Legislature(1999 - 2000)

05/14/1999 06:30 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                                                                                
                                                                                                                                
HOUSE FINANCE COMMITTEE                                                                                                         
May 14, 1999                                                                                                                    
6:30 P.M.                                                                                                                       
                                                                                                                                
TAPE HFC 99 - 140, Side 1.                                                                                                      
TAPE HFC 99 - 140, Side 2.                                                                                                      
TAPE HFC 99 - 141, Side 1.                                                                                                      
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriualt  called the House Finance Committee                                                                         
meeting to order at 6:30 P.M.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Therriault   Representative Foster                                                                                     
Co-Chair Mulder    Representative Grussendorf                                                                                   
Vice Chair Bunde   Representative Kohring                                                                                       
Representative Austerman  Representative Moses                                                                                  
Representative J. Davies  Representative Williams                                                                               
Representative G. Davis                                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Wilson Condon, Commissioner, Department of Revenue; Denny                                                                       
DeWitt, Staff, Representative Eldon Mulder; Speaker Brian                                                                       
Porter; Representative Gail Phillips; Representative Sharon                                                                     
Cissna; Representative Ethan Berkowitz; Representative Jerry                                                                    
Sanders.                                                                                                                        
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 231 An Act relating to income of the Alaska permanent                                                                        
fund, to the Alaska Income Account, and to                                                                                      
permanent fund dividends; and providing for an                                                                                  
effective date.                                                                                                                 
                                                                                                                                
 CS HB 231 was reported out of Committee with a "do                                                                             
pass" recommendation and with a new House Finance                                                                               
Committee fiscal note.                                                                                                          
                                                                                                                                
HB 232 An Act making a special appropriation from the                                                                           
budget reserve fund under art. IX, sec. 17c,                                                                                    
Constitution of the State of Alaska, to the Alaska                                                                              
Income Account; and providing for an effective                                                                                  
date.                                                                                                                           
                                                                                                                                
 CS HB 232 (FIN) was reported out of Committee with                                                                             
a "do pass" recommendation and with a new fiscal                                                                                
note by the Department of Revenue.                                                                                              
HOUSE BILL NO. 232                                                                                                              
                                                                                                                                
An Act making a special appropriation from the budget                                                                           
reserve fund under art. IX, sec. 17c, Constitution of                                                                           
the State of Alaska, to the Alaska Income Account; and                                                                          
providing for an effective date.                                                                                                
                                                                                                                                
HOUSE BILL NO. 231                                                                                                              
                                                                                                                                
An Act relating to income of the Alaska permanent fund,                                                                         
to the Alaska Income Account, and to permanent fund                                                                             
dividends; and providing for an effective date.                                                                                 
                                                                                                                                
Co-Chair Mulder acknowledged that Commissioner Condon had                                                                       
previously expressed his concern regarding the plan                                                                             
submitted by the House Majority and how the anticipated                                                                         
level of return would affect the plan.  He noted that the                                                                       
Commissioner had provided several "runs" on the plan.                                                                           
                                                                                                                                
WILSON CONDON, COMMISSIONER, DEPARTMENT OF REVENUE, advised                                                                     
that previous discussion had focused on two issues.  The                                                                        
first created a target rate of return projection of 8.25%                                                                       
including current capital market assumptions.  He noted that                                                                    
an 8.1% rate of return or greater would be important.  An                                                                       
additional concern is that the rate of return supports the                                                                      
payout under the provision of HB 231.  He believed that the                                                                     
legislation would provide for a 5.25% payout on a five-year                                                                     
"look-back" rolling average.                                                                                                    
                                                                                                                                
Commissioner Condon explained that an 8.1% rate of return,                                                                      
subtracting 4% for inflation and 40 basis points for                                                                            
management fees, could provide trend line projections.  The                                                                     
trend line projections follow the value of the fund from                                                                        
four years ago.  The bill would average market value over 20                                                                    
quarters beginning one year ago.  He commented that over                                                                        
time and working through the transition period, it was                                                                          
acknowledged by the staff that the actual payout rate would                                                                     
be a medium case of 4.8% to 4.9% of the current value.  He                                                                      
believed that a 5.25% proposed payout could work.                                                                               
                                                                                                                                
