Legislature(2017 - 2018)BUTROVICH 205

02/28/2017 03:30 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 46 Out of Committee
-- Public Testimony --
Moved SB 21 Out of Committee
Scheduled but Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 21-PERMANENT FUND: INCOME; POMV; DIVIDENDS                                                                      
4:14:51 PM                                                                                                                    
CHAIR DUNLEAVY announced the consideration  of SB 21. He declared                                                               
that public testimony is closed on SB 21.                                                                                       
4:15:11 PM                                                                                                                    
At ease.                                                                                                                        
4:15:48 PM                                                                                                                    
CHAIR  DUNLEAVY called  the  committee back  to  order. He  asked                                                               
Senator Stedman, sponsor  of SB 21, if he had  any final comments                                                               
or remarks.                                                                                                                     
4:15:57 PM                                                                                                                    
SENATOR BERT  STEDMAN, Alaska State Legislature,  Juneau, Alaska,                                                               
sponsor of SB 21,  said the bill is an integral  part of a fiscal                                                               
solution for Alaska. He commented as follows:                                                                                   
     There are  a lot  of Alaskans  that are  very concerned                                                                    
     that as  we try to  move through to a  fiscal solution,                                                                    
     the biggest pot  of gold is the  permanent fund sitting                                                                    
     there, roughly $57 billion, a  very large, sweet target                                                                    
     of  which  we could  probably  appropriate,  us in  the                                                                    
     Legislature, somewhere  around currently $8  billion or                                                                    
     $9 billion and  then maybe an additional  $4 billion or                                                                    
     so of unrealized earnings. It's  very easy to go in for                                                                    
     us in the Legislature to  appropriate large sums out of                                                                    
     the permanent fund.                                                                                                        
     The concern  is as  we move  forward to  try to  find a                                                                    
     fiscal solution  is that we  ensure that  the viability                                                                    
     of the  permanent fund  stays intact  and that  we that                                                                    
     were  fortunate enough  to live  through  the vast  oil                                                                    
     boom of the last four  decades leaves something for our                                                                    
     kids and  our children's  children on into  the future,                                                                    
     that we  don't over the  next decade just  liquidate it                                                                    
     or  cripple  it  in  a significant  way.  We  are  very                                                                    
     fortunate to  be stewards of  the subsurface  assets in                                                                    
     the State of  Alaska unlike all other  states, and it's                                                                    
     incumbent  upon   us  to  look  forward   to  the  next                                                                    
     Senate Bill 21 would  basically ring-fence or set aside                                                                    
     and   protect   the   permanent   fund   from   adverse                                                                    
     withdrawals  setting  up  a  percent  of  market  value                                                                    
     management  approach to  it where  you could  only take                                                                    
     out 4.5 percent per year  of a 5-year moving average of                                                                    
     the fund  going back 6  years; and that  [4.5] percent,                                                                    
     50   percent  of   that  would   go  automatically   to                                                                    
     dividends, which is 2.25 percent,  the other 50 percent                                                                    
     would  be  available  for  us  in  the  Legislature  to                                                                    
     appropriate  either to  the general  fund to  deal with                                                                    
     fiscal  issues at  the time,  when  clearly that's  the                                                                    
     time we have  today, but looking forward  there will be                                                                    
     a  time when  it's not  needed and  we can  appropriate                                                                    
     that back to  the permanent fund to  make the permanent                                                                    
     fund  grow faster,  or add  it to  the dividends  if we                                                                    
     want to increase the dividends.                                                                                            
     Now  this  structure is  set  up  ignoring the  current                                                                    
     fiscal  position  of the  state;  in  other words,  the                                                                    
     percentage  withdrawal amount  is driven  by the  asset                                                                    
     allocation  of  the fund  and  its  goal  is to  be  in                                                                    
     perpetuity. That 4.5 percent  would allow the permanent                                                                    
     fund  to  not change  its  management  style and  would                                                                    
     block  us from  taking more  than 4.5  percent out  per                                                                    
