Legislature(2017 - 2018)ADAMS ROOM 519
03/12/2018 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HJR23 | |
| HB97 | |
| HJR23 | |
| Public Testimony | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 23 | TELECONFERENCED | |
| + | HB 97 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 12, 2018
3:11 p.m.
3:11:21 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 3:11 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 Paul Seaton; Arnold Liebelt, Staff,
Representative Paul Seaton; Doug Gardner, Director,
Legislative Legal Services; Angela Rodell, Executive
Director, Alaska Permanent Fund Corporation; Representative
Steve Thompson; Max Thompson, Son, Representative Steve
Thompson; Forrest Wolfe, Staff, Representative Steve
Thompson; Martin Stepetin Sr, Self, Juneau; Representative
Justin Parish; Representative Louise Stutes; Representative
Geran Tarr.
PRESENT VIA TELECONFERENCE
Loretta Jones, Self, Wrangell; Michael Chambers, Self,
Anchorage; Michael Garhart, Self, Wasilla; Joel Sigman,
Self, Wasilla; Mike Alexander, Self, Big Lake; Muriel
Gillette, Self, Big Lake; Cris Eichenlaub, Self, Eagle
River; Richard Heller, Self, Chugiak; James Squyers, Self,
Rural Deltana; Mike Coons, Self, Palmer; Herman Morgan,
Self, Aniak; Lynette Clark, Self, Fox; Kurt Schmitt, Self,
Delta Junction; William Topel, Self, Anchorage; Ed Martin,
Self, Cooper Landing; Ronald Larkin, Self, Fairbanks; Randy
Griffin, Self, Fairbanks; Garvan Bucaria, Self, Wasilla;
William Deaton, self, Cordova; Wayne Ozosky, Self, Wasilla;
Bill Reiner, Self, Anchorage; Benjamin Williams, Self,
North Pole; Mikki Barker, Self, Fairbanks; David
Strickland, Self, Delta Junction; Karen Perry, Self,
Chugiak; Bonnie Lilley, Self, Anchorage; Sally Johnson,
Self, Palmer; Steven Wright, Self, Palmer; Gail Kozlowski,
Self, Wasilla; Ed Kaiser, Self, Wasilla; Bert Houghtaling,
Self, Big Lake; William Lambert, Self, North Pole; Michael
Boll, Self, Wasilla; Sarah Vance, Self, Homer; Libby
Dalton, Self, Fairbanks; Hilda Lestron, Self, Seward;
Robert Christianson, Self, Fairbanks; Michael Sheldon,
Self, Petersburg; Jim Weidner, Self, Fairbanks; Joe
Schlanger, Self, Wasilla; Leslie Dodge, Self, Houston; Tom
Lakosh, Self, Anchorage; John Vandiest, Self, Palmer; Janet
Mclain, Self, Palmer.
SUMMARY
HB 97 REPEAL AK FIRE STANDS. COUNCIL TAX CREDIT
HB 97(STA) was REPORTED out of committee with a
"do pass" recommendation and with one zero fiscal
note from the Department of Public Safety.
HJR 23 CONST AM: PERMANENT FUND; POMV; DIVIDEND;
HJR 23 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda.
HOUSE JOINT RESOLUTION NO. 23
Proposing amendments to the Constitution of the State
of Alaska relating to the Alaska permanent fund.
3:12:53 PM
Vice-Chair Gara MOVED to ADOPT the proposed committee
substitute for HJR 23, Work Draft 30-LS0838\T (Martin,
3/11/18).
Representative Wilson OBJECTED for discussion.
3:13:58 PM
Representative Wilson asked for the difference between the
previous bill as well.
REPRESENTATIVE PAUL SEATON, explained the changes in the
work draft. He relayed that the option in the bill had not
been the first choice. He detailed that the initial choice
had been a comprehensive fiscal plan to balance the state's
revenues with its expenditures, which would protect the
Permanent Fund Dividend (PFD). The PFD was in statute only,
not in the constitution. There had been challenges with the
other body that had communicated there would be no
diversification of the state's revenues until PFDs were no
longer sent out. He explained it meant that the only source
of readily available revenue in the future was to reduce
the PFD or eliminate it, which the House Majority coalition
was adamantly against. The bill provided an alternative to
protecting the PFD was to include it in the constitution
through a vote of the public.
3:16:32 PM
Co-Chair Seaton explained that HJR 23 was a constitutional
amendment.
Co-Chair Foster recognized Representative Pruitt had joined
the meeting.
Co-Chair Seaton provided a PowerPoint presentation titled
"HJR 23 - Constitutional Amendment Permanent Fund; POMV;
Dividend" (copy on file). He began with a bubble chart on
slide 2 of the presentation. The Permanent Fund was made up
of principal and the earnings reserve account (ERA). The
bill proposed a 4.75 percent percent of market value (POMV)
automatic transfer to the General Fund (GF) - 67 percent
would go to essential public services and 33 percent would
go to the dividend. He noted that the 67 percent would
remain in GF for expenditures and appropriation by the
legislature. The bill included the current method of
inflation proofing of the Permanent Fund with a majority
vote. He noted the House's budget contained $942 million
for inflation proofing by depositing the money back into
the fund's principal. He explained that ad hoc draws (draws
in addition to the 4.75 POMV transfer) would require a
three-quarter vote of the legislature. The goal was to
ensure the ERA was not depleted - the 4.75 percent POMV
would come from the ERA. The bill maintained the
constitutional provision that prevented the legislature
from appropriating money out of the fund's principal.
Co-Chair Seaton explained that the bill language used the
word "may" because a structure that changed multiple
articles of the constitution would take a constitutional
convention - it would be eliminating the legislature's
power of appropriation, the governor's right to veto an
appropriation, and setting it up as a higher designated use
than public safety, education, and the other things in
Article I that were the legislature's responsibility. He
believed it would be a high bar to get over (once the
voters had voted) for a certain amount of the transfer that
would go to dividends for the legislature to violate that.