Representative Austerman questioned if the proposed plan                                                                        
could provide better "possibility" for the State in the                                                                         
long-term.  Commissioner Condon replied that in order to                                                                        
make a payout from the permanent fund could reduce the risk                                                                     
relative to current practice.  He emphasized that the State                                                                     
has been very lucky over the past twenty years in using the                                                                     
current system.                                                                                                                 
                                                                                                                                
Vice-Chair Bunde MOVED to adopt work draft CS HB 231 (FIN),                                                                     
1-LS0960\H, Cook, 5/14/99, as the version before the                                                                            
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
Representative Grussendorf requested discussion on Section                                                                      
10 which outlines the questions being proposed to the public                                                                    
and how they should appear on the ballot.                                                                                       
                                                                                                                                
Representative Bunde noted that he supported a "yes" and                                                                        
"no" option.  He assumed that the ballot would increase the                                                                     
likelihood that people read the plan and then make an                                                                           
informed vote.                                                                                                                  
                                                                                                                                
Representative G. Davis asked that the effective date be                                                                        
clarified for the record.  He referenced Page 5, Section 5,                                                                     
and suggested that it be clarified that the dividends                                                                           
received in 1999 would be for calendar year 1998.  Co-Chair                                                                     
Mulder suggested that people do not equate that this year's                                                                     
dividend is for previous year eligibility.  He thought that                                                                     
would confuse the issue for the voters.  Representative G.                                                                      
Davis suggested adding language including the 1999                                                                              
"distribution".                                                                                                                 
                                                                                                                                
Representative Bunde pointed out that Section 10 indicates                                                                      
that the Special Election would be held September 14th.  He                                                                     
questioned if the program would go into effect after the                                                                        
election had been tabulated.  Co-Chair Mulder explained that                                                                    
Sections 3, 7 and 9 of the act take effect July 2, 1999.                                                                        
Sections 1, 2, 8 and 10 take effect immediately.  There                                                                         
would be an advisory election, and if the voters turn it                                                                        
down, the Legislature would need to take recourse to reverse                                                                    
the action of adopting those sections.                                                                                          
                                                                                                                                
Representative J. Davies believed that enacting the $1000                                                                       
dollar dividend this October would cause confusion.  The                                                                        
Legislature would be subject to criticism if that action was                                                                    
taken.  In order to achieve greater clarity, he recommended                                                                     
a special session be planned to address these concerns.                                                                         
                                                                                                                                
Co-Chair Therriault agreed that there would be a lot of                                                                         
suspicion from the voters.  Co-Chair Mulder explained that                                                                      
it had been presented this way, following consultation with                                                                     
Legislative Legal, and not having the ability to tie the                                                                        
outcome of an advisory election to the enactment of the                                                                         
legislation.  The legislation attempts to provide a one vote                                                                    
vehicle; if that should be rejected, then the Legislature                                                                       
can come back into Special Session.                                                                                             
                                                                                                                                
Representative J. Davies inquired if the Permanent Fund                                                                         
Division had been consulted regarding the length of time it                                                                     
would take to issue the checks.  Co-Chair Mulder replied                                                                        
that he personally did not know the amount of programming                                                                       
and time required recalculating the checks.  Representative                                                                     
J. Davies suggested that the September 14th election date be                                                                    
moved up considering the downside possibility.  He commented                                                                    
that the proposed schedule might not be workable.                                                                               
                                                                                                                                
Representative Williams questioned the constitutional issue                                                                     
of people voting themselves more money through the permanent                                                                    
fund.  Representative J. Davies reiterated his concern                                                                          
regarding the timing issue of the "no" vote.  Representative                                                                    
Williams interjected that the Legislature is not responsible                                                                    
to provide voters with their check at a time they believe                                                                       
reasonable.                                                                                                                     
                                                                                                                                
Co-Chair Mulder noted that the September 14th date had been                                                                     
chosen in consultation with the Division of Elections.  He                                                                      
offered to try to "marry" the two-time tables between the                                                                       
Division of Elections and the Permanent Fund Division's                                                                         
release of checks.  Discussion followed regarding the timing                                                                    
of disbursement of the permanent fund checks.                                                                                   
                                                                                                                                
