Legislature(2017 - 2018)HOUSE FINANCE 519
03/01/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB57 || HB59 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 57 | TELECONFERENCED | |
| += | HB 59 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 1, 2017
2:35 p.m.
2:35:20 PM
CALL TO ORDER
Co-Chair Seaton called the House Finance Committee meeting
to order at 2:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Charisse Millett; Representative Dan
Saddler; Representative Mike Chenault; Representative
Jennifer Johnston; Representative Colleen Sullivan-Leonard;
Representative David Eastman; Representative Chris Birch;
Representative Chuck Kopp; Representative Gary Knopp;
Representative Dave Talerico; Representative Mark Neuman;
Representative Lora Reinbold; Representative George
Raucher.
SUMMARY
HB 57 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 57 was HEARD and HELD in committee for further
consideration.
HB 59 APPROP: MENTAL HEALTH BUDGET
HB 59 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton addressed the meeting agenda.
HOUSE BILL NO. 57
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; repealing appropriations; making
supplemental appropriations and reappropriations, and
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
HOUSE BILL NO. 59
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
2:35:54 PM
Co-Chair Seaton explained the information provided to
members. He underscored that the bill versions for
consideration were not finals. The committee would be
hearing public testimony the following three days. He
addressed the schedule for the following week pertaining to
amendments.
2:41:13 PM
Representative Wilson asked about the chair's intent
regarding public testimony and wanted to ensure people
testifying had time to express their comments.
Co-Chair Seaton relayed that testifiers who were not heard
by the end of their communities' allotted time-slot would
be rolled to the end of public testimony.
Representative Wilson requested more time for amendments
following public testimony.
Co-Chair Seaton thanked Representative Wilson for her
comments, but maintained the 5:00 p.m. deadline on
Saturday, March 4.
2:44:29 PM
Co-Chair Foster MOVED to ADOPT the proposed committee
substitute (CS) for HB 57, Work Draft 30-GH1855\U (Wallace,
3/1/17).
Representative Wilson OBJECTED.
2:44:59 PM
AT EASE
2:45:39 PM
RECONVENED
Representative Wilson spoke to her objection. She
referenced an article put forward by Governor Bill Walker
[Alaska Dispatch News, May 14, 2016], in which he expressed
his views on the $4 billion draw on the Permanent Fund
Earnings Reserve Account (ERA), where he opined that taking
out $4 billion in a single fiscal year would erode the
value of the fund and its earning potential. She read an
excerpt from the article:
A fast and large drawdown does not allow for the fund
to keep up with inflation-and reduces the fund's
purchasing power.
It would leave us with $150 million to $200 million
less that can be drawn annually under a rules-based
framework...
Representative Wilson also mentioned a memorandum provided
in response to a list of questions asked of Commissioner
Randall Hoffbeck, Department of Revenue [memorandum
addressed to staff to Representative Steve Thompson dated
January 27, 2017 (copy on file)]. She referenced answer 7
[page 5 of the memorandum] where Commissioner Hoffbeck
specified that taking out $4 billion or more in a single
fiscal year would inevitably erode the value of the fund
and hurt its future ability to provide support for
dividends and government. She wondered how the draw would
affect the ERA and the dividend in future years.
Co-Chair Seaton corrected that the items were addressing a
$4 billion ad hoc draw at a single time, whereas the bill
proposed a draw over two fiscal years, 2017 and 2018. He
also mentioned that according to Angela Rodell, Executive
Director, Alaska Permanent Fund Corporation (APFC), the
schedule was in August of each year, so that it would not
be an ad hoc draw. He understood the point, but disagreed.
Representative Wilson explained it was not only the
specific portion of the draw, or whether it occurred over
one year or two years, but that it would substantially
impact the Permanent Fund. She found it very interesting
that Ms. Rodell's testimony had been different the prior
day compared to the prior week, when she had been very
cautious about how much money would have to be taken out
and how investment would change if the state was going to
start using the Permanent Fund as its general fund. She
underscored that although the bill proposed taking the
funds out over a two-year period, the action was being
taken before knowing the final budget. She believed it was
indisputable that using the funds took savings away from a
fund with the biggest earning potential (compared to the
Constitutional Budget Reserve (CBR), which was invested in
safer [lower earning] investments). She thought the public
needed to understand there had been significant talk about
essentially "reaching your hand in the cookie jar" and
taking out a certain amount of money. She noted that a two-
minute time limit on public testimony was minimal
considering the size of the bill. She continued to discuss
the negative effects a draw would have on the Permanent
Fund, particularly if the stock market plummeted in the
future. She added that the bill would also mean the funds
would be placed in an account that would earn little to no
money.