     year. It just  so happens we are around  the mid-50s in                                                                    
     billions  in the  permanent fund,  if we  were at  $100                                                                    
     billion it would be double  the numbers, and if we were                                                                    
     at  $25  billion it  would  be  half the  numbers.  The                                                                    
     dividend  calculation defaults  out  at  $1,700; now  I                                                                    
     know  some folks  around the  state might  think that's                                                                    
     too big of  a dividend and some folks  might think it's                                                                    
     too small of a dividend, but  it's a 50-50 split and it                                                                    
     happens to  be the time  frame we are in  allowing that                                                                    
     balance to be measured at about $55 billion.                                                                               
     So  that  Mr. Chairman  is  what  is  in front  of  the                                                                    
     committee  on a  second hearing.  I think  there's some                                                                    
     amendments  and  some  other discussions,  but  I  just                                                                    
     wanted  to take  a  few  minutes to  frame  it for  the                                                                    
     people at  home because this  is not a bill  that fixes                                                                    
     our  physical deficit,  it  is a  bill  to protect  the                                                                    
     permanent fund from us, the  Legislature, and to ensure                                                                    
     that we have an intact,  vast amount of wealth from our                                                                    
     oil  boom  going  forward   to  future  generations  of                                                                    
     Alaskans  and   we  are  not   talking  two   or  three                                                                    
     generations, we are talking in perpetuity.                                                                                 
4:20:51 PM                                                                                                                    
SENATOR GIESSEL commented as follows:                                                                                           
     I appreciate  the carefulness that Senator  Stedman has                                                                    
     put  into  this  bill.  I especially  like  that  50-50                                                                    
     split.  Certainly,  citizens  at home  receiving  their                                                                    
     check in  the mail can say,  "Okay, this is how  much I                                                                    
     got and  I know how  much government got, I'm  going to                                                                    
     keep  an eye  on how  they  spend the  50 percent  they                                                                    
     got."  I  think  that  would   create  a  more  engaged                                                                    
     citizenry and that's a good thing.                                                                                         
CHAIR DUNLEAVY asked Senator Stedman if he wanted to touch upon                                                                 
the future of the fund someday that there may be discussions                                                                    
about constitutionalization.                                                                                                    
SENATOR STEDMAN explained as follows:                                                                                           
     I've been  asked how come  I didn't write the  bill and                                                                    
     come  forward  with  a constitutional  amendment,  it's                                                                    
     because  clearly, it's  the constitution  that protects                                                                    
     the corpus  of the permanent  fund, we cannot  spend it                                                                    
     without authorization  of the people. We  can spend and                                                                    
     have  the  authority  to as  the  Legislature,  as  the                                                                    
     appropriators, all of the  earnings and trading profits                                                                    
     of the fund which we call the earnings reserve.                                                                            
     There  are two  reasons  why it's  not  requested as  a                                                                    
     constitutional  amendment  today.  Number  one  is  the                                                                    
     cash-flow draws  and needs  in the  current environment                                                                    
     of the  state, I don't  think we  have the time  to get                                                                    
     there  right  away.  Also,  I would  like  to  see  the                                                                    
     opportunity for all of us  in the Legislature to have a                                                                    
     discussion  with our  constituents  to  make sure  that                                                                    
     they are  onboard in protecting the  permanent fund for                                                                    
     future generations  and they  are comfortable  with the                                                                    
     endowment  approach  so that  we  can  move forward.  I                                                                    
     think that  would be  nice if we  could have  that come                                                                    
     after the statutory  bill has passed, which  is what we                                                                    
     have  in   front  of   us  and   we  have   a  thorough                                                                    
     understanding at the public level.                                                                                         
     This is very  clear and transparent, this  is not smoke                                                                    
     and mirrors,  there's not a  lot of moving  parts, it's                                                                    
     very  straight forward;  and  then,  hopefully we  will                                                                    
     have   the   ability   in  the   future   to   have   a                                                                    