Representative Bunde stated that if the voters chose not to                                                                     
accept the proposed option, this Legislative Body does not                                                                      
have "time" to wait until next year to address these budget                                                                     
challenges.  He suggested that the Committee discuss a                                                                          
"Letter of Intent" should the plan be rejected to meet in                                                                       
Special Session.                                                                                                                
                                                                                                                                
Representative Austerman pointed out that everything                                                                            
discussed thus far had been tied to how much money would be                                                                     
distributed and then tying that concept to the dollar value                                                                     
of the permanent fund in an "yes" or "no" vote.                                                                                 
                                                                                                                                
Co-Chair Mulder assumed that voters would react to question                                                                     
Grussendorf asked if question #7 would be affected by a "no"                                                                    
vote on #5.  He agreed that the question is simple, however,                                                                    
there will be complications when explaining it to the                                                                           
public.                                                                                                                         
                                                                                                                                
Representative Austerman recommended that Sections 8 & 9                                                                        
become effective October 1st.  He believed that could tie                                                                       
the vote to the dividend to the rest of the questions which                                                                     
would keep the endowment active.  Co-Chair Mulder noted that                                                                    
there would continue to be a need for a payout                                                                                  
recalculation.                                                                                                                  
                                                                                                                                
Representative J. Davies questioned "What the people would                                                                      
be voting on" with these questions.  He recommended that the                                                                    
issue and focus be limited in order to make it clear what                                                                       
the results become.  Representative Bunde preferred that the                                                                    
proposed questions continue to be submitted as a package.                                                                       
                                                                                                                                
Representative Grussendorf pointed out that there are                                                                           
several options which are not included in proposed statute                                                                      
such as spending reductions, spending limits and no new                                                                         
statewide taxes.                                                                                                                
                                                                                                                                
Representative G. Davis reiterated that 99% of the decision                                                                     
would be based on the question dealing with the dividend.                                                                       
He agreed it is important to establish a plan which includes                                                                    
that concern.  He recommended that the question be put to                                                                       
the public one week earlier.                                                                                                    
                                                                                                                                
Representative Williams elaborated that each question would                                                                     
be essential to the entire package for creating a spending                                                                      
plan.  Co-Chair Mulder advised that constituents would be                                                                       
more at ease knowing that there was "constraint" on State                                                                       
spending.  He added that his office had received negative                                                                       
feedback when proposing a tax issue. The proposed                                                                               
legislation would encourage the "State to put their best                                                                        
foot forward in obtaining passage of the legislation".  That                                                                    
expectation was the spirit in which this plan was designed.                                                                     
                                                                                                                                
Representative Austerman asked what will happen if it is                                                                        
voted down.  Co-Chair Mulder replied, no one knows what will                                                                    
happen if there is a "no" vote.  He reiterated that there is                                                                    
a lot of pressure to make large budget reductions and that                                                                      
no single option can bring the State to an optimal place.                                                                       
                                                                                                                                
Representative J. Davies stated that he had been prepared to                                                                    
move the previous version of the legislation from Committee.                                                                    
That version did not include a statement that no further                                                                        
taxes would be implemented.  He acknowledged that he did not                                                                    
support the current version.                                                                                                    
                                                                                                                                
Representative Bunde pointed out that this plan does not                                                                        
suggest that new taxes be enacted, however, observed that                                                                       
would not preclude taxes being introduced in other                                                                              
legislation.                                                                                                                    
                                                                                                                                
(Tape Change HFC 99 - 140, Side 2).                                                                                             
                                                                                                                                
Representative Austerman recommended deleting question #2                                                                       
regarding spending limit.  If the Legislature should enact                                                                      
new taxes, that question would not be clear.                                                                                    
                                                                                                                                
Representative Grussendorf agreed with Representative                                                                           
Austerman recommending that question #2 be dropped.                                                                             
                                                                                                                                
Co-Chair Mulder clarified that the proposed plan could put                                                                      
in place a funding mechanism for basic level State funding.                                                                     
If people want more services, options will be available with                                                                    
consideration of new revenue.  He projected that the issue                                                                      
will not go away soon. Co-Chair Mulder noted that taxes are                                                                     
not precluded from the option.                                                                                                  
                                                                                                                                
