANCE WITH  GENERALLY ACCEPTED                                                                    
     ACCOUNTING PRINCIPLES,  EXCLUDING ANY  UNREALIZED GAINS                                                                    
     OR LOSSES]."                                                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 4, following line 27:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec.  15. AS 43.23.025(a), as amended  by sec. 14                                                                
     of this Act, is amended to read:                                                                                           
          (a)  By October 1 of each year, the commissioner                                                                      
     shall  determine  the  value  of  each  permanent  fund                                                                    
     dividend for that year by                                                                                                  
               (1)   determining the total  amount available                                                                    
     for dividend payments, which equals                                                                                        
               (A)    the amount  of  income  of the  Alaska                                                                
     permanent  fund   transferred  [APPROPRIATED]   to  the                                                                
     dividend fund under  AS 37.13.145(b) during the current                                                                    
     year;                                                                                                                      
               (B)    plus  the unexpended  and  unobligated                                                                    
     balances  of  prior  fiscal  year  appropriations  that                                                                    
     lapse into the dividend fund under AS 43.23.045(d);                                                                        
               (C)   less the amount necessary  to pay prior                                                                    
     year dividends  from the dividend  fund in  the current                                                                    
     year    under     AS 43.23.005(h),    43.23.021,    and                                                                    
     43.23.055(3) and (7);                                                                                                      
               (D)    less  the   amount  necessary  to  pay                                                                    
     dividends  from  the  dividend  fund  due  to  eligible                                                                    
     applicants who, as determined  by the department, filed                                                                    
     for a  previous year's dividend by  the filing deadline                                                                    
     but  who  were  not   included  in  a  previous  year's                                                                    
     dividend computation;                                                                                                      
               (E)   less  appropriations from  the dividend                                                                    
     fund during the current  year, including amounts to pay                                                                    
     costs  of administering  the dividend  program and  the                                                                    
     hold harmless provisions of AS 43.23.240;                                                                                  
               (2)   determining  the number  of individuals                                                                    
     eligible to receive a dividend  payment for the current                                                                    
     year and the number  of estates and successors eligible                                                                    
     to  receive a  dividend  payment for  the current  year                                                                    
     under AS 43.23.005(h); and                                                                                                 
               (3)   dividing  the  amount determined  under                                                                    
     (1) of  this subsection by the  amount determined under                                                                    
     (2) of this subsection."                                                                                                   
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 4, line 29, through page 5, line 15:                                                                                  
          Delete all material and insert:                                                                                       
        "*  Sec. 17.  The  uncodified law  of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          CONDITIONAL EFFECT. Sections 2, 4, 6, 8, 9, 11,                                                                       
     13,  and  15  of  this  Act take  effect  only  if,  by                                                                    
     November 30,  2023,  the  voters have  not  approved  a                                                                    
     resolution that appears on  a statewide election ballot                                                                    
     that amends the Constitution of the State of Alaska to                                                                     
               (1)  specify that the amount that may be                                                                         
     appropriated from  the Alaska permanent fund  is a draw                                                                    
     based on  the average  fiscal-year-end market  value of                                                                    
     the permanent fund; and                                                                                                    
               (2)  require deposit of the unencumbered                                                                         
     balance  of the  earnings  reserve account  established                                                                    
     under AS 37.13.145  into the  Alaska permanent  fund to                                                                    
     become part of the principal of the fund.                                                                                  
        * Sec. 18.  If, under sec. 17 of this  Act, secs. 2,                                                                  
     4, 6,  8, 9, 11,  13, and 15  of this Act  take effect,                                                                    
     they take effect July 1, 2023."                                                                                            
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 5, line 16:                                                                                                           
          Delete "sec. 12"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
1:57:44 PM                                                                                                                    
CHAIR HOLLAND objected for discussion purposes.                                                                                 
                                                                                                                                
SENATOR SHOWER  asked for the  work order number for  Amendment 3                                                               
to verify whether he has the correct amendment before him.                                                                      
                                                                                                                                
1:58:05 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:58:46 PM                                                                                                                    
CHAIR  HOLLAND  reconvened  the   meeting.  He  stated  that  the                                                               
amendments to SB 53 were  recently posted on BASIS. He identified                                                               
the work order for Amendment 3 as 32-GS1693\A.11.                                                                               
                                                                                                                                
1:59:25 PM                                                                                                                    
SENATOR MYERS explained  that Amendment 3 would tie SB  53 to the                                                               
proposed constitutional amendment. Initially  the bill called for                                                               
an advisory  vote of  the people. He  understood that  a separate                                                               
amendment would remove the proposed advisory vote.                                                                              
                                                                                                                                
2:00:32 PM                                                                                                                    
SENATOR  MYERS elaborated  that the  concept was  to align  SB 53                                                               
with   the  constitutional   amendment.   He   stated  that   the                                                               
constitutional  amendment cannot  become effective  unless voters                                                               
approve  it  during the  next  general  election  to be  held  in                                                               
November  2022. If  that constitutional  amendment were  to fail,                                                               
the law would revert to the current statute by repealing SB 53.                                                                 
                                                                                                                                