     constitutional  amendment and  that  would enclose  the                                                                    
     earnings account, basically there  would be no need for                                                                    
     it, it would  just go away for  all practical purposes,                                                                    
     and we the Legislature could  only get our hands-on 4.5                                                                    
     percent per  year, and  half of that  then would  go to                                                                    
     the citizens for dividends.                                                                                                
     We would  not be able to  take the easy road,  which is                                                                    
     vote huge chunks  out of the earnings  reserve which we                                                                    
     can  do  today  with  a  simple  majority  vote  and  a                                                                    
     signature  by  the  governor, we  can  easily  move  $7                                                                    
     billion  or $8  billion this  year, and  to me  it just                                                                    
     makes me  want to  stay awake  at night  worrying about                                                                    
     that, it's  not any public  servant I don't  think ever                                                                    
     came to Juneau to see that.                                                                                                
4:23:59 PM                                                                                                                    
CHAIR DUNLEAVY moved to adopt Amendment 1, labeled 30-                                                                          
                          AMENDMENT 1                                                                                       
     OFFERED IN THE SENATE                                                                                                      
     Page 1, line 2, following "dividends;":                                                                                  
     Insert  "authorizing an  advisory  vote on  legislative                                                                  
     action that  changes the  calculation of  the permanent                                                                  
     fund   dividend   and    the   amount   available   for                                                                  
     distribution  from  the  earnings reserve  account  and                                                                  
     making  the   legislative  action  contingent   on  the                                                                  
     advisory vote receiving an affirmative majority vote;"                                                                   
     Page 3, line 19:                                                                                                           
               Delete all material and insert:                                                                                  
        "*  Sec.  6. The  uncodified  law  of the  State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
               ADVISORY VOTE. At a special election to be                                                                       
     held on  September 26, 2017, in  substantial compliance                                                                    
     with  the   election  laws  of  the   state,  including                                                                    
     absentee voting  and the preparation,  publication, and                                                                    
     mailing  of an  election pamphlet  under AS 15.58,  the                                                                    
     lieutenant  governor shall  place before  the qualified                                                                    
     voters  of  the  state  a   question  advisory  to  the                                                                    
     legislature  and the  governor.  The election  pamphlet                                                                    
     for   the    special   election   must    comply   with                                                                    
     AS 15.58.020(a)(6), including  the requirement  that it                                                                    
     contain  statements  that  advocate voter  approval  or                                                                    
     rejection    of     the    question.    Notwithstanding                                                                    
     AS 15.80.005 and other laws  relating to preparation of                                                                    
     the ballot  proposition, the  question shall  appear on                                                                    
     the ballot in the following form:                                                                                          
                        Q U E S T I O N                                                                                         
     Do  you approve  of  the passage  by  the Alaska  State                                                                    
     Legislature of  a bill that changes  the calculation of                                                                    
     the permanent  fund dividend  and the  amount available                                                                    
     for  distribution  from  the earnings  reserve  account                                                                    
     established under AS 37.13.145?                                                                                            
          Yes [  ]       No [  ]                                                                                                
        * Sec. 7. The uncodified  law of the State of Alaska                                                                  
     is amended by adding a new section to read:                                                                                
               NOTICE TO THE REVISOR OF STATUTES. The                                                                           
     director  of  elections  shall notify  the  revisor  of                                                                    
     statutes  when the  results of  the election  have been                                                                    
     certified  under  AS 15.15.450  if  the  advisory  vote                                                                    
     authorized  in   sec.  6  of   this  Act   receives  an                                                                    
     affirmative majority vote.                                                                                                 
        * Sec. 8. The uncodified  law of the State of Alaska                                                                  
     is amended by adding a new section to read:                                                                                