3:20:31 PM
Co-Chair Seaton turned to a table on slide 3 showing a 4.75
POMV from FY 19 through FY 27. He explained the amount
reflected the same figures included in the current budget.
He noted the previous budget bill had included a POMV
transfer and then a draw that could be made by statue
instead of automatic transfer. The table included the same
67/33 percent split which would result in a dividend of
$1,258 in the current year and $1,635 in FY 27. The current
formula for distribution was based on earnings. He
elaborated that 50 percent of earnings could be a volatile
number on an annual basis; there had been efforts to smooth
the figure out by using five of the previous six years, but
it was still much more volatile than value of the entire
fund. The bill's objective was a sustainable draw from the
ERA over time. The 4.5 percent draw was not to exceed the
balance of the fund. He explained that if at some time the
fund was less than 4.75 percent, it would not mean there
would be no draw, but a draw would be taken up to the
balance of the fund. He detailed if there was only 4.5
percent available, 4.5 percent would be drawn.
Co-Chair Seaton replied to an earlier question by
Representative Wilson. The previous bill had contained a 5
percent draw. The goal was the most sustainable level over
time. He explained that because the language would be in
the constitution it was meant to endure for a long time. He
expounded that a 5 percent draw had been viewed as somewhat
risky over time. The other bill had specified the PFD was
mandated to be paid and if there had not been sufficient
funds in the ERA, the GF would have to backfill the
deficiency. Given the current financial situation,
backfilling from the GF would be nearly impossible or would
put public safety, education, and funding for other items
at risk. The bill was meant to impinge on the ability of
future legislatures to make appropriations as minimal as
possible.
3:24:30 PM
Co-Chair Foster asked to hear from Legislative Legal
Services and the Alaska Permanent Fund Corporation (APFC).
Vice-Chair Gara asked about language that had been in the
previous bill version that the amount for a PFD "shall" be
provided. He asked Legislative Legal Services for comment.
DOUG GARDNER, DIRECTOR, LEGISLATIVE LEGAL SERVICES,
referenced the question pertaining to "may" versus "shall"
language in the bill. He detailed the concern was using the
word "shall" would mean the PFD would be paid first - ahead
of education, public safety, and other important services
the legislature was constitutionally responsible to fund.
He cited the case Bess v. Ulmer [1999] to highlight the
concern. He detailed that the constitution could be amended
through the process contemplated by HJR 23. He referenced a
memorandum he had authored and addressed to Co-Chair Seaton
dated March 11, 2018 regarding proposed constitutional
amendments to the Permanent Fund (copy on file). He read
four factors identified by the court: "(1) the proposal is
simple to express and understand; (2) is complete within
itself; (3) relates to only one subject; and (4)
substantially affects only one section of the
constitution." He believed use of the word "shall" made the
fourth factor more complicated.
Mr. Gardener continued that the court had also suggested if
a fundamental power of one of the branches of state
government was significantly altered, it could result in
the type of sweeping change that was not permitted to be
accomplished in an amendment to the state constitution. He
elaborated that the court had determined that if the
legislature reweighed how it prioritized expenditures,
there needed to be a constitutional convention. He
explained that trying to predict what the court may do in a
revision amendment case (there was only one case: Bess v.
Ulmer) with a unique provision like the Permanent Fund was
very difficult.
Mr. Gardner believed there was a substantial risk that
using the word "shall" would result in a possible reversal
of the resolution or a ruling that it violated Bess v.
Ulmer before getting on the ballot. In response to the
concern, the current bill had been drafted to try to
balance the throttle on the most the legislature could do
with the least amount of risk of a bad result in the
supreme court. Therefore, the decision had been made to
replace "shall" with "may" in the current bill draft. The
likelihood of a reversal of the bill was much more elevated
with the use of the word "shall." The language meant the
legislature did not appropriate, the governor could not
veto, and the legislature could not override the veto. All
the mechanisms and plumbing in the constitution established
by its framers for one of the most substantial legislative
powers and corollary powers of the governor were eliminated
with use of the word "shall." The state had a strong
executive and there was a commitment to the appropriation
process.
Vice-Chair Gara referenced Mr. Gardner's statement that
Vice-Chair Gara had suggested something to him. He
clarified that he had not brought the bill draft to Mr.
Gardner.
Mr. Gardner agreed and noted that Vice-Chair Gara had
grilled him over the phone earlier in the day.
3:31:16 PM
Representative Wilson spoke about ensuring residents
received their PFDs and surmised the using the word "shall"
would override the legislative process and the governor's
veto powers. She thought it would read that the PFD shall
be paid, not may be paid.
Mr. Gardner answered that use of the word shall could mean
a litigation result and none of the resolution would go
forward.
Representative Wilson had received the questions about
ensuring residents would receive the dividend. She asked
for verification that use of the word shall was the only
way to ensure the dividend could not be vetoed by the
governor or the legislature could choose not to fund it.
She was asked frequently whether a constitutional amendment
would ensure residents would receive a dividend. She
believed that was the difference between using shall versus
may.
Mr. Gardner assumed she was trying to respond to a
constituent concern where they wanted a guarantee they
would receive a PFD.
Representative Wilson agreed and asked if the objective
could be accomplished by the constitutional amendment.
Mr. Gardner agreed the objective could be accomplished by
using the word shall, but the legislature would take on
high risk that litigation would be triggered. The word
shall could be included and passed, but he believed the
likelihood of litigation was high. He did not want anyone
to walk away with the idea there was a yes or no answer.
Shall could be used and the legislature would find out from
the court how Bess v. Ulmer would play out in the context
of the PFD.