2:00:55 PM                                                                                                                    
SENATOR MYERS directed attention to  page 2, line 14 of Amendment                                                               
3,  which  would  make  the change  Senator  Hughes  pointed  out                                                               
earlier by  changing "may" to  "shall." As Ms.  Nauman indicated,                                                               
the  "shall"  language  is  only  constitutional  if  the  voters                                                               
approve the constitutional amendment, he said.                                                                                  
                                                                                                                                
SENATOR HUGHES asked for confirmation  that if the constitutional                                                               
amendment were to  fail in November 2022 and SB  53 was repealed,                                                               
it would affect the PFDs issued in 2021 and 2022.                                                                               
                                                                                                                                
SENATOR MYERS answered that is correct.                                                                                         
                                                                                                                                
2:01:51 PM                                                                                                                    
SENATOR MYERS  directed attention to  the effective date  on page                                                               
6,  line 11  in  Section 18  of  Amendment 3.  He  asked for  the                                                               
outcome of  the bill if  the legislative  vote on the  passage of                                                               
the effective date failed.                                                                                                      
                                                                                                                                
MS.  NAUMAN  asked  whether  he  was  speaking  about  SB  53  or                                                               
Amendment 3.                                                                                                                    
                                                                                                                                
SENATOR MYERS  asked what the  overall effect  would be if  SB 53                                                               
were to pass the legislature  but the legislature failed to adopt                                                               
the effective date clause.                                                                                                      
                                                                                                                                
MS.  NAUMAN  answered  that  the  question  is  complicated.  She                                                               
predicted it would be chaotic  for Legislative Legal to determine                                                               
the  legal implications.  She suggested  it was  likely that  the                                                               
changes  would  occur simultaneously  and  so  the outcome  would                                                               
result in no changes to the statutes.                                                                                           
                                                                                                                                
2:03:26 PM                                                                                                                    
SENATOR  KIEHL  directed  attention to  the  conditional  effects                                                               
provision on  page 6, line 3  of Amendment 3. He  stated that the                                                               
language would  revert back to  the original PFD language  "? if,                                                               
by   November  30,   2023  the   voters  have   not  approved   a                                                               
constitutional  amendment."   However,  the resolution  can  only                                                               
appear  on the  ballot during  a  general election.  He asked  if                                                               
there was  a reason to use  the November 30, 2023  date since the                                                               
next general  election is  in November  or if  it was  a drafting                                                               
error.                                                                                                                          
                                                                                                                                
2:04:33 PM                                                                                                                    
SENATOR MYERS deferred to Ms. Nauman.                                                                                           
                                                                                                                                
2:04:32 PM                                                                                                                    
MS. NAUMAN responded that it was probably a typo since the year                                                                 
should read 2022.                                                                                                               
                                                                                                                                
2:04:54 PM                                                                                                                    
SENATOR HUGHES moved Conceptual Amendment 1 to Amendment 3 on                                                                   
page 6, line 3, to delete "2023" and insert "2022".                                                                             
                                                                                                                                
CHAIR HOLLAND found no objection and Conceptual Amendment 1 to                                                                  
Amendment 3 was adopted.                                                                                                        
                                                                                                                                
2:05:29 PM                                                                                                                    
CHAIR HOLLAND removed his objection. There being no further                                                                     
objection, Amendment 3, as amended, was adopted.                                                                                
                                                                                                                                
2:05:48 PM                                                                                                                    
CHAIR HOLLAND moved Amendment 4, work order 32-GS1693\A.6.                                                                      
                                                                                                                                
                                                   32-GS1693\A.6                                                                
                                                         Nauman                                                                 
                                                        8/26/21                                                                 
                          AMENDMENT 4                                                                                       
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                        BY SENATOR HOLLAND                                                                 
     TO:  SB 53                                                                                                                 
                                                                                                                                
     Page 1, line 3:                                                                                                            
          Delete "relating to an advisory vote on the                                                                         
     permanent fund;"                                                                                                         
                                                                                                                                
     Page 4, line 29, through page 5, line 12:                                                                                  
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 5, line 15:                                                                                                           
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill section accordingly.                                                                           
                                                                                                                                
     Page 5, line 16:                                                                                                           
          Delete "Except as provided in sec. 12 of this                                                                         
     Act, this"                                                                                                                 
          Insert "This"                                                                                                         
                                                                                                                                
2:05:53 PM                                                                                                                    
SENATOR HUGHES objected for discussion purposes.                                                                                
                                                                                                                                
2:06:10 PM                                                                                                                    
MR.  KING explained  that the  passage of  Amendment 3  would put                                                               
this question  to a vote  of the people through  a constitutional                                                               
amendment. Therefore, it  would nullify the need  for an advisory                                                               
vote.                                                                                                                           
                                                                                                                                