               CONDITIONAL EFFECT. Sections 1 - 5 of this                                                                       
     Act  take  effect only  if  the  director of  elections                                                                    
     notifies the revisor  of statutes under sec.  7 of this                                                                    
     Act that the  question in the advisory  vote under sec.                                                                    
     6 of this Act received an affirmative majority vote.                                                                       
        * Sec. 9. If, under sec. 8  of this Act, secs. 1 - 5                                                                  
     of this Act take effect,  they take effect on July 1 in                                                                    
     the  year following  the year  in which  the notice  is                                                                    
     given under sec. 7 of this Act.                                                                                            
        *  Sec.  10. Section  6  of  this Act  takes  effect                                                                  
     immediately under AS 01.10.070(c).                                                                                         
        * Sec. 11.  Except as provided in secs. 9  and 10 of                                                                  
     this Act, this Act takes effect July 1, 2017."                                                                             
4:24:08 PM                                                                                                                    
SENATOR GIESSEL objected for purposes of discussion.                                                                            
4:24:18 PM                                                                                                                    
CHRISTA  MCDONALD, Staff,  Senator  Mike  Dunleavy, Alaska  State                                                               
Legislature, Juneau, Alaska, said  Amendment 1 places an advisory                                                               
vote of the  people to have SB 21 become  effective and explained                                                               
as follows:                                                                                                                     
   · Section 6: is the language of the advisory vote that                                                                       
     reads, "Do  you approve  of the  passage by  the Alaska                                                                    
     State   Legislature  of   a  bill   that  changes   the                                                                    
     calculation  of the  permanent  fund  dividend and  the                                                                    
     amount  of  it  available  for  distribution  from  the                                                                    
     earnings reserve account?".                                                                                                
   · Section 7: establishes that the Director of Elections                                                                      
     will  notify  the  reviser  of  statutes  if  the  vote                                                                    
     receives a majority.                                                                                                       
   · Section 8: creates a conditional requirement of an                                                                         
     affirmative majority vote in order  for Sections 1 to 5                                                                    
     of the  bill to become  effective which is SB  21 which                                                                    
     you see before you.                                                                                                        
   · Section 9: states that Sections 1 to 5 of the                                                                              
     legislation  will  take  place   on  June  1  after  an                                                                    
     affirmative majority vote.                                                                                                 
   · Section 10: issues the advisory vote and states that                                                                       
     it will become effective immediately.                                                                                      
   · Section 11: is the rest of the effective dates of the                                                                      
CHAIR DUNLEAVY noted that the last advisory vote regarding the                                                                  
permanent fund went to the people 18 years ago. He pointed out                                                                  
the  permanent fund  is  a  unique instrument  not  just in  this                                                               
country,  but  worldwide.  He admitted  that  there  are  varying                                                               
opinions on the  purpose of the permanent fund  and the dividend,                                                               
but explained  that the reason  he offered the amendment  is that                                                               
the  people   of  Alaska  are  partners   with  their  government                                                               
regarding the permanent fund issue  and the 50-50 proposition. He                                                               
said  the people  constitutionalized the  permanent fund  decades                                                               
ago during a time when the  Alaska Legislature was spending a lot                                                               
of money  and they  wanted to  figure out a  way to  preserve the                                                               
money for future  generations. He noted that  after the permanent                                                               
fund was  constitutionalized, other  instruments as well  went to                                                               
the  people for  a  vote  over a  12-year  period, including  the                                                               
Constitutional Budget  Reserve, the  appropriations limit,  and a                                                               
statutory dividend.                                                                                                             
4:27:24 PM                                                                                                                    
SENATOR GIESSEL expressed concern that  the amendment calls for a                                                               
vote of  the people in less  than 6 months. She  pointed out that                                                               
people  may not  completely understand  the fiscal  situation and                                                               
the gravity of the decision.  She added that the special election                                                               