2:51:08 PM
Vice-Chair Gara understood the disagreement and the
frustration. He remarked on his past experience as a member
of the House Minority. He brought up a discussion about
something that had occurred a few years back compared to
the present. He stated it was "not an apples-to-apples
comparison." He elaborated that two years earlier there had
been an attempt by the former Majority to take $5 billion
from the ERA.
2:52:18 PM
AT EASE
2:52:55 PM
RECONVENED
Vice-Chair Gara listed some of the items in the bill. He
remarked that he would personally like a larger dividend.
The current bill contained a $1,100 Permanent Fund Dividend
(PFD), which was larger than those in other proposals. He
stated that the budget before the committee did what the
legislature had historically done until the previous year;
put funds into the Public Education Fund. That money would
be the full amount to pay for the Base Student Allocation
(BSA). He wanted to see a bigger BSA.
2:55:09 PM
Representative Pruitt described his opposition to the CS.
He emphasized that the committee was trying to pass a
budget based on bills that had not passed, by creating a
framework through which bills that may not pass would have
been included in the amendments. He spoke to an attempt to
remove the role of the Minority in crafting the budget, for
example by removing the CBR discussion. He underlined that
he was not referencing a letter that had come forward two
years previous, but stated that it had been objected to at
the time, but was somehow acceptable at the current stage.
He was challenged with the process at hand. Amendments had
been offered by Majority members and the public would then
testify on those amendments and on the bill. The Minority
members had not been given the opportunity to offer
amendments before public testimony. He thought all
amendments should be offered either before or after public
testimony. He pointed to a separation between Majority and
Minority participation and called for a discussion of
amendments in committee whether they passed or not. He
recognized colleagues in the audience.
2:58:19 PM
Co-Chair Seaton clarified that every Minority member had
been on finance subcommittees and that all amendments
offered were subcommittee amendments. He specified that no
personal amendments had been put forward, only subcommittee
amendments. He had chaired the subcommittee for the
language amendments and had offered them as the
subcommittee chair. He detailed that subcommittees had been
composed of policy committees which were all composed of
members of the Majority and the Minority. He disagreed
with the comments made. He addressed an earlier point Vice-
Chair Gara had wanted to make and clarified that the
subject of the letter from two years earlier had been
brought up previously; therefore, he would allow Vice-Chair
Gara to address the issue. Co-Chair Seaton described the
proposed actions of the previous Majority, that wanted to
transfer a one-time sum of $4.5 billion from the ERA to the
corpus of the fund, and a second transfer for the following
year to the amount of $1.5 billion; the action would have
made the funds unavailable for appropriation. He suggested
that a discussion of overdraws would have to include that
proposal two years ago by the then Majority that was
objected to by several members, including himself, as
depleting savings to the point where a PFD may no longer
have been an option. The current bill took a structured
draw and reflected the same proposal by the governor in the
amount of 5.25 percent of the market value draw from the
ERA in 2017, and 5.25 percent draw in 2018. He reiterated
that Ms. Rodell had stated that the proposed draw amount
would not influence APFC's investment strategies.
3:02:10 PM
Representative Pruitt read from a subcommittee narrative
that the budget amendments were submitted by the
subcommittee chair. He maintained that many of his
colleagues were ready to be a part of the process and felt
that they were not fully able to be. He stated that in some
instances there were opportunities to offer amendments, and
in other cases there were not. He disagreed with the
statements made previously. He asked about a subcommittee
related to language. He had never heard of it.
Co-Chair Seaton agreed. The language section was the
purview of the operating budget chair. He highlighted that
the procedure had previously been rolled into a CS behind
closed doors, whereas now the CS only contained changes to
the governor's budget and amendments that had been voted on
by the committee.