CHAIR HOLLAND withdrew Amendment 4.                                                                                             
                                                                                                                                
2:06:43 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:07:00 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.  He stated that he withdrew                                                               
Amendment 4 in error. Amendment 4 was before the committee.                                                                     
                                                                                                                                
2:07:20 PM                                                                                                                    
SENATOR HUGHES asked if Mr.  King could explain the necessity for                                                               
Amendment 4.                                                                                                                    
                                                                                                                                
2:07:29 PM                                                                                                                    
MR.  KING  explained  that  Amendment  4  proposes  removing  the                                                               
advisory  vote  language in  SB  53.  With  the addition  of  the                                                               
constitutional  amendment conditional  language, the  people will                                                               
have  an opportunity  to vote  on  the constitutional  amendment.                                                               
Therefore, establishing  an advisory vote  in SB 53 is  no longer                                                               
necessary.   Amendment  4   would   remove   the  advisory   vote                                                               
requirement  in SB  53,  but  it retains  the  requirement for  a                                                               
statewide vote on the constitutional amendment.                                                                                 
                                                                                                                                
2:08:27 PM                                                                                                                    
SENATOR HUGHES removed her objection.                                                                                           
                                                                                                                                
2:08:31 PM                                                                                                                    
CHAIR  HOLLAND found  no further  objection and  Amendment 4  was                                                               
adopted.                                                                                                                        
                                                                                                                                
SENATOR   HUGHES  advised   members  that   Senator  Shower   was                                                               
experiencing audio issues.                                                                                                      
                                                                                                                                
2:08:46 PM                                                                                                                    
At-ease                                                                                                                         
                                                                                                                                
2:11:50 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.                                                                                           
                                                                                                                                
2:12:04 PM                                                                                                                    
SENATOR SHOWER confirmed his audio difficulties were resolved                                                                   
and he was online.                                                                                                              
                                                                                                                                
2:12:29 PM                                                                                                                    
CHAIR HOLLAND stated he would not offer Amendment 5, work order                                                                 
32-GS1693\A.10, today but retained the option to offer it at a                                                                  
later date.                                                                                                                     
                                                                                                                                
2:13:05 PM                                                                                                                    
CHAIR HOLLAND moved Amendment 6, work order 32-GS1693\A.14.                                                                     
                                                                                                                                
                                                  32-GS1693\A.14                                                                
                                                         Nauman                                                                 
                                                        8/27/21                                                                 
                          AMENDMENT 6                                                                                       
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                        BY SENATOR HOLLAND                                                                 
     TO:  SB 53                                                                                                                 
                                                                                                                                
     Page 4, following line 28:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "*  Sec.  9. The  uncodified  law  of the  State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          USE    OF    THE   EARNINGS    RESERVE    ACCOUNT.                                                                    
     Notwithstanding  AS 37.13.145(e)   and  (f),   for  the                                                                    
     fiscal years  ending June 30, 2022, and  June 30, 2023,                                                                    
     in addition  to the amount available  for appropriation                                                                    
     calculated under  AS 37.13.140(b), the  legislature may                                                                    
     appropriate from  the earnings  reserve account  to the                                                                    
     general fund  an additional 1.5 percent  of the average                                                                    
     market  value of  the fund  for the  first five  of the                                                                    
     preceding six  fiscal years, including the  fiscal year                                                                    
     just ended,  computed annually for each  fiscal year in                                                                    
     accordance    with   generally    accepted   accounting                                                                    
     principles. In  this section, "average market  value of                                                                    
     the fund" has the meaning given in AS 37.13.140(b)."                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 5, line 15:                                                                                                           
          Delete "Section 9 of this Act takes"                                                                                  
          Insert "Sections 9 and 10 of this Act take"                                                                           
                                                                                                                                
     Page 5, line 16:                                                                                                           
          Delete "sec. 12"                                                                                                      
          Insert "sec. 13"                                                                                                      
                                                                                                                                
2:13:10 PM                                                                                                                    
SENATOR HUGHES objected for discussion purposes.                                                                                
                                                                                                                                
2:13:23 PM                                                                                                                    
MR.  KING explained  Amendment  6. He  said  the legislature  has                                                               
hesitated or  resisted using  more than the  5 percent  of market                                                               
value (POMV) cap  for use of the Earnings  Reserve Account (ERA).                                                               
Amendment  6 would  authorize the  legislature to  use additional                                                               
funds from  the ERA  to assist  the state  in transitioning  to a                                                               
long-term  stable fiscal  plan. Amendment  6 would  authorize the                                                               
use of an additional  1.5 percent of the POMV for  FY 2022 and FY                                                               
2023 to  bridge the gap  while the  long-term fiscal plan  of the                                                               
Fiscal  Plan  Working Group  is  effectuated.  He estimated  this                                                               
would use  $2 billion  of the $15  billion surplus  earnings from                                                               
last year.                                                                                                                      
                                                                                                                                