means   there  are   extra  costs   and  its   turnout  will   be                                                               
unpredictable.  She stated  that she  is not  convinced that  the                                                               
people's feelings  will be received with  clarity. She reiterated                                                               
that  she  is  not  convinced that  folks  would  understand  the                                                               
ramifications  of a  "yes"  or "no"  vote. She  asked  if he  had                                                               
considered the factors she noted in terms of a special election.                                                                
CHAIR DUNLEAVY replied that the  people are probably more in tune                                                               
with  the  permanent  fund  issue   than  many  others  that  the                                                               
Legislature deals with.  He opined that the  permanent fund issue                                                               
is of such  magnitude that the people of Alaska  should be a part                                                               
of it.                                                                                                                          
SENATOR EGAN noted  that Senator Stedman is the sponsor  of SB 21                                                               
and asked what his thoughts were on the proposed amendment.                                                                     
4:30:46 PM                                                                                                                    
SENATOR STEDMAN replied as follows:                                                                                             
     The  committee  of   jurisdiction  always  makes  bills                                                                    
     better.  I would  like to  see at  the end  of the  day                                                                    
     constitutional protection for the  permanent fund and a                                                                    
     percent-of-market value setup  with a reasonable payout                                                                    
     targeted  toward the  structure  and  longevity of  the                                                                    
     permanent  fund, not  our cashflow  needs, and  I think                                                                    
     that's what  the bill does.  I always respect  the will                                                                    
     of the committees.                                                                                                         
CHAIR DUNLEAVY noted that SB  21 is referred to another committee                                                               
and continued discussions will address  the contents of the bill.                                                               
He suggested  that the bill be  moved to the next  committee with                                                               
the amendment. He asked if the objection was maintained.                                                                        
SENATOR GIESSEL maintained her objection.                                                                                       
CHAIR DUNLEAVY asked that a roll  call vote be taken on Amendment                                                               
A roll  call vote  was taken. Senator  Wilson and  Chair Dunleavy                                                               
voted  in favor  of Amendment  1  and Senators  Giessel and  Egan                                                               
voted against it. Therefore, Amendment 1 failed by a 2:2 vote.                                                                  
4:32:41 PM                                                                                                                    
At ease.                                                                                                                        
4:45:14 PM                                                                                                                    
CHAIR DUNLEAVY  called the committee  back to order. He  asked if                                                               
there was a motion to move SB 21.                                                                                               
4:45:20 PM                                                                                                                    
SENATOR GIESSEL moved  to report SB 21,  version 30-LS0128\O from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
4:45:30 PM                                                                                                                    
CHAIR DUNLEAVY  announced that  there being  no objection,  SB 21                                                               
moved from the Senate State  Affairs Standing Committee. He asked                                                               
if there were any closing comments or questions.                                                                                
SENATOR WILSON  read a "Letter  of Intent" from the  Senate State                                                               
Affair Committee regarding SB 21 as follows:                                                                                    
     It is the intent of  the Senate State Affairs Committee                                                                    
     that  when subsequent  committees of  referral in  both                                                                    
     bodies of  the Alaska Legislature consider  Senate Bill                                                                    
     21 (Permanent  Fund: Income;  POMV, Dividends),  or any                                                                    
     related  legislation  dealing  with   the  use  of  the                                                                    
     earnings of  the Permanent Fund, that  those committees                                                                    
     strongly consider including the following elements.                                                                        
        1. Protection of the corpus of the Permanent Fund                                                                       
          against the erosive effect of inflation over                                                                          
        2. A draw limit on the portion of earnings of the                                                                       
          Permanent Fund drawn for use by state government.                                                                     
        3. A savings rule which captures and saves at least                                                                     
          some peak revenue, and places these savings into                                                                      
          the corpus of the Permanent Fund.                                                                                     
CHAIR  DUNLEAVY  announced that  the  letter  of intent  will  be                                                               