Representative Williams commented that question #7 is                                                                           
misleading.                                                                                                                     
                                                                                                                                
Co-Chair Therriault referenced Page 5, Line 4 and asked why                                                                     
language "substantial" had been included.  Co-Chair Mulder                                                                      
replied that there is no formula within statute for an                                                                          
advisory election and that there is no absolute compliance                                                                      
with election laws.                                                                                                             
                                                                                                                                
REPRESENTATIVE SHARON CISSNA questioned if it would be                                                                          
problematic in having a "yes" or "no" vote on each                                                                              
individual question.  Co-Chair Mulder assumed that would                                                                        
make it more difficult for the Division of Elections and                                                                        
offered to consult with them regarding this matter.                                                                             
Representative Bunde pointed out that this plan needs to be                                                                     
included in a package for it to work.  Representative Cissna                                                                    
advised that if the voter decides not to cap the dividend                                                                       
and yet wants the rest of the plan, they would basically be                                                                     
requesting a tax.                                                                                                               
                                                                                                                                
Representative Kohring advised that he would not support the                                                                    
plan.  He stated that the plan does not clearly make the                                                                        
connection between the use of the permanent fund earnings                                                                       
for government services.  He urged that question #6 be                                                                          
further clarified.                                                                                                              
                                                                                                                                
Representative Williams voiced frustration in that                                                                              
Representative Kohring was not supporting the plan, and had                                                                     
not provided the Committee with an alternative option.                                                                          
Representative Kohring argued that he had submitted his                                                                         
proposed plan to Co-Chair Mulder's office and that he had                                                                       
also addressed these concerns in caucus.                                                                                        
                                                                                                                                
Representative Austerman stated that the State could not                                                                        
balance the budget by cuts only as proposed by                                                                                  
Representative Kohring.  He emphasized that ten members of                                                                      
the Majority body had worked long and hard on preparation of                                                                    
this plan.                                                                                                                      
                                                                                                                                
Co-Chair Mulder MOVED to adopt Amendment #1 and then                                                                            
OBJECTED for the purpose of discussion.  [Copy on File].  He                                                                    
explained that voting citizens had requested that there be                                                                      
greater accountability of expenditures.                                                                                         
                                                                                                                                
Representative J. Davies noted that the details outlined in                                                                     
the amendment are already included in the Permanent Fund                                                                        
expenditure list. He added that he did not object to the                                                                        
amendment, however, urged that it be on a short list.  He                                                                       
envisioned a succinct list of the basic programs for which                                                                      
the money would be used.   Co-Chair Mulder asked if                                                                             
Representative J. Davies felt that the amendment would "add                                                                     
anything" to the ballot question.  Representative J. Davies                                                                     
replied that it would marginally enhance the concern.                                                                           
                                                                                                                                
Co-Chair Mulder WITHDREW his OBJECTION to Amendment #1.                                                                         
There being NO further OBJECTION, Amendment #1 was adopted.                                                                     
                                                                                                                                
Co-Chair Mulder MOVED a conceptual amendment to Page 5, Line                                                                    
26, deleting "revenue" and inserting "annual payout".  He                                                                       
pointed out that revenue would reflect earnings.                                                                                
                                                                                                                                
Co-Chair Mulder MOVED to amend the language to insert                                                                           
"amount transferred" instead.  There being NO OBJECTION to                                                                      
the amendment to the amendment, it was changed.  There being                                                                    
NO OBJECTION to Amendment #2 as amended, it was adopted.                                                                        
                                                                                                                                
Representative J. Davies MOVED to adopt Amendment #3.  [Copy                                                                    
on File].  Co-Chair Mulder OBJECTED for the purpose of                                                                          
discussion.  Representative J. Davies explained that the                                                                        
amendment would add the language "University of Alaska" to                                                                      
Page 5, Line 30.  Co-Chair Mulder suggested that inserting                                                                      
that language could lose the support of those voters who do                                                                     
not support public school education.                                                                                            
                                                                                                                                
Co-Chair Therriault added that the Alaska Constitution                                                                          
currently addresses that concern.  Discussion followed among                                                                    
Committee members regarding the referenced language being                                                                       
including K-12 or K-University.  Representative J. Davies                                                                       
WITHDREW the MOTION to adopt Amendment #3.  There being NO                                                                      
OBJECTION, Amendment #3 was withdrawn.                                                                                          
                                                                                                                                