CHAIR  HOLLAND  related  his understanding  that  the  governor's                                                               
original plan  included a  $3 billion  bridge fund  transfer from                                                               
the permanent  fund to the  Constitutional Budget  Reserve (CBR).                                                               
Amendment 6 would provide a  different funding mechanism to cover                                                               
the anticipated shortfall for the next two years.                                                                               
                                                                                                                                
MR. KING  agreed. He  explained that if  the legislature  were to                                                               
pass the PFD  calculation as proposed by SB 53,  it would require                                                               
$1.5 billion.  Those funds have  already been spent based  on the                                                               
appropriations bill  that passed the legislature  during the last                                                               
legislative session.  He estimated  that roughly $500  million of                                                               
funding   remains   for   any  additional   appropriations   this                                                               
legislative session,  which leaves  a shortfall  of approximately                                                               
$1 billion.                                                                                                                     
                                                                                                                                
2:15:43 PM                                                                                                                    
SENATOR  HUGHES  asked  if  Amendment  6 were  to  fail  but  the                                                               
legislature  passed  SB  53,  the legislature  would  be  in  the                                                               
position that it could not follow the law.                                                                                      
                                                                                                                                
MR.  KING responded  that is  correct. He  advised that  there is                                                               
currently enough money in CBR  for the legislature to balance the                                                               
budget,  but  it  would  take  the CBR  balance  to  a  very  low                                                               
unsustainable level. Rather  than transfer money from  the ERA to                                                               
the CBR as the governor has  proposed, Amendment 6 would take the                                                               
funds directly  from the  ERA and use  it for  the appropriations                                                               
currently being debated.                                                                                                        
                                                                                                                                
SENATOR HUGHES indicated she had a question for Mr. Painter.                                                                    
                                                                                                                                
2:16:39 PM                                                                                                                    
ALEXI   PAINTER,   Director,    Legislative   Finance   Division,                                                               
Legislative Agencies and Offices,  Juneau, Alaska, stated that he                                                               
was experiencing audio difficulties and could not hear members.                                                                 
                                                                                                                                
2:16:51 PM                                                                                                                    
MS.  NAUMAN  indicated  that  she  was  also  experiencing  audio                                                               
issues.                                                                                                                         
                                                                                                                                
2:17:26 PM                                                                                                                    
SENATOR SHOWER advised members that  his audio connection was now                                                               
fine.                                                                                                                           
                                                                                                                                
2:17:37 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:21:51 PM                                                                                                                    
CHAIR  HOLLAND  reconvened the  meeting.  He  explained that  the                                                               
committee  was  experiencing  some   audio  difficulties  so  Mr.                                                               
Painter has joined the meeting in person.                                                                                       
                                                                                                                                
2:22:17 PM                                                                                                                    
SENATOR HUGHES  asked if  Amendment 6, which  would allow  a $1.6                                                               
billion POMV draw  in addition to the annual 5  percent POMV draw                                                               
were to fail, whether the  legislature could follow the law under                                                               
SB  53 since  it provides  for  a 50:50  POMV. The  PFD would  be                                                               
approximately  $2,300. She  asked if  the legislature  would have                                                               
sufficient funds  to pay for the  draw, and if so,  the source of                                                               
the draw  and the  CBR balance  after the  draw. She  offered her                                                               
view that  if the bill  passed without Amendment 6  being adopted                                                               
she did  not believe  the legislature  could take  the additional                                                               
1.5 percent draw.                                                                                                               
                                                                                                                                
MR. PAINTER responded that the  current budget has a $500 million                                                               
surplus before the  payment of the PFD or  any other unrestricted                                                               
general  fund  (UGF) items.  The  proposed  PFD would  cost  $1.5                                                               
billion, which  would result in  a $1 billion deficit.  Since the                                                               
CBR  balance  is  projected  to  be less  than  that  amount  and                                                               
assuming a reverse sweep, there  would not be sufficient funds to                                                               
fund the budget.  The legislature would need to  turn to accounts                                                               
such as Power Cost Equalization  (PCE), the Higher Education Fund                                                               
or some other account to bridge the deficit.                                                                                    
                                                                                                                                
2:24:07 PM                                                                                                                    
SENATOR   HUGHES  related   her  understanding   that  it   would                                                               
essentially  reduce the  CBR to  zero and  the legislature  would                                                               
need to  pull funds from other  accounts if Amendment 6  does not                                                               
pass  and the  legislature  desires to  follow  the statutes  and                                                               
issue a full PFD.                                                                                                               
                                                                                                                                
MR. PAINTER answered yes.                                                                                                       
                                                                                                                                
2:24:39 PM                                                                                                                    
SENATOR SHOWER asked  for clarification that if  Amendment 6 were                                                               
to pass as  opposed to a bridge fund, the  legislature could draw                                                               
up to 1.5  percent from the permanent fund but  the entire amount                                                               
might not be  needed. He asked whether Amendment  6 would provide                                                               
more  flexibility  than  making  a direct  transfer  because  the                                                               
entire 1.5 percent might not  be needed. He acknowledged that Mr.                                                               
Painter indicated  it wouldn't  be necessary  to draw  the entire                                                               
1.5 percent, depending on moving  other funds to cover the budget                                                               
and fund the PFD.                                                                                                               
                                                                                                                                