Representative Wilson referenced the bill provision that
would require a three-quarter vote [by the legislature] to
draw over 4.75 percent POMV [from the ERA]. She asked if
the language had to be included in the constitutional
amendment. She wondered if excluding the language would
mean a draw cap of 4.75 percent.
3:34:42 PM
Mr. Gardner answered that if subsection (e) was removed
from the bill, the current laws would apply and the
legislature would have the ability to appropriate from the
ERA with a simple majority vote (21/11). The legal effect
of the provision was more like a Constitutional Budget
Reserve (CBR) vote to make additional expenditures from the
ERA. He explained that without the language the legislature
could spend from the ERA with a majority vote.
Representative Wilson asked whether the legislature would
have to change subsection (e) to specify the cap if it
wanted to ensure that no more than 4.75 percent could be
taken.
Mr. Gardner answered that by specifying a 4.75 percent POMV
transfer for the purposes designated in the bill, if the
rest of the ERA was not available for appropriation, it
would almost seem tantamount to rolling it into the
principal of the fund. He was not certain he understood the
question.
Representative Wilson spoke about a scenario where the
resolution went on the ballot. She asked if the legislature
would have to put something in the constitutional amendment
to ensure no more than the 4.75 percent POMV draw could be
taken [from the ERA]. Alternatively, she wondered if it
would only require a statutory change. She observed that
subsection (e) allowed drawing more than the 4.75 percent
POMV.
Mr. Gardner answered that a 21 vote [simple majority vote
in the House] was currently required to access an ERA draw.
He agreed that the majority vote issue needed to be
addressed in the bill. He explained Representative Wilson
would need to suggest amendment language to Legislative
Legal Services. He explained it would have the effect of
fencing off the remaining amount.
3:38:07 PM
Representative Kawasaki spoke to the Bess v. Ulmer issue
and the permanency of the PFD. He understood that the word
"may" complicated the issue for some. He asked if there
would be a legal challenge if the bill passed and became
constitutional and a future legislature did not pay out a
PFD.
Mr. Gardner suspected so.
Representative Kawasaki asked whether including language in
the bill communicating the legislature's intent [to pay out
PFDs] was sufficient assurance.
Mr. Gardner imagined that including the PFD in the
constitution would be a fairly heavy burden for the
legislature to disregard. He believed that with the term
"may" the court would uphold the legislative power of
appropriations. For example, if the Valdez marine terminal
was destroyed by a tsunami and the legislature was faced
with expenditures it had to balance with the PFD, he
believed the legislature would have that ability. He
believed that was what the court would say, but the answer
was not known with 100 percent certainty. He believed the
bill language gave some assurance to PFD recipients, but it
ultimately left the burden with the legislature to make an
appropriation. Additionally, it left a burden with the
governor to veto or not veto the line item. He could see
there was a desire to come to a high level of certainty.
Unless the committee wanted to put "shall" in and roll the
dice with the supreme court, he believed the bill was the
closest they would get to a safe path forward. He did not
believe many guarantees in life and it would be difficult
to put it in the constitution without a convention.
3:40:43 PM
Representative Guttenberg remarked that the bill included
the word "may" pertaining to the PFD. He detailed that the
legislature was constitutionally mandated to provide funds
for education, university, public safety, and economic
development. He asked why the use of the word shall would
prioritize the PFD over the other items. He wondered why
the items originally in the constitution would not have
priority over the proposed amendment.
Mr. Gardner answered that the other model of the use of the
word "shall" would require the payment. Meaning the
transfer of funds would occur based on whatever percentages
were decided upon. He assumed that without an appropriation
the funds would go straight to the dividend fund to be put
into checks. Under the current bill the funds would go to
the GF for appropriation and ultimately was susceptible to
being balanced out with the other fundamental
constitutional responsibilities of the legislature. He
explained the change [to the word "may"] was an effort to
save the bill from a constitutional challenge.
Representative Guttenberg surmised that the change meant
the legislature was delineating the PFD as a specific
program that would be paid out (at 33 percent) if the bill
used the word shall. He remarked that the constitution
required the legislature to fund university and public
safety. He referenced first in/first out and asked what the
constitution mandated the legislature to do. He listed
items the legislature was required to fund including the
general welfare of the people, university, K-12 education,
public safety, prisons, and economic development. He stated
that Mr. Gardner was saying if the word "may" was used it
would be a legislative process.
Representative Guttenberg remarked that for 35 years the
legislature had done the right thing. He observed it was
hitting a wall at present that was changing how it had to
act. He continued that the committee was now discussing
changing the method to pay out the PFD. In the context of
the constitution, if the bill used the word "shall," the
constitution would still specify that the legislature was
required to provide funds for the other items as well. He
remarked on the last [most recent] thing being done having
the highest priority. He asked if that was the case.
3:44:02 PM
Mr. Gardner answered that one thing would not be like the
others. He explained that the constitution required there
shall be education and public safety. He detailed that the
legislature spent long nights trying to determine how to
fund those items based on input from the public. Whereas
the bill would designate 4.75 percent of a known number and
33 percent of a known number "with a shall." It would no
longer be like the other items listed by Representative
Guttenberg; it would be an automatic transfer as he
understood it. The other items the constitution required
the legislature to fund would still be mandated, but the
constitution did not specify education would be funded with
4.75 percent of the Permanent Fund multiplied by 33 percent
with the use of the words "shall transfer." The
constitution designated that there shall be given programs,
but not how much money shall be designated.
Representative Guttenberg stated it got to dialogue down
the road. He commented that there had only been one
relevant legal case (Bess v. Ulmer) regarding the issue. He
stated he would have to think more about the issue.
