Legislature(2021 - 2022)BUTROVICH 205

03/02/2021 03:30 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Moved SJR 1 Out of Committee
-- Invited & Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
         SJR  1-CONST AM: GUARANTEE PERM FUND DIVIDEND                                                                      
4:33:26 PM                                                                                                                    
CHAIR  SHOWER   announced  the  consideration  of   SENATE  JOINT                                                               
RESOLUTION NO. 1 Proposing amendments  to the Constitution of the                                                               
State  of  Alaska  relating  to the  Alaska  permanent  fund  and                                                               
appropriations from the Alaska permanent fund.                                                                                  
He noted that  the committee previously heard the  bill and today                                                               
would hear a summary followed by invited and public testimony.                                                                  
4:33:51 PM                                                                                                                    
SENATOR  BILL  WIELECHOWSKI,  Alaska State  Legislature,  Juneau,                                                               
Alaska, sponsor of SJR 1, reminded  the committee that that SJR 1                                                               
enshrines  the  original permanent  fund  dividend  (PFD) in  the                                                               
Alaska Constitution and  limits the draw from the  fund corpus to                                                               
five percent  of a  five-year averaged  market value  (POMV). The                                                               
bill prioritizes  the POMV draw  to first  pay a dividend  to the                                                               
people and  government may  use the  remainder to  pay government                                                               
expenses.  He explained  that  this is  similar  to an  endowment                                                               
program used by institutions worldwide.                                                                                         
SENATOR  WIELECHOWSKI  highlighted  that  SJR  1  eliminates  the                                                               
Earnings Reserve  Account (ERA) because legislatures  have access                                                               
to that account. If earnings  from the permanent fund continue to                                                               
flow  into  the  ERA,  he   said  legislatures  could  repeatedly                                                               
withdraw funds  to the point  that there  would not be  enough to                                                               
pay a dividend.                                                                                                                 
He  referenced  the  chair's   earlier  question  about  historic                                                               
funding  of   PFDs  through  automatic  transfers   and  directed                                                               
attention to the brief in  the bill packets. It recounts numerous                                                               
occasions  of  fund transfers  from  the  permanent fund  to  the                                                               
dividend fund without appropriation.  He explained that the basis                                                               
of the argument in his  lawsuit [Wielechowski v. Alaska] was that                                                               
there  does not  need  to  be an  appropriation  for a  dividend;                                                               
therefore, the governor cannot veto the dividend.                                                                               
4:36:25 PM                                                                                                                    
SENATOR   HOLLAND  asked   if  this   legislation  affected   the                                                               
Constitutional Budget Reserve (CBR).                                                                                            
SENATOR WIELECHOWSKI answered no.                                                                                               
4:37:10 PM                                                                                                                    
JOE  GELDHOF,  Board  Member,  Alaska  Permanent  Fund  Defenders                                                               
("Defenders"), Juneau,  Alaska, stated  that Clem  Tillion, chair                                                               
of Defenders  asked him to  make a  couple of macro  points about                                                               
the permanent  fund and the PFD,  the first of which  is that the                                                               
permanent fund was  never intended to be a rainy  day account for                                                               
government spending. The second point  is that the permanent fund                                                               
is arguably  the best idea  that Alaska has had  since statehood;                                                               
it  saves   a  portion  of  nonrenewable   resources  for  future                                                               
generations. Third, the  PFD is not an entitlement; it  is a form                                                               
of  ownership designed  to  meet  the constitutional  requirement                                                               
that the  resources of the state,  which are held in  common, are                                                               
developed for the maximum use and benefit of Alaskans.                                                                          
He related that  Defenders believe that there is  a critical need                                                               
to quickly  address the  permanent fund and  the PFD  because too                                                               
much has  already been spent and  too little has been  saved. The                                                               
state's  savings  accounts  are  dwindling  and  the  options  to                                                               
address the state's fiscal problems  are quickly disappearing. He                                                               
said  Defenders strongly  believe that  the legislature  needs to                                                               
enact  legislation this  session so  the  measure can  be on  the                                                               
ballot in 2022. He recounted  the basic principles that Defenders                                                               
adopted for looking at any proposal  such as SJR 1. The corpus of                                                               
the fund  must be  protected from  inflation; the  permanent fund                                                               
needs to  continue to grow; spending  funds that go into  the ERA                                                               