He asked whether Amendment 6  would be more palatable politically                                                               
because  the  legislature  wouldn't  be  moving  the  entire  1.5                                                               
percent   without  knowing   if  the   funds  were   needed.  The                                                               
legislature would  only have to  use what was needed  until other                                                               
things fell into place.                                                                                                         
                                                                                                                                
MR. PAINTER answered that the  language in Amendment 6 reads "may                                                               
appropriate   up  to"   so  the   legislature  could   choose  to                                                               
appropriate less  than the full  1.5 percent in  additional funds                                                               
depending on revenue  performance over the next year.  In FY 2023                                                               
the deficit  is unknown so  it would provide the  legislature the                                                               
flexibility to pick the amount needed.                                                                                          
                                                                                                                                
2:26:25 PM                                                                                                                    
SENATOR  SHOWER asked  for  a rough  estimate  of the  percentage                                                               
needed for the draw based on  this year's projection. He asked if                                                               
the percentage would be .75 percent or 1 percent.                                                                               
                                                                                                                                
MR. PAINTER answered  that it will depend on the  FY 2022 budget.                                                               
He stated that  the House would like  to pay for oil  and gas tax                                                               
credits. Further, the governor identified  $7.5 million in budget                                                               
vetoes of undesignated general fund  (UGF) funds yesterday. Thus,                                                               
there  is some  uncertainty  in  the final  FY  2022 budget  even                                                               
though the legislature passed the appropriations bill.                                                                          
                                                                                                                                
2:27:25 PM                                                                                                                    
MR.  PAINTER  explained  that  currently the  state  faces  a  $1                                                               
billion deficit. The  additional 1.5 percent draw  proposed in SB
53 would bring  in an additional $900 million.  He suggested that                                                               
the legislature  may want to  take the  full 1.5 percent  draw to                                                               
maintain  a   higher  CBR  balance.   On  the  other   hand,  the                                                               
legislature might only need to draw  1 percent or .75 percent and                                                               
spend down the CBR balance  to $500 million. However, there would                                                               
be less funds available if  the legislature added back funding to                                                               
restore items the  governor vetoed, address the  oil tax credits,                                                               
school debt  reimbursement and other unfunded  items. These items                                                               
were unfunded  at the end of  the legislative session due  to the                                                               
CBR vote failure.                                                                                                               
                                                                                                                                
2:28:34 PM                                                                                                                    
SENATOR HUGHES  asked if it would  be possible to bring  in other                                                               
revenue sources retroactively to July  2021 to help solve the PFD                                                               
funding shortfalls.  In other words,  the legislature  could draw                                                               
some funds  from the  CBR and rely  on additional  revenue rather                                                               
than wait for an effective date of July 1, 2022.                                                                                
                                                                                                                                
MR.  PAINTER  answered  that  it would  depend  on  the  specific                                                               
revenue  measures  selected.  The governor's  proposed  "S  Corp"                                                               
taxes could  be applied retroactively because  the companies have                                                               
not  yet filed  their taxes.  This  could provide  income in  the                                                               
current fiscal year. Similarly, changing  oil and gas taxes could                                                               
be  accomplished in  the current  fiscal year  with an  effective                                                               
date  of January  1 or  some other  date. However,  increasing an                                                               
excise tax  like the motor fuel tax cannot be  done retroactively                                                               
because people have  already paid for the  fuel. Further, setting                                                               
up  a new  tax would  require establishing  infrastructure, which                                                               
would take time to develop.                                                                                                     
                                                                                                                                
2:30:15 PM                                                                                                                    
SENATOR HUGHES  asked for a  rough estimate of  potential revenue                                                               
for  some of  the  ideas Commissioner  Mahoney  outlined for  the                                                               
committee.  Further,  she  asked  for the  revenue  derived  from                                                               
raising taxes  retroactively, such  as corporate taxes.  She said                                                               
she  assumed that  Governor Dunleavy's  gaming proposal  would be                                                               
complicated  to set  up  but she  expressed  interest in  revenue                                                               
other measures could bring in.                                                                                                  
                                                                                                                                
MR.  PAINTER  answered  that  two  Department  of  Revenue  (DOR)                                                               
measures  come to  mind. He  recalled  DOR estimated  $60 to  $70                                                               
million could  be raised from  "S Corp"  taxes in the  first year                                                               
and in  excess of $100  million from  the per barrel  tax credit,                                                               
which would be dependent on oil  prices so it could be greater or                                                               
less.                                                                                                                           
                                                                                                                                
2:31:41 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:31:45 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.                                                                                           
                                                                                                                                