Vice-Chair Gara communicated that he was not cheerleading
for one bill version or another. He understood Mr. Gardner
believed it was likely someone would litigate if the word
"shall" was used in the bill. He asked if the bill was
likely to be upheld by the courts if it passed with the
word "shall" included. He did not care whether someone
would sue, but whether it would be upheld by the courts. He
stated there was some concern that those who wanted to put
the burden of a fiscal plan to heavily on the Permanent
Fund would jeopardize the PFD. He reiterated his question
about using the word shall.
Mr. Gardner replied that Legislative Legal Services may
have to defend the legislature on the issue. He thought the
odds of winning a case were not high. He used a scale of 1
to 10 and rated the use of the word "may" as a 2 and the
use of the word "shall" as a 9. He did not know what a 10
would be in terms of the likelihood of a problem with the
supreme court. For the reasons he had listed, the word
"shall" would alter many of the pieces.
Vice-Chair Gara thanked Mr. Gardner and stated what a court
would do was the key issue for him.
Mr. Gardner relayed he would be available by phone.
Co-Chair Foster referenced a letter provided by Angela
Rodell, director, APFC dated March 12, 2018 (copy on file).
ANGELA RODELL, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, relayed that she had provided written
testimony to the committee, but did not plan on reading it.
She shared that APFC board had been supportive of a POMV
since it passed a resolution in 2000. The board did not
weigh in on how the draw was spent or what it was used for,
but rather creating a rule around how the fund mechanics
would work. The board had identified five important
criteria for a constitutional limit:
1. Annual limit on appropriations from the Fund of up to
five percent of the total market value of the fund,
averaged over a period of five years;
2. Use of a five year period to provide certainty about
the amount available for distribution before the
fiscal year commenced;
3. Income of the Fund would become a part of the Fund and
would not be subject to separate appropriation, other
than as a part of the annual distribution;
4. Current value of the earnings reserve account would be
rolled into the principal of the Fund; and
5. The distinction between principal and earnings would
be eliminated.
Ms. Rodell stated there had been numerous proposals for
statutory changes to rules over the past few years that for
the board had different thresholds than a constitutional
amendment. She noted that in theory it was easier to amend
statute than the constitution. She relayed that APFC did
not support the current version of HJR 23.
3:50:48 PM
Representative Wilson thanked Ms. Rodell for her testimony.
She asked how APFC would react to subsection (e) where at
any time more money could be taken out [of the ERA] with a
three-quarter vote [by the legislature]. She asked if it
would impact how the fund was invested.
Ms. Rodell answered that it would have an effect. She
explained APFC was trying to avoid ad hoc draws of any
amount in any year. She explained that it would require
adjustment to how the fund was invested. The fact that the
ERA was kept separate from the fund principal meant that
the amount could be drawn in it's entirety at any time with
a three-quarter vote. She detailed that APFC had to assume
that the money would be drawn; therefore, it would have to
be invested differently. Even though the language read the
fund would be invested the same, it would be contradictory
for the board of trustees as fiduciaries to protect the
money on deposit that was expected to use. She elaborated
it would provide a level of instability APFC was looking to
avoid. A constitutional amendment would introduce the
instability in perpetuity.
Representative Wilson asked if there would be a decrease in
revenue from the fund.
Ms. Rodell believed there would have to be a decrease - it
would have to look similar to the CBR.
Representative Wilson asked about coming up with the 4.75
percent POMV. She asked about the method that would be used
to determine the figure. She wondered if the amount would
be determined by looking at the Permanent Fund corpus and
the ERA on one day in time. She queried who would select
the given day.
Ms. Rodell answered that APFC would assume there would be
conforming statutory changes that would put some of the
mechanisms in place to enact how the resolution would go
forward. Traditionally June 30 of a fiscal year was the
"mark" date. She detailed June 30 was the date APFC marked
its comprehensive annual financial report and it was the
end of the state's fiscal year. The corporation would
expect June 30 to be the valuation date of the fund
(similar to current process) - on that date they would look
at the balances of the fund in total (principal and ERA) on
each of the June 30th dates for the past five years, do an
average valuation, and draw 4.75 percent.
Representative Wilson referenced read from a change in
current language on page 1 [lines 10 through 12] of the
bill:
The earnings reserve account is established as a
separate account in the fund. Income from the fund
shall be deposited into the earnings reserve account
as soon as it is received...
Representative Wilson was uncertain about the meaning. She
asked whether APFC considered [income] as realized
earnings. She asked if it was the current methodology.
3:54:46 PM
Ms. Rodell answered that the corporation had struggled with
the sentence when preparing for the meeting. The way the
bill was drafted would require the definition of statutory
net income in statute, which was only realized income.
Under the bill it would be difficult to move away from
statutory net income to transfer income to the ERA
immediately. She explained APFC would have to work with
counsel regarding moving unrealized gains, which would be
in contradiction to earlier legal opinions the corporation
had received; however, the constitutional language would be
new. She relayed that it would require a new opinion from
the attorney general's office.
Representative Wilson asked how realized and unrealized
gains would impact the Permanent Fund corpus.
Ms. Rodell answered that the corpus of the fund at present
would be reduced by $8.7 billion immediately because all
the unrealized gain would have to be immediately moved over
to the ERA.
Representative Ortiz asked if hardening the ad hoc draw to
5 or 6 percent would impact the decision of the APFC board.
Ms. Rodell answered that predictability provided by the
legislature made the job of the board of trustees and its
investment decisions straight forward, whereas
unpredictability made the board's job difficult.
Representative Ortiz asked whether the only way to create
true predictability would be to change the fund over to an
endowment model and eliminate the difference between the
ERA and the fund corpus.
3:57:24 PM
Ms. Rodell answered in the affirmative.
Representative Thompson asked what kind of effect no
inflation proofing in the last few years had on the fund
principal.