Representative Austerman MOVED conceptual Amendment #4,                                                                         
deletion of subsection #2, Page 5, Lines 15 & 16.  There                                                                        
being NO OBJECTION, it was deleted.                                                                                             
                                                                                                                                
Representative J. Davies MOVED a corresponding change to                                                                        
Page 5, Line 10.  Co-Chair Mulder noted that the plan does                                                                      
call for a spending limit.  Representative J. Davies MOVED                                                                      
that the language on Line 10 read:  "This long range plan                                                                       
requires further state spending reductions and limitations                                                                      
on State spending."  Representative Williams suggested that                                                                     
language would be redundant.  Representative Grussendorf                                                                        
recommended using the language "fiscal discipline".  Co-                                                                        
Chair Mulder thought "spending limits" would work best.                                                                         
                                                                                                                                
Representative Bunde questioned what would be addressed with                                                                    
the addition of that proposed language.  Representative J.                                                                      
Davies stated that it would be clearer to indicate that:                                                                        
"This long-range plan would require further reductions and                                                                      
limitations on state spending".  Representative J. Davies                                                                       
WITHDREW the prior MOTION to adopt Amendment #5.  There                                                                         
being NO OBJECTION, it was withdrawn.                                                                                           
                                                                                                                                
Representative J. Davies MOVED to adopt the new Amendment                                                                       
requires further limitations and reductions on state                                                                            
spending".  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
Representative Austerman MOVED to adopt Amendment #6, Page                                                                      
5, Line 25, inserting "for distribution" after "$1,000".                                                                        
Representative J. Davies MOVED to amend Amendment #6                                                                            
inserting "in each of".  Co-Chair Mulder questioned if that                                                                     
language would enhance the amendment.  He suggested changing                                                                    
the language to "Alaska residents in the amount of $1,000                                                                       
for annual distribution in 1999, 2000, and 2001".  Co-Chair                                                                     
Mulder MOVED the amendment to Amendment #6.  There being NO                                                                     
OBJECTION, the language was changed.  There being NO                                                                            
OBJECTION to Amendment #6 as amended, it was adopted.                                                                           
                                                                                                                                
Representative Bunde MOVED to report CS HB 231 (FIN) out of                                                                     
Committee with individual recommendations and with the                                                                          
accompanying fiscal note.  Co-Chair Mulder requested that                                                                       
the MOTION be HELD.  Co-Chair Mulder explained that the                                                                         
Division of Elections had not yet prepared a fiscal note.                                                                       
The fiscal note accompanying the bill had been taken from SB
76, which reflects an $839 thousand dollar note, assuming                                                                       
that the cost would be the same.                                                                                                
                                                                                                                                
Representative Bunde acknowledged that the fiscal note was                                                                      
high, pointing out that public government and participation                                                                     
"costs money" which is the price we need to pay.                                                                                
                                                                                                                                
Co-Chair Mulder explained the note and also the services                                                                        
attached to it.  The fiscal note would cover costs of a                                                                         
special election as provided for in a similar advisory                                                                          
election as in the Senate version of the legislation.                                                                           
Representative J. Davies asked if there would be additional                                                                     
expenditures by the Permanent Fund Corporation.  Co-Chair                                                                       
Mulder noted that they had not provided a fiscal note to the                                                                    
Senate Finance Committee at this time.                                                                                          
                                                                                                                                
Representative Bunde MOVED to report CS HB 231 (FIN) out of                                                                     
Committee with individual recommendations and with the                                                                          
accompanying fiscal note.  Representative Kohring OBJECTED.                                                                     
                                                                                                                                
Representative Foster also objected noting that the proposed                                                                    
plan would be harmful to the people living in Bush Alaska.                                                                      
He emphasized that the proposed plan was a "Healthy Urban                                                                       
Alaska Plan" and would be unfair to Bush Alaska.                                                                                
                                                                                                                                
Representative J. Davies added that this bill is not                                                                            
necessarily "good" for urban Alaska either.  He stated that                                                                     
there needs to be constraints on government, however, the                                                                       
plan does not include statewide taxes, which will ultimately                                                                    
limit funding for statewide roads and the University system.                                                                    
In order to be equitable, there should be a balanced                                                                            
approach in who is asked to pay.                                                                                                
                                                                                                                                