needs to stop;  the annual brawl over the PFD  must stop; and the                                                               
legislation  needs straightforward  language that  pays an  equal                                                               
PFD to all Alaskans and is easy for the public to understand.                                                                   
4:41:30 PM                                                                                                                    
MR. GELDHOF said Chair Tillion likes  what SJR 1 does in terms of                                                               
allocation of  the fund. The  problem is that 5  percent arguably                                                               
will  jeopardize the  corpus  of the  account.  He reported  that                                                               
economists  that  Defenders  worked   with,  the  Permanent  Fund                                                               
Corporation and the people who run  stress tests all agree that 5                                                               
percent may fail. He pointed  out that the Rockefeller Foundation                                                               
used 4 percent  when it moved to a POMV  structure. He emphasized                                                               
that  when shifting  from a  trust fund  structure to  an annuity                                                               
structure, it is very important  to set the percentage low enough                                                               
for the fund  to continue to grow and  provide sufficient returns                                                               
to  provide   for  the  PFD   and  general  fund   spending  into                                                               
4:45:52 PM                                                                                                                    
RICK HALFORD, representing self,  Chugiak, Alaska, stated that he                                                               
was involved in  the initial management structure of  the PFD and                                                               
it   received   broad  support   and   was   viewed  as   clearly                                                               
constitutional. He  agreed with the previous  testimony and added                                                               
that what  was lost  most in  the court  case was  the connection                                                               
between the performance of the  fund and the management structure                                                               
that created  such a successful  fund. He said the  dividend grew                                                               
as a defense of the fund and  the element of that defense was the                                                               
realized gain averaged over five years.                                                                                         
MR. HALFORD  pointed out that  the POMV structure bases  the draw                                                               
on the gross  value of the fund, not the  performance of the fund                                                               
and does not affect trustee  decisions and the investment system.                                                               
Transitioning  to the  POMV  offers  security and  constitutional                                                               
protection but  the connection between  the fund  performance and                                                               
the dividend is lost. He said  that loss may be worthwhile if the                                                               
number is low enough that the fund increases in value.                                                                          
MR.  HALFORD  described  a  4 percent  POMV  with  language  that                                                               
retains  the  old  calculation  versus  50  percent  of  the  new                                                               
calculation as a big step in the right direction.                                                                               
CHAIR   SHOWER  commented   on  the   value  of   his  historical                                                               
SENATOR REINBOLD asked if he  would broaden the permanent fund to                                                               
include taxes on all resources  to promote development and better                                                               
management of state resources.                                                                                                  
MR. HALFORD  replied he  has many  friends who  believe severance                                                               
tax should have  been included initially, but  the permanent fund                                                               
is not  based on  taxes; it  is based on  ownership. The  hope is                                                               
that the  renewable resources ownership will  maintain value into                                                               
the future.  The concern is  that this generation is  spending in                                                               
one generation  the nonrenewable resources ownership  that is the                                                               
property  of all  generations  of Alaskans.  "We  have not  saved                                                               
enough. We  are spending the endowment  as a trust land  state of                                                               
all future Alaskans in one generation," he said.                                                                                
4:54:01 PM                                                                                                                    
CHAIR  SHOWER asked  him  to comment  on  the prevalent  attitude                                                               
among some  current and former  legislators that the  dividend is                                                               
free money  and they  do not want  an income tax  to pay  for it,                                                               
which is very much  at odds with the view that  it belongs to the                                                               
MR.  HALFORD related  that  Wally Hickel  was  famous for  saying                                                               
Alaska is an  owner state and Jay Hammond  individualized that by                                                               
giving  the  people  a  stake  in  all  of  it.  He  said  it  is                                                               
interesting that  people who were  close to being in  diapers are                                                               
telling people what we meant  when we created the permanent fund.                                                               
He highlighted that Elmer Rasmusson  and members of the permanent                                                               
fund working  group spent two  years trying  to get an  answer to                                                               
what  the  reason for  the  permanent  fund  was and  they  never                                                               