incorporated  as the  bill  moves  on to  the  next committee  of                                                               
referral.  He   asked  if  committee  members   had  any  closing                                                               
SENATOR WILSON thanked  Senator Stedman for putting  forth SB 21.                                                               
He  said the  issues that  SB  21 addresses  are complicated.  He                                                               
added that he  appreciated the committee's time to  address SB 21                                                               
and other  bills related  to the permanent  fund. He  opined that                                                               
hopefully the  next committees will  spend time diving  deep down                                                               
into the  issues that  SB 21  addresses as  well as  listening to                                                               
Alaskans.  He  stated  that  he  is  a  strong  believer  of  the                                                               
government not  having any more  than what he has.  He reiterated                                                               
that  he  appreciates  Senator   Stedman's  efforts  and  others'                                                               
efforts put forth during the interim to work on the bill.                                                                       
4:47:31 PM                                                                                                                    
CHAIR DUNLEAVY  said he agreed  with many of the  sentiments that                                                               
Senator  Stedman stated.  He reiterated  that the  permanent fund                                                               
was constitutionalized  decades ago because the  people of Alaska                                                               
did not  trust the Legislature. He  hoped that the state  was not                                                               
entering another period where Alaskans  are going to question the                                                               
Legislature's motives.                                                                                                          
He  set forth  that he  looked  forward to  working with  Senator                                                               
Stedman and  others to  ensure that the  permanent fund  is ring-                                                               
fenced to  make sure the  worst possible fears are  not realized.                                                               
He added that he is going  to keep pushing for the involvement of                                                               
Alaskans in  the protection  of the  permanent fund  because they                                                               
are partners  in the process.  He remarked  that he was  not sure                                                               
Alaskans were  going to support a  plan that they are  not a part                                                               
SENATOR  GIESSEL addressed  the letter  of  intent for  SB 21  as                                                               
     The  letter of  intent is  very positive,  and I  think                                                                    
     really fits  well with Senator  Stedman's bill,  SB 21;                                                                    
     he has  used the  title "Grow  and Guard  the Permanent                                                                    
     Fund" and I think we all agree with that.                                                                                  
     The  statement has  been made,  "The  people of  Alaska                                                                    
     entrusting  to their  elected officials,"  and I  agree                                                                    
     with that,  in fact  I spoke about  that on  the Senate                                                                    
     floor.  I  believe  that  trust  was  eroded  when  the                                                                    
     governor  vetoed 50  percent of  the dividend  in 2016;                                                                    
     this  is a  grave,  serious decision  that the  elected                                                                    
     officials  of  this  body should  be  making  with  the                                                                    
     deliberation we are going through right now.                                                                               
     I  hope   we  can  restore  that   trust  through  this                                                                    
     deliberation  with  public   comment  and  the  various                                                                    
     committees this bill will go through.                                                                                      
4:49:47 PM                                                                                                                    
CHAIR DUNLEAVY asked if there was  a motion to move the letter of                                                               
intent  regarding the  items  that Senator  Wilson  had put  into                                                               
public record.                                                                                                                  
SENATOR GIESSEL  moved that the  letter of intent be  attached to                                                               
SB 21 as it moves through the committee process.                                                                                
4:50:12 PM                                                                                                                    
CHAIR DUNLEAVY found no objection, and  SB 21, with the letter of                                                               
intent,  was  reported from  the  Senate  State Affairs  Standing                                                               

Document Name Date/Time Subjects
SB 46 - Fiscal Note DMVA.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Hearing Request.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Letter of Support.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Sectional Analysis.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Senator Sullivan's Support.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Sponsor Statement.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Version A.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 46 - Shala Dobson Letter of Support.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB46 - Lael Morgan Letter of Support.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 21 & SB 26 - Public Testimony to (S)STA 02.28.17.pdf SSTA 2/28/2017 3:30:00 PM
SB 21
SB 26
SB46 - Letter of support - Mr. Reginald Beverly.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB46 letter of support - AK Veterans Foundation.pdf SSTA 2/28/2017 3:30:00 PM
SB 46
SB 21 & SB 26 - 2016 Letter from Law & Revenue to Sen. MacKinnon.pdf SSTA 2/28/2017 3:30:00 PM
SB 21
SB 26
SB 21 - (S)STA Letter of Intent.PDF SSTA 2/28/2017 3:30:00 PM
SB 21
SB 21 - Amendment 1 - Sen. Dunleavy.pdf SSTA 2/28/2017 3:30:00 PM
SB 21