(Tape Change HFC 99 - 141, Side 1).                                                                                             
                                                                                                                                
Representative Grussendorf noted that the process of the                                                                        
plan is not yet over.  He advised that when educating his                                                                       
constituents, he would indicate both the "ups and downs" of                                                                     
the proposed plan and then what could happen to the State                                                                       
with "no" plan.                                                                                                                 
                                                                                                                                
Representative Austerman stated that he supported the plan                                                                      
and that to "do nothing" would doom the permanent fund                                                                          
dividend.  That is not an option.  There is no other source                                                                     
of money at this time.                                                                                                          
                                                                                                                                
Representative Bunde commented that the Alaska fiscal                                                                           
situation is "sick".  Without addressing the problem now,                                                                       
there will be no dividend down the road.  He looked forward                                                                     
to educating the citizens of Alaska regarding these options                                                                     
and allowing them to make the choice.                                                                                           
                                                                                                                                
Representative G. Davis noted that the decision before the                                                                      
State is difficult.  The proposed plan has consistent                                                                           
flexibility and does not preclude any future taxes.  He                                                                         
emphasized that this is a responsible plan and voiced his                                                                       
support in putting the vote to the people.                                                                                      
                                                                                                                                
Representative Moses pointed out that the State would spend                                                                     
nearly $1 million dollars to implement "1/2 of a plan".  He                                                                     
emphasized that Legislators continue to make recommendations                                                                    
that are not feasible.  Representative Moses believed that                                                                      
all legislators know what really needs to be done.                                                                              
                                                                                                                                
Co-Chair Mulder spoke in support of the proposed                                                                                
legislation, as it is essential to critical services within                                                                     
the State.  Without this legislation to safeguard Alaska's                                                                      
future, the outlook is bleak.  If the public votes "no", the                                                                    
Legislature will be faced with a difficult decision of                                                                          
dismantling State government.                                                                                                   
                                                                                                                                
Representative Kohring observed that there exists a                                                                             
philosophical disagreement among Committee members.  He                                                                         
noted that he personally comes from a more conservative                                                                         
perspective.  He recommended more privatization, merging and                                                                    
focusing on resources for very basic standards.  He voiced                                                                      
concern about the current size of State government, while                                                                       
continuing to spend $6 billion dollars a year.                                                                                  
Representative Kohring stressed that he does not want to see                                                                    
just cuts but recommends more profound incentive measures be                                                                    
taken.                                                                                                                          
                                                                                                                                
Representative J. Davies agreed with Representative Moses                                                                       
that what is being proposed is 1/2 of a plan.  There are                                                                        
pieces of the plan which he knew would be good public                                                                           
policy, however, this plan will not bring enough money to                                                                       
the State to continue funding major pieces of public policy.                                                                    
He maintained that other revenues need to be found in order                                                                     
to maintain our current expenditures.  He reminded members                                                                      
that the University of Alaska badly needs more money.                                                                           
                                                                                                                                
Representative Williams advised members that the Permanent                                                                      
Fund was established in order to pay for a "rainy" day which                                                                    
the State is currently experiencing.                                                                                            
                                                                                                                                
A roll call vote was taken on the MOTION made by                                                                                
Representative Bunde to move the bill from Committee.                                                                           
                                                                                                                                
IN FAVOR: G. Davis, Grussendorf, Williams, Austerman,                                                                           
Bunde, J. Davies, Therriault, Mulder                                                                                            
OPPOSED:  Foster, Moses, Kohring                                                                                                
                                                                                                                                
The MOTION PASSED (8-3).                                                                                                        
                                                                                                                                
CS HB 231 (FIN) was reported out of Committee with a "do                                                                        
pass" recommendation and with a new fiscal note by the House                                                                    
Finance Committee.                                                                                                              
                                                                                                                                
HOUSE BILL NO. 232                                                                                                              
                                                                                                                                
"An Act making a special appropriation from the budget                                                                          
reserve fund under art. IX, sec. 17c, Constitution of                                                                           
the State of Alaska, to the Alaska Income Account; and                                                                          
providing for an effective date."                                                                                               
                                                                                                                                