Ms. Rodell answered that the amount of inflation proofing
that had not gone into the fund's principal was about $1.9
billion (not including the proposal for FY 19). The money
was still residing in the ERA and should be moved to the
principal of the fund. She explained the $40 billion that
would be left behind if all the unrealized gain was
transferred, would be closer to $42 billion.
Representative Thompson pointed to slide 2 in the
presentation that showed inflation proofing with a majority
vote. He noted that HJR 23 did not address inflation
proofing. He asked for Ms. Rodell's opinion on the matter.
Ms. Rodell answered that one of the reasons the corporation
did not support the current bill was the absence of
inflation proofing and because it only contained language
allowing the legislature to make an appropriation to the
principal at any time.
3:59:27 PM
Vice-Chair Gara had no interest in passing something for
show or that the voters would reject. One of the things the
board was asking for was to go into the principal, which he
believed the public would reject. He stated that the board
supported creating one fund of earnings and principal and
in down years the principal could go down and a dividend or
government services could still be paid. He asked for
verification that it was one of the board's
recommendations.
Ms. Rodell answered in the affirmative, but in the context
of rolling the balance of the ERA into the principal. She
explained that they would start off with a $65 billion
fund, not a $40 billion fund. There would be a draw limit
of 5 percent and whether it was used for dividends or any
other allowable purchase, was up to statute and the
appropriation powers granted to the legislature by the
constitution. She explained that the money would be
invested and the legislature could spend up to 5 percent
per the board of trustees' request.
Vice-Chair Gara understood Ms. Rodell's perspective as a
fund manager. He believed the public would be strongly
opposed to the idea. He stated that one of the board's
recommendations was to combine the ERA and the principal of
the fund. He continued that in a bad stock market year
where the fund went from $65 [billion] to $55 [billion]
there would still be a payout from principal. He explained
it was his concern politically.
4:01:59 PM
Ms. Rodell answered that it was the reason for smoothing of
over five of the past six years because the lower year
would feed into whatever the calculation was (e.g. the 5
percent, 4.75 percent, 5.25 percent). Whatever the
percentage was would take the dropped years into account
and the concept of principal and earnings went away. There
would be one fund/endowment that would be creating wealth
and a portion would be used. Presumably earnings and
expenditures would average out. She elaborated there would
be years where they under drew, as with the current year.
She explained that the value of the fund had increased
tremendously over the past year and the calculation would
not include that value. She expounded that the fund had
increased from $59 billion to $64.5 billion, which was not
taken into account. She detailed it was the reason the
effective draw rate was less than the 5 percent. As the
fund declined, there may be an over draw in some years, but
it would average out over the long-term. The idea of
principal would go away completely because everything the
fund was earning (royalty or investment earnings) would all
go to the same place. The fund would work as an endowment.
Vice-Chair Gara understood Ms. Rodell was seeking wise
management of the fund. He was not happy that a fiscal plan
had not been established. Currently the state was almost
out of savings and some legislators believed it would be
necessary to begin drawing money from the ERA (with no
designated draw formula). He stated it represented the
status quo. He remarked that the Senate had been clear
about that in a press conference. He did not see
significant savings elsewhere since the CBR had nearly been
depleted. The proposed constitutional amendment included a
formula and a three-quarter vote to draw anything exceeding
the formula, which he believed appeared to be more
protective than current law. He asked if and why APFC's
investment decisions would go the other way if HJR 23
passed.
4:05:35 PM
Ms. Rodell believed the reasoning was based on what had
taken place with the CBR and the three-quarter votes. She
elaborated that HJR 23 appeared to be a nice fiscal
constraint on the fund, but it actually would end up being
the opposite because of the mechanics and what was needed.
She explained that the three-quarter votes did happen, and
it was not the limiter that people intended to be when put
in place.
Vice-Chair Gara asked if the three-quarter language was not
included in the bill. He spoke about the status quo that
would allow the legislature to take as much from the ERA as
it wanted. He asked if APFC would invest differently under
the bill's 4.75 percent draw limit versus the status quo.
Ms. Rodell communicated the need for clarification. She
wondered if the majority vote statute would still apply if
the ERA was created as a separate account (as under the
first section of HJR 23). Alternatively, she wondered if
the 4.75 percent would become the draw limit. She would
need clarification from Mr. Gardner because the distinction
would make a difference. She continued that if all that
could come out of the fund was 4.75 percent, APFC would not
have to alter its investment strategy. Whereas, the
possibility of accessing the ERA for ad hoc draws with a
simple majority or a three-quarter [super majority] vote
introduced uncertainty and unpredictability, which would
cause APFC to alter or rethink how the fund was invested.
Vice-Chair Gara spoke to a scenario where the draw limit
was 4.75 percent and a majority vote (instead of status
quo) allowed the legislature to draw anything it wanted. He
wondered how APFC would invest under the status quo
compared to HJR 23 with no three-quarter vote.
Ms. Rodell answered that if the amount available for
distribution from the Permanent Fund equaled 4.75 percent
of the average market value of the Permanent Fund including
the ERA (as in version T), APFC would not have to change
how it invested the fund.
4:09:49 PM
Representative Grenn thanked Ms. Rodell for her work
protecting the fund for current and future generations. He
asked if APFC was amenable to the 4.75 percent POMV in the
legislation. He noted that Ms. Rodell had communicated that
a draw up to 5 percent was acceptable.
Ms. Rodell replied in the affirmative.
Representative Grenn asked for verification that the bill's
use of five out of six years to provide certainty of the
amount available for distribution was acceptable.
Ms. Rodell answered in the affirmative.
Representative Grenn referenced the APFC board's five
criteria [reviewed earlier by Ms. Rodell]. He asked whether
the board believed HJR 23 was lacking criteria 4 and 5
regarding rolling the [ERA] into the principal of the fund
and eliminating the distinction [between fund principal and
earnings] in terms of becoming a true endowment.