3:04:46 PM
Representative Thompson spoke to a gigantic draw of $4.2
billion from the ERA. He believed Co-Chair Seaton had made
a misstatement related to Ms. Rodell's prior testimony. He
corrected that Ms. Rodell had stated that the draw for the
PFD checks was made in August and that the $1.7 billion
draw for the education fund would be made on the first of
July. The size of the draw and the effect of lost earnings
amounted to $200 million to $400 million per year.
Currently the Permanent Fund was earning 18 percent
returns. He was disappointed in the process. He also wished
to recognize the other House members present.
3:06:38 PM
Co-Chair Seaton clarified that Ms. Rodell had testified
that the $1.7 billion draw would be structured over time
and it would not pose a cash problem for APFC. He
recognized Representatives Jennifer Johnston, Colleen
Sullivan-Leonard, Charisse Millett, Dan Saddler, George
Rauscher, DeLena Johnson, Chris Birch, Chuck Kopp, Dave
Talerico, Gary Knopp, David Eastman, Mike Chenault, Mark
Neuman, and Lora Reinbold in the audience.
3:07:50 PM
Representative Tilton spoke to her opposition to the CS.
She was opposed to including bills in the document that had
not passed. She remarked on the dividend rate set in the CS
that had not heard discussion and on the removal of the
CBR. She was concerned that Mat-Su testifiers would not be
able to examine the bill in time for public testimony. She
did not believe her colleagues had received the voice they
should have and that the committee had been told that the
subcommittee would not hear amendments the subcommittee
chair did not like.
3:10:05 PM
Vice-Chair Gara discussed the prior years' budget process
in the committee. He understood not being happy with the
budget. He explained that in the past, the committee chair,
without consultation with anyone in the Minority, had
written the language section of the CS, put it into a two-
hundred page document, and put it forward. Some of the
material would be read through, some of it was confusing,
but there had been no real debate. He added that some
subcommittees had not allowed amendments and others had. He
underscored that in this case, all of the amendments in the
CS had been discussed by the committee and had been more
openly discussed than in the past. He contended the present
system was not perfect but was better than previous ones.
3:13:39 PM
Representative Wilson clarified that comments from
Commissioner Hoffbeck were made on January 27, 2017, and
that Governor Walker's article was from May 14, 2016, so
both were relatively recent. She stated that in the past
the purpose of the draw had been to put money back into the
corpus of the Permanent Fund, not to be spent on
government. She mentioned that there was a section that was
much bigger than she had ever seen in a budget bill; one
amendment had contained six parts. She believed Co-Chair
Seaton had done things differently and she was not
complaining, but that she wanted to ensure that the people
of Alaska understood and would be able to comment on all of
the amendments. She MAINTAINED her OBJECTION.
Co-Chair Seaton clarified that the proposed draw from the
ERA was less than that proposed by the governor. The
governor proposed, in 2017, 5.25 percent in addition to the
PFD that was paid in 2017. This bill reduced the amount of
the draw so that it was 5.25 percent of the value minus the
amount of $695 million paid out in dividends. He understood
the objection, but stated that it was an objection to what
the governor had originally put forward and not to the
amendments.
3:17:32 PM
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Seaton,
Foster
OPPOSED: Tilton, Wilson, Pruitt, Thompson
The MOTION PASSED (7/4). There being NO further OBJECTION,
Work Draft 30-GH1855\U was ADOPTED.
3:18:20 PM
Co-Chair Foster MOVED to ADOPT the proposed committee
substitute for HB 59, Work Draft 30-GH1856\J (Wallace,
2/28/17). There being NO OBJECTION, it was so ordered.
HB 57 was HEARD and HELD in committee for further
consideration.
HB 59 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton discussed the schedule for the following
day.
ADJOURNMENT
3:19:43 PM
The meeting was adjourned at 3:19 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 59 CS WORKDRAFT 2-28-17 vJ.pdf |
HFIN 3/1/2017 1:30:00 PM |
HB 59 |
| HB 59 3-1-17 11am MH Bill Doc Compare vD to vJ Numbers and Language.pdf |
HFIN 3/1/2017 1:30:00 PM |
HB 59 |
| HB 57 CS WORKDRAFT 3-1-17 vU.pdf |
HFIN 3/1/2017 1:30:00 PM |
HB 57 |
| HB 57 CS 3-1-17 1pm OP Bill Compare between vJ and vU Numbers and Lang.pdf |
HFIN 3/1/2017 1:30:00 PM |
HB 57 |