Representative Bunde MOVED to adopt work draft for CS HB 232                                                                    
(FIN), 1-LS0961\D, Cook, 5/14/99, as the version before the                                                                     
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
DENNY DEWITT, STAFF, REPRESENTATIVE ELDON MULDER, explained                                                                     
the differences between the previous committee substitute                                                                       
and the newly adopted one.  He referenced the sectional                                                                         
analysis provided by Tamara Cook, Director of Legal                                                                             
Services.  [Copy on File].                                                                                                      
                                                                                                                                
Mr. DeWitt explained that the current permanent fund payout                                                                     
would have a dividend larger than HB 231 would allow for.                                                                       
The structure required to have that amount of money                                                                             
available in the account would require the State to place by                                                                    
statute more dollars in that account then the Permanent Fund                                                                    
Dividend Division would be allowed to pay out.  The balance                                                                     
would be greater than allowed to be paid out to the Alaska                                                                      
Income Account.                                                                                                                 
                                                                                                                                
Representative J. Davies understood that explanation was                                                                        
opposite of what was actually occurring.  He thought that                                                                       
the dividend account would be emptied after the 1999                                                                            
appropriation.  Mr. DeWitt replied that the reason that                                                                         
there is money left in that account is because the State                                                                        
would be moving toward making a deposit into the dividend                                                                       
account, greater than the amount allowed by law to be paid                                                                      
out.  Co-Chair Mulder added that the excess funds would be                                                                      
swept into the Income Account.                                                                                                  
                                                                                                                                
Representative J. Davies asked if the Income Account had                                                                        
been created under current statute.  Mr. DeWitt replied that                                                                    
it was and would not go away because the excess funds would                                                                     
need to be moved back to the Alaska Income Account.                                                                             
                                                                                                                                
Representative J. Davies pointed out that for the                                                                               
legislation to be effective, it would require a 3/4 vote.                                                                       
He asked the intent including the Capital Budget Request                                                                        
(CBR) following the budget appropriation.  Co-Chair Mulder                                                                      
replied that it would continue to exist to address potential                                                                    
settlements coming into it.  If the plan were adopted and                                                                       
placed into statute, there would be a corresponding                                                                             
constitutional amendment to come forward to the CBR as                                                                          
unnecessary in the future.                                                                                                      
                                                                                                                                
Representative J. Davies questioned how a significant                                                                           
shortfall would be handled by the Healthy Alaska Plan.  Co-                                                                     
Chair Mulder responded that the money would either be                                                                           
borrowed, reduce spending accordingly or raise taxes.                                                                           
                                                                                                                                
Representative Grussendorf voiced hesitation in eliminating                                                                     
the CBR should something dramatic occur to State revenues.                                                                      
                                                                                                                                
Co-Chair Therriault asked about the repayment section of the                                                                    
CBR and when that money would become available.                                                                                 
Representative Austerman pointed out that neither of the                                                                        
proposed bills addresses the CBR.  However, he saw the                                                                          
Alaska Income Account as the "shock absorber".                                                                                  
                                                                                                                                
Representative Bunde suggested that the role of the CBR                                                                         
would follow the money, so then the money would roll over to                                                                    
the Alaska Income Account.  Representative J. Davies agreed.                                                                    
He added that it is important to know how the State will                                                                        
track money borrowed from that account.  Co-Chair Mulder                                                                        
agreed that some mechanism should be put in place,                                                                              
emphasizing however, that it is important to allow future                                                                       
legislatures to be able to adjust that amount.                                                                                  
                                                                                                                                
Representative Bunde MOVED to report CS HB 232 (FIN) out of                                                                     
Committee with individual recommendations and the                                                                               
accompanying fiscal note.  There being NO OBJECTION, it was                                                                     
so ordered.                                                                                                                     
                                                                                                                                
CS HB 232 (FIN) was reported out of Committee with a "do                                                                        
pass" recommendation with a new fiscal note by the                                                                              
Department of Revenue.                                                                                                          
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 8:45 P.M.                                                                                              
                                                                                                                                
                                                                                                                                
H.F.C. 12 5/14/99 p.n.                                                                                                          

Document Name Date/Time Subjects