2:32:06 PM                                                                                                                    
BRIAN  FECHTER,  Deputy   Commissioner,  Department  of  Revenue,                                                               
Juneau, Alaska, asked for clarification of the question.                                                                        
                                                                                                                                
2:32:19 PM                                                                                                                    
SENATOR  HUGHES explained  that the  committee was  exploring new                                                               
revenue sources  to provide  sufficient funds  for the  50:50 PFD                                                               
proposal. She asked for an estimate  of the revenue that could be                                                               
assessed retroactively.  She said  this is important  because the                                                               
public is  understandably frustrated  with the  legislature since                                                               
it has not  solved the statutory issues with the  PFD in the last                                                               
six  years. She  offered her  belief  that the  public wants  the                                                               
statutory  PFD  issue  settled,  the fiscal  gap  solved,  and  a                                                               
sustainable  fiscal policy.  She  expressed concern  that if  the                                                               
legislature  did  not  follow  the  statutory  PFD,  it  will  be                                                               
confusing  to understand  the legislature's  plan to  solve these                                                               
issues. If  so, the constitutional  amendment could fail  and the                                                               
legislature would need to address it again, she said.                                                                           
                                                                                                                                
SENATOR HUGHES highlighted that some  members do not want to take                                                               
a penny more than the 5  percent [POMV] but there's a tradeoff to                                                               
doing so. The  legislature could protect the ERA  long term. This                                                               
proposal does  not contemplate taking money  out year-after-year.                                                               
Instead, these draws would be  temporary and be "hands off" after                                                               
several  years. She  stressed that  to settle  this members  must                                                               
always bear in  mind public sentiment and what may  happen at the                                                               
ballot  box. She  acknowledged some  members  favor a  stair-step                                                               
approach,  which  would  work mathematically.  However,  such  an                                                               
approach   could   be  very   confusing   and   may  derail   the                                                               
legislature's  efforts.   Her  questions  relate   to  addressing                                                               
revenue sources as  a path forward to pay a  50:50 PFD this year,                                                               
she said.                                                                                                                       
                                                                                                                                
2:35:32 PM                                                                                                                    
MR.  FECHTER  echoed  Mr.  Painter's   comments  that  DOR's  two                                                               
proposals for  FY 2022 were  the changes to the  corporate income                                                               
tax structure  and the per  barrel tax credit. He  explained that                                                               
it would  not be difficult for  the DOR to implement  any changes                                                               
to the tax  rates on alcohol or tobacco since  those taxes are in                                                               
place and  increases to those  tax rates would allow  the revenue                                                               
to flow.                                                                                                                        
                                                                                                                                
2:36:39 PM                                                                                                                    
SENATOR  HUGHES asked  for the  estimated revenue  from increased                                                               
taxes on the items mentioned.                                                                                                   
                                                                                                                                
MR. FECHTER estimated  an additional $116 million  for per barrel                                                               
credit limitation  to $5  per barrel from  the current  level and                                                               
$60  million in  FY  2022  for changes  to  the corporate  income                                                               
taxes.                                                                                                                          
                                                                                                                                
SENATOR HUGHES explained that the  PFD program was established to                                                               
provide residents  with a dividend  from the permanent  fund. She                                                               
said the state  needs revenue to close the budget  gap to pay for                                                               
government. Although it is a matter  of semantics for some, it is                                                               
a matter of principle for her, she said.                                                                                        
                                                                                                                                
CHAIR HOLLAND remarked that it  seemed as though funding for PFDs                                                               
is the  last funding consideration when  many legislators believe                                                               
it should be funded first.                                                                                                      
                                                                                                                                
2:38:17 PM                                                                                                                    
SENATOR KIEHL reminded members that the  PFD is a program and not                                                               
a constitutional obligation. However, he  agreed it would be wise                                                               
for  the   legislature  to   protect  the   PFD  in   the  Alaska                                                               
Constitution for the  future. He stated that  according to Alaska                                                               
Supreme Court decisions  it is part of the  budget. Therefore, it                                                               
is part of  the budget deficit issue. He recalled  that there was                                                               
a bill  before the  legislature related to  Oil and  Gas Property                                                               
Taxes. He  asked how much  revenue that could bring  in depending                                                               
on the effective  date. He recalled there was an  increase in the                                                               
total  state property  tax  from 20  mills to  30  mills with  no                                                               
change in what municipalities can keep.                                                                                         
                                                                                                                                
MR. FECHTER answered  that a rough number for a  10 mill increase                                                               
to  the current  Oil and  Gas Property  Tax would  bring in  just                                                               
under $300  million. He offered  to report back to  the committee                                                               
on the feasibility of assigning a retroactive date.                                                                             
                                                                                                                                
MR. PAINTER  highlighted that those  payments are  typically made                                                               
at the end of the fiscal year  but he believed they were based on                                                               
the calendar  year. He stated that  this is typically one  of the                                                               
last sources of revenue the state receives.                                                                                     
                                                                                                                                