Ms. Rodell agreed.
Representative Grenn stated that an ad hoc draw could be
"nine-tenths, 99 out of 100, 59 out of 60." He asked for
verification that the ad hoc draw caused concern that APFC
would have to adjust investment management going forward.
Ms. Rodell answered that the ad hoc draw reduced
predictability and there was no recognition of inflation
proofing, only recognition that the legislature may
appropriate money back to the principal.
4:11:43 PM
Representative Wilson asked for clarification. She
understood APFC wanted to see the principal and the ERA
combined. Her understanding of Ms. Rodell's response to an
earlier question was that if there was a 4.75 percent POMV
and no ad hoc draw there would be predictability. She asked
whether there was no predictability unless the principal
and the ERA were combined.
Ms. Rodell answered that limiting the draw to 4.75 percent
created predictability. She was unsure why the legislature
would not choose to roll the ERA into the principal instead
of limiting itself to the ERA alone. However, as long as
the legislation limited it to the ERA, the predictability
increased because the legislature would never be able to
exceed the amount in the ERA. She explained that the APFC
board contemplated and continued to support the idea of a
true endowment - one fund with a spending limit of a
percent of all assets under management and no bifurcation
of principal and ERA.
Representative Wilson understood and appreciated it. She
referenced Vice-Chair Gara's point earlier that the public
wanted to protect the corpus of the fund. She was trying to
ensure she understood Ms. Rodell correctly. She stated
there were two issues. The first pertained to whether the
POMV was correct and she understood that the APFC board was
comfortable with 4.75 percent. The second, which was a
policy call, was how the 4.75 percent should be divided.
She remarked that the second issue was outside the board's
purview. She believed APFC was more concerned about the
possibility of what could be drawn from the fund and that
nothing else could happen to negatively impact
predictability. She stated her understanding that creating
an endowment was not as important to APFC as it was to have
a consistent fund draw that could not be exceeded.
4:14:25 PM
Ms. Rodell agreed. She referenced slide 3 of the
presentation and detailed that APFC wanted certainty on the
"total draw" row [top row in the table]. The other three
rows on the table were in the legislature's purview. She
detailed that knowing and providing for the certainty of
the total draw line (4.75 percent or 5 percent) was what
APFC was seeking; the corporation believed the limit would
protect the fund for future generations. She explained that
it would mean all things being equal, if the draw was
calculated at $2,800 in FY 22, that amount would not be
exceeded. She noted there was nothing to prevent the
legislature from taking less, but it could not take more,
which protected the long-term viability of the fund.
Representative Wilson asked how much the Permanent Fund was
expected to earn to meet the numbers on slide 3.
Co-Chair Seaton replied 6.5 percent.
Representative Pruitt observed that the CS and the proposal
by APFC required handling the legislative budget in
different ways. He detailed that the 4.75 percent POMV set
a limit and the ad hoc draw accessed by a three-quarter
vote could increase the budget. He remarked that the second
item created the uncertainty APFC was concerned about. He
thought the APFC board was proposing the idea of becoming
trust fund babies. He elaborated that out of the total
fund, only a specific amount could be accessed, which would
allow APFC to maintain stability. He believed it would be
challenging for APFC if the legislation specified that up
to a certain percentage could be drawn (e.g. 5 percent or
other). He asked if the scenario would introduce the
uncertainty APFC was concerned with.
Ms. Rodell disagreed. She explained that "up to" a certain
amount meant APFC would know the maximum draw amount. The
current draft of the resolution did not include a cap. She
detailed it was the uncertainty between the 4.75 percent
draw and everything in the ERA at the time [an additional
draw] was debated. She elaborated that if there was only $1
billion in the ERA, the issue may look different than it
did at present with an ERA balance of $16.5 billion. The
fact that the draw could be anything [under the current
legislation] was what created the uncertainty.
4:18:25 PM
Representative Pruitt understood the ad hoc draw was a
concern, as well as a cap. He detailed that if the state
needed additional revenue, which he acknowledged they
wanted to limit, it may be prudent not to set a low number
that would mean searching other places for revenue. He
provided a scenario where the ERA and principal were
combined, and the ad hoc draw was removed. He asked whether
increasing the draw up to a certain amount such as 5.5
percent would create inflexibility for APFC in terms of
investment.
Ms. Rodell replied that knowing what was expected was
needed to provide certainty.
Representative Pruitt asked if a statutory mechanism to
handle the issue at hand was sufficient.
Ms. Rodell replied that the board was very concerned about
the lack of statutory or constitutional rules. The board
preferred a constitutional amendment to provide a simple
mechanism recognizing the changes to the definition of
income from an accounting perspective, that the investment
landscape had changed since the original passage of the
amendment in 1976, and the predictability of a needed
distribution. The board would support statutory rules if
the legislature could get them in place. Statute could be
changed each year, which was a benefit and a challenge. The
absence of both had become problematic.
4:22:09 PM
Representative Pruitt addressed a scenario where the fund
ERA and principal were merged, and a higher draw percentage
was set to give the legislature the flexibility to move up
and down based on the needs in a given year. He referenced
legislation from the previous year (SB 26) that included a
draw of 5.25 percent for two years and 5 percent
thereafter. He asked if the 5.25 percent variability for
two years would create long-term problems or be reasonable.
Ms. Rodell answered that the fund could sustain a statutory
5.25 percent for two years. However, it could not sustain a
5.25 percent draw on an ad hoc calculation year after year
with nothing set in statute and no certainty on whether the
percentage would increase or decrease. Formally agreeing to
something in writing made the concept sustainable.