reached  a conclusion.  The  only  agreement was  that  it was  a                                                               
savings account and the money should not be wasted.                                                                             
4:57:34 PM                                                                                                                    
CHAIR  SHOWER  found  no  further  questions  and  opened  public                                                               
testimony on SJR 1.                                                                                                             
4:58:15 PM                                                                                                                    
CRIS EICHENLAUB, representing self,  Wasilla, Alaska, stated that                                                               
he supported SJR  1 generally but he did not  support the POMV or                                                               
the elimination of the ERA.  He suggested that if the legislature                                                               
repealed the POMV  legislation [Senate Bill 26] the  ERA could be                                                               
left intact. Do it the way it's  been done for the last 40 years,                                                               
he said.                                                                                                                        
5:00:06 PM                                                                                                                    
SHERRY  EICHENLAUB, representing  self,  Wasilla, Alaska,  stated                                                               
support for  SJR 1  and enshrining the  PFD in  the constitution.                                                               
She  suggested that  people who  do not  want their  dividend can                                                               
donate it  through Pick Click  Give of  not apply. She  wants the                                                               
dividend to continue  so her children and  grandchildren can have                                                               
a future in Alaska as college graduates and good citizens.                                                                      
5:01:07 PM                                                                                                                    
EDWARD MARTIN, representing self,  Cooper Landing, Alaska, stated                                                               
that SJR  1 is an  important aspect of  the future of  Alaska and                                                               
its children. He reported that  he has supported the dividend his                                                               
entire life and  his dad gathered signatures on  the peninsula to                                                               
get the advisory  vote. Nothing has changed and there  is no need                                                               
for another  advisory vote.  He said the  decision about  what is                                                               
done  with the  dividend should  be an  individual decision.  The                                                               
future  of Alaska  is the  people as  owners benefiting  from the                                                               
resources of the state.                                                                                                         
5:03:30 PM                                                                                                                    
BERT HOUGHTALING, representing self,  Big Lake, Alaska, began his                                                               
testimony on SJR 1 by Governor Jay Hammond:                                                                                     
     Alaska's dividend  program is, of course,  anything but                                                                    
     socialistic. Socialism  is taking  from the  wealthy to                                                                    
     provide  what  government  thinks   is  best  for  all.                                                                    
     Permanent  Fund Dividends  do just  the opposite.  They                                                                    
     take  the  money,   which  by  constitutional  mandate,                                                                    
     belongs to all and  allows all individuals to determine                                                                    
     how to  spend some of his  or her share. What  could be                                                                    
     more capitalistic?                                                                                                         
MR. HOUGHTALING  stated full  support for  enshrining the  PFD in                                                               
the constitution but  not having Senate Bill  26 involvement with                                                               
the POMV or the elimination of  the ERA and combining it with the                                                               
corpus. They need  to be separate so the corpus  cannot be spent,                                                               
he  said. He  advocated for  continued meaningful  cuts to  state                                                               
CHAIR  SHOWER advised  that  written comments  could  be sent  to                                                               
5:06:01 PM                                                                                                                    
CHAIR SHOWER closed public testimony on SJR 1.                                                                                  
5:06:15 PM                                                                                                                    
At ease                                                                                                                         
5:06:47 PM                                                                                                                    
CHAIR SHOWER reconvened the meeting and solicited a motion.                                                                     
5:06:58 PM                                                                                                                    
SENATOR REINBOLD moved  to report SJR 1,  work order 32-LS0015\A,                                                               
from  committee  [with  individual recommendations  and  attached                                                               
fiscal note(s)].                                                                                                                
CHAIR SHOWER found  no objection and SJR 1 was  reported from the                                                               
Senate State Affairs Standing Committee.                                                                                        

Document Name Date/Time Subjects
SB 84 Dept of Revenue PPT.pdf SSTA 3/2/2021 3:30:00 PM
SB 84
SB 84 Sectional Analysis.pdf SSTA 3/2/2021 3:30:00 PM
SB 84
SB 84 Bill.PDF SSTA 3/2/2021 3:30:00 PM
SB 84
SB 83 Sectional Analysis version A.pdf SSTA 3/2/2021 3:30:00 PM
SB 83
SB 83 Sponsor Statement version A.pdf SSTA 3/2/2021 3:30:00 PM
SB 83
SB 83 A.PDF SSTA 3/2/2021 3:30:00 PM
SB 83
SB 83-1-2-021221-GOV-N.PDF SSTA 3/2/2021 3:30:00 PM
SB 83