2:40:28 PM                                                                                                                    
SENATOR SHOWER asked if the discussion  on changes to the Oil and                                                               
Gas Property Tax is similar to  Senate Bill 57 from several years                                                               
ago. If so, he asked if  this would be separate from changing the                                                               
oil tax structure  that companies pay because  this discussion is                                                               
about the  amount that the  North Slope and Valdez  would receive                                                               
from  the property  tax.  He highlighted  that  some people  were                                                               
concerned about how much pressure  the legislature is exerting on                                                               
the oil  companies but  this relates  to what  municipalities are                                                               
collecting.                                                                                                                     
                                                                                                                                
2:41:40 PM                                                                                                                    
MR.  PAINTER offered  his belief  that Senator  Kiehl was  asking                                                               
about an  increase in the mill  rate of the Oil  and Gas Property                                                               
Tax. Two  years ago, Senate Bill  57 did not change  the tax rate                                                               
but  rather it  eliminated the  deductibility of  municipal taxes                                                               
against the  state tax.  It was a  very different  structure than                                                               
what Senator Kiehl is referring to, he said.                                                                                    
                                                                                                                                
SENATOR  SHOWER clarified  that  a number  of  issues were  being                                                               
discussed so he appreciated the response.                                                                                       
                                                                                                                                
2:42:22 PM                                                                                                                    
SENATOR KIEHL  said his question  relates to what  Senator Hughes                                                               
alluded to  in terms of how  to bridge to a  more thorough fiscal                                                               
plan.  One  recommendation of  the  Fiscal  Policy Working  Group                                                               
(FPWG) was to  ensure that any bridge be one  time and limited so                                                               
Alaskans  could depend  on it.  He pointed  out that  Amendment 6                                                               
would authorize two  years of an "overdraw." This  is a deviation                                                               
from  the  5 percent  POMV  limit.  He highlighted  that  Senator                                                               
Hughes expressed concerns that a  constitutional amendment to the                                                               
permanent fund constitutionalizing the POMV  might fail. He asked                                                               
what  protections would  prevent further  draws to  the permanent                                                               
fund beyond the 5 percent draw.                                                                                                 
                                                                                                                                
2:43:38 PM                                                                                                                    
MR. PAINTER  said absent passage  of a  constitutional amendment,                                                               
the legislature could  access the ERA at any  time. Nothing would                                                               
prevent  the legislature  from additional  draws  either in  this                                                               
case to follow a statute or by drawing in excess of the POMV.                                                                   
                                                                                                                                
SENATOR KIEHL expressed  grave concern with Amendment  6 since it                                                               
would  allow  drawing  more  than 5  percent  POMV.  Although  he                                                               
recognized members only plan for  additional draws for two years,                                                               
he  was  unsure  the  legislature  could  constrain  itself.  The                                                               
benefit  of the  5 percent  POMV limit  for the  draw is  that it                                                               
constrains the legislature.                                                                                                     
                                                                                                                                
2:45:40 PM                                                                                                                    
CHAIR HOLLAND  offered his  view that the  1.5 percent  POMV over                                                               
two years  was a good limit.  He said he reviewed  the history of                                                               
the PFD.  He noted  that the  government consistently  limits the                                                               
PFD.  The  first PFD  of  $1,000  represented approximately  14.4                                                               
percent  of the  market  value. Although  people express  concern                                                               
over the  permanent fund, it  continues to grow. He  reviewed the                                                               
percentage  of   market  value  (POMV)  of   the  permanent  fund                                                               
dividend. From 1983 to 2003 the  PFD was based on 4 percent POMV,                                                               
during the  next 10 years  the PFD was  based on 3  percent POMV,                                                               
during the next 10 years the PFD  was based on 2 percent POMV and                                                               
now the legislature  would be asking Alaskans to be  happy with a                                                               
dividend of  1 percent  POMV, which  is approximately  $1,000. He                                                               
said this  is not fair.  While the state continually  reduces the                                                               
PFD, the permanent fund continues to grow at unexpected levels.                                                                 
                                                                                                                                
2:47:25 PM                                                                                                                    
SENATOR  HUGHES said  she appreciated  the concerns  that Senator                                                               
Kiehl  raised. Without  a constitutional  amendment,  the PFD  is                                                               
vulnerable, she  said. The  only thing that  might protect  it is                                                               
who  sits in  the 60  legislative  seats. She  advocated for  the                                                               
legislature to  protect the  PFD constitutionally.  She expressed                                                               
concern with public perception.                                                                                                 
                                                                                                                                