Representative Ortiz referenced slide 2 and spoke to the
APFC board's concern with no certainty in the legislation's
inflation proofing with a majority vote. He asked whether
the APFC board would continue to oppose the legislation if
the provision was maintained, but the ad hoc draw provision
was removed.
Ms. Rodell answered there would still be concern. She
detailed it had been a priority of the board since 1982 to
protect the purchasing power of the fund's principal. The
resolution continued the concept of a principal versus an
ERA. The only way the principal preserved its purchasing
power in that case was the inflation proofing method
currently in statute and the recognition the annual
appropriations needed to be made.
Representative Ortiz asked for clarification that to get
the support of the APFC board the resolution should include
something providing more certainty on inflation proofing.
Ms. Rodell agreed; the corporation was happy to work with
committee members on the concept.
4:26:13 PM
Vice-Chair Gara made the assumption that the public would
not support going into the corpus of the Permanent Fund,
which was part of APFC's recommendation to combine the ERA
and principal. He referenced that SB 21 [SB 26] and HJR 23
both operated in a world where APFC was trying to make the
funds in the ERA last. Both bills operated in a world with
$16 billion in the ERA. He continued that HJR 23 included a
4.75 percent annual draw for a larger than before PFD and
funds for public services. He spoke to a scenario where
traditional inflation proofing was included (another $1
billion). His understanding from conversation the previous
year was that using a waterfall mechanism for inflation
proofing was safer. He thought including annual inflation
proofing on top of a 4.75 percent draw in the constitution
would risk the balance of the ERA.
Ms. Rodell replied that SB 26 recognized inflation
proofing; however, the calculation was based not on
inflation, but on an amount four times the expected draw.
She clarified that it did not have a correlation to actual
inflation unlike current statute. She noted that inflation
proofing was not money spent, but money transferred into
the principal and invested in kicking off additional
investment income. She explained that the money came back
in the form of additional earnings. The money was still
generating income - the idea was to preserve the purchasing
power of the principal and to ensure the balance continued
to grow with the cost of services. As the legislature was
passing budgets, part of the natural growth in the budget
would be the cost of inflation for services. The idea was
that if the Permanent Fund was going to be used as a fund
source that it be allowed at the same rate as the budget
because the baseline services had a natural inflationary
component as well.
Vice-Chair Gara discussed that under SB 26 money would be
put into the Permanent Fund principal once there was four
times what was needed in the ERA. He noted there had been a
slightly different bill version in the House.
Alternatively, if they were only operating within the ERA
and had a 4.75 percent draw and inflation of 3 percent, it
seemed to be a heavy lift to preserve the ERA over the
long-term.
4:30:29 PM
Ms. Rodell believed it was part of the debate over how to
spend the ERA earnings - it was a policy call. She
elaborated it was APFC's long-held view that it was the
corporation's fiduciary responsibility to ensure the fund
could keep up and was protected. When the fund was put in
competition with everything else it was a difficult
conversation, but the fund would not be there to pay for
services in ten years if it was not cared for at present.
Vice-Chair Gara believed people were comfortable putting
inflation proofing in the budget for FY 19 for those
reasons.
4:31:34 PM
Co-Chair Seaton was curious about the 5 percent
recommendation. It seemed the 5 percent recommendation was
contingent on there being no ad hoc draws.
Ms. Rodell agreed.
Co-Chair Seaton stated there had been eight or more years
of steady increases in the value of the fund. He provided a
reverse scenario of eight years of decline where the fund
was getting smaller annually, meaning the 5 percent draw
would get increasingly larger depending on the economics of
investments. He asked if the 5 percent draw was the maximum
that APFC would suggest if there was no ad hoc draw. He
asked if it was on the precipice or hanging in the balance.
He considered that in an eight-year decline scenario the
legislature would have to work on a number of different
things. He asked if the 4.75 percent draw included in the
bill was less risky than 5 percent over time especially if
there were limited ad hoc draws. He understood the
corporation wanted an endowment model and only one
predetermined draw. He thought 4.75 percent made more sense
than 5 percent, but he was uncertain whether APFC had
addressed the issue if there were ad hoc draws.
4:34:37 PM
Ms. Rodell believed that as a constitutional amendment, the
ad hoc draws would be very problematic regardless of a 4.75
or 5 percent draw. A constitutional amendment would not be
undone after a certain time, unlike SB 26 that would be
statutory, included a three-year lookback, and could be
amended. She highlighted that the topic had not been
touched in 41 years. She detailed that HJR 23 was a
constitutional amendment that would take place after
something had been in place for 41 years. The board of
trustees had arrived at a 5 percent draw because of its 5
percent real target return. She explained that a 5 percent
expenditure and the 5 percent target had resulted in a
matching in trustees' minds about what was happening. She
spoke to 4.75 percent versus 5 percent, which meant there
would be more money remaining. The more money taken at
present meant less later and vice versa. She added that the
5 percent real target return had not been changed for 40
years. The board had considered it the preceding year and
was concerned about the direction of the capital markets,
but no change had been made.
4:36:38 PM
Representative Wilson WITHDREW her OBJECTION to the
adoption of the CS. She clarified her dislike for the bill.
There being NO further OBJECTION, Work Draft 30-LS0838\T
(Martin, 3/11/18) was ADOPTED.
4:37:35 PM
AT EASE
4:39:18 PM
RECONVENED
Co-Chair Foster relayed amendments to the bill would be due
by 5:00 p.m. the following day. He shared information about
public testimony times.
HJR 23 was HEARD and HELD in committee for further
consideration [public testimony was taken beginning at 7:00
p.m. and is included following HB 97 in the current
document].
HOUSE BILL NO. 97
"An Act repealing the insurance tax credit for gifts
to the Alaska fire standards council; and providing
for an effective date."
4:40:23 PM
REPRESENTATIVE STEVE THOMPSON, SPONSOR, introduced himself.