SENATOR HUGHES  asked if  the legislature did  pass the  1.5 POMV                                                               
draw for 2  years but the constitutional amendment  did not pass,                                                               
whether the  money could be  paid back  to the permanent  fund to                                                               
provide some  kind of  stop gap. She  stated that  some endowment                                                               
funds  in the  world  work  on the  current  balance rather  than                                                               
having a  one year lag  and an average  of the prior  five years.                                                               
Thus,  the 5  percent POMV  draw could  be based  on the  current                                                               
balance. Some  funds have  a range  between 4  to 7  percent, she                                                               
said. Since Alaska uses a 5 percent  POMV but has a lag, it means                                                               
the actual  effective rate for  this year  is 3.7 percent  of the                                                               
current balance of the permanent  fund. She suggested that if the                                                               
legislature  could use  a bridge  fund to  win back  the people's                                                               
trust,  the   legislature  could   then  pass   a  constitutional                                                               
amendment to  protect the fund  by disallowing  additional draws.                                                               
Such an approach could be a win-win for everyone, she said.                                                                     
                                                                                                                                
2:50:06 PM                                                                                                                    
SENATOR HUGHES  asked members  to consider  what would  happen if                                                               
the constitutional amendment did not  pass but Amendment 6 passed                                                               
which  would  allow  for  an additional  1.5  percent  draw.  She                                                               
emphasized  that it  was possible  that  in the  second year  the                                                               
additional   1.5  percent   draw   might  not   be  needed.   She                                                               
acknowledged  Senator Kiehl's  concern  yet there  is  a need  to                                                               
provide  some  protection.  She   offered  her  belief  that  the                                                               
concerns could be addressed in some manner.                                                                                     
                                                                                                                                
2:50:52 PM                                                                                                                    
SENATOR  MYERS echoed  Senator Hughes'  point that  SB 53  was in                                                               
large   part   symbolic   without   passage   of   the   proposed                                                               
constitutional  amendment.   As  Ms.   Nauman  and   Mr.  Painter                                                               
indicated, the legislature  could pay any size  dividend and draw                                                               
down  the  ERA  for  state  services until  the  $21  billion  of                                                               
unencumbered  ERA  funds  are   depleted.  He  acknowledged  that                                                               
Amendment 6 would be symbolic  until the constitutional amendment                                                               
passes.                                                                                                                         
                                                                                                                                
2:51:52 PM                                                                                                                    
SENATOR MYERS  said the legislature  could do without  this bill.                                                               
However, a  large part  of this bill  acknowledges the  six years                                                               
the legislature  has ignored the  statutory requirements  for the                                                               
PFD. Amendment 6 provides assurance  that the legislature intends                                                               
to follow  its own laws. He  highlighted that part of  the public                                                               
frustration  stems from  the legislature  not  following its  own                                                               
laws. He  concluded that Amendment  6 is  a good idea  because it                                                               
attempts to restore some of the public's trust.                                                                                 
                                                                                                                                
2:52:54 PM                                                                                                                    
SENATOR HUGHES  said she served  as one  of eight members  of the                                                               
Fiscal Plan  Working Group  (FPWG) along  with Senator  Kiehl and                                                               
Senator  Shower.  She  explained  that  the  group  put  together                                                               
economic models to show how to  close the fiscal gap. Some models                                                               
were  based  on  the  50:50 split.  Support  for  bridge  funding                                                               
varied, with  1.5 percent as the  mid-point and 3 percent  as the                                                               
upper  limit.  Members   wanted  to  keep  in   mind  what  would                                                               
realistically  pass  on  the  Senate and  House  floor  since  it                                                               
requires 11  and 21  for policy  votes and 14  and 27  votes, for                                                               
constitutional amendments.  She emphasized  that deciding  on the                                                               
1.5 percent  bridge funding  meant members  believed it  might be                                                               
possible to get  the votes. She pointed out that  1.5 percent was                                                               
less than the governor proposed.                                                                                                
                                                                                                                                
2:54:47 PM                                                                                                                    
SENATOR SHOWER  acknowledged Senator Kiehl's concerns  were valid                                                               
ones. The  FPWG worked on  issues and compromises had  to happen.                                                               
While  the  group could  not  unanimously  agree, it  generically                                                               
stepped to  the middle in  an effort to  find a path  forward. He                                                               
offered  his support  for  Amendment 6  because  it represents  a                                                               
compromise and gives the legislature some flexibility.                                                                          
                                                                                                                                
2:56:36 PM                                                                                                                    
SENATOR KIEHL said  Amendment 6 does not get him  to the level of                                                               
security if bridge funding is  necessary. He stated his objection                                                               
to Amendment 6.                                                                                                                 
                                                                                                                                
2:57:35 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:59:41 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting                                                                                            
                                                                                                                                
2:59:47 PM                                                                                                                    
CHAIR HOLLAND tabled Amendment 6.                                                                                               
                                                                                                                                
[SB 53 was held in committee.]                                                                                                  

Document Name Date/Time Subjects
2021_Fiscal_Policy_Working_Group-Final_Report.pdf SJUD 8/27/2021 1:30:00 PM
SB 53
Legal Memo on SB 53 amendment A.8.pdf SJUD 8/27/2021 1:30:00 PM
SB 53
SB53 SJUD Amendment Packet 1.pdf SJUD 8/27/2021 1:30:00 PM
SB 53
SB53 A.14.pdf SJUD 8/27/2021 1:30:00 PM
SB 53