He thanked the committee for hearing the bill.
MAX THOMPSON, SON, REPRESENTATIVE STEVE THOMPSON,
introduced himself.
FORREST WOLFE, STAFF, REPRESENTATIVE STEVE THOMPSON,
introduced himself.
Representative Thompson explained that the bill had
originated from a search for indirect expenditures. He
explained that the bill pertained to a tax credit that had
been established in 2000 to allow insurance companies to
donate to establishing the fire standards council. During
the process of the bill passing through the legislature,
other funding had been located and the tax credit had never
been utilized. He elaborated that no one had ever donated
or taken a tax credit in the 18 years since the passage of
the bill. He believed it was time to remove the credit from
statute. He encouraged the committee to pass the bill.
Representative Guttenberg asked if Mr. Max Thompson thought
they should pass the bill.
Mr. Max Thompson replied in the affirmative.
Co-Chair Foster listed individuals available online for
questions.
Co-Chair Foster OPENED and CLOSED public testimony.
4:43:41 PM
Vice-Chair Gara reviewed the zero fiscal note from the
Department of Public Safety.
Co-Chair Seaton MOVED to REPORT HB 97(STA) out of committee
with individual recommendations and the accompanying fiscal
note.
There being NO OBJECTION, HB 97(STA) was REPORTED out of
committee with a "do pass" recommendation and with one zero
fiscal note from the Department of Public Safety.
Representative Wilson requested to hear any public
testimony that may have been online for HJR 23.
Co-Chair Foster agreed; however, there were no testifiers
remaining online. Public testimony would begin at 7:00 p.m.
4:46:14 PM
RECESSED
7:03:47 PM
RECONVENED
HOUSE JOINT RESOLUTION NO. 23
Proposing amendments to the Constitution of the State
of Alaska relating to the Alaska permanent fund.
7:03:53 PM
Co-Chair Seaton relayed that Representative Guttenberg
would be listening in by telephone.
^PUBLIC TESTIMONY
7:04:36 PM
Co-Chair Foster indicated a new committee substitute had
been adopted, version T. He relayed that public testimony
would be limited to 2 minutes. He also encouraged people to
send in their written testimony.
7:05:57 PM
LORETTA JONES, SELF, WRANGELL (via teleconference), thanked
the committee and various legislators for serving the
public. She shared that former Governor Jay Hammond had
been concerned about making changes to the Permanent Fund.
She stated that the PFD was for state residents. She
provided detail. She opposed using the PFD for a bail out.
She encouraged a vote of the people. She stressed that the
money belonged to Alaskans.
Representative Wilson asked if the testifier preferred the
original version or the new version that had been adopted
earlier in the meeting.
Ms. Jones responded that she just wanted the issue to go to
a vote of the people. She stated the public was losing
faith in the legislature.
7:09:04 PM
MICHAEL CHAMBERS, SELF, ANCHORAGE (via teleconference),
spoke in favor of HJR 23. He had looked forward to the
original version of the legislation because he preferred a
50/50 split. He spoke directly to the CS. He thought the
most important point was the choice of the word "shall" or
"may." He read from Article VIII, Section 7 of the Alaska
Constitution regarding dedicated general funds. He
mentioned hearing Angela Rodell being concerned about an ad
hoc draw. He wondered why the ERA would be included because
there was already a CBR. He stated directing a 4.75 or 5
percent draw or a lump sum to the CBR. He quoted from the
Alaska Constitution a second time and reemphasized a 50/50
split.
7:13:05 PM
MICHAEL GARHART, SELF, WASILLA (via teleconference), spoke
of his brother had followed the PFD for many years. He
provided detail. He believed Alaskans should have been
getting more money than they had been from the Permanent
Fund. He opined that the split should be 50/50 rather than
33/67; he did not think the latter split was fair to
Alaskans. He believed crime and politics was going hand in
hand unless the legislature started doing something for the
people. He thanked the committee.
7:14:25 PM
JOEL SIGMAN, SELF, WASILLA (via teleconference), spoke in
favor of the issue going to a vote of the people. He shared
that he was raising a family of three on $8,500 per year.
He thought the governor's reduction to the PFD equated to
stealing from the people. He spoke to the high rate of
homelessness and that people were losing their property
because they could not afford their taxes. He stressed that
the government was ripping them off. He thought it appeared
the politicians were for the politicians, not the people.
He did not feel the meeting was noticed properly. He also
commented about moving the capital of Alaska. He suggested
moving the building inside of the old Palmer Fred Meyer.
7:17:21 PM
MIKE ALEXANDER, SELF, BIG LAKE (via teleconference), spoke
in opposition of a 33/67 split. He opposed HJR 23. He felt
the legislature had taken money from the people. He
advocated cutting the budget further. He opposed the
proposed gasline. He proposed putting the issues to a vote
of the people. He thought the legislature had stolen money
from Alaskans. He strongly opposed HJR 23.
7:19:35 PM
MURIEL GILLETTE, SELF, BIG LAKE (via teleconference),
opposed HJR 23. She remarked that two years earlier the
governor had cut the PFD in half. She opposed the cut to
the PFD made by the legislature the preceding year. She
disagreed with the proposed split. She and her husband were
retirees and would be greatly affected.
7:21:07 PM
CRIS EICHENLAUB, SELF, EAGLE RIVER (via teleconference),
spoke in opposition of HJR 23. He thought the word "may"
was a non-starter. He spoke against taking the dividends of
the people. He thought taking people's PFD put many people
on Medicaid, which was a cost to the state. He believed
cuts to the PFD stifled economic growth. He supported the
development of the state's natural resources to obtain
sustained income. He disagreed with taking money from the
people. He remarked that one day the PFD would be gone. He
argued that the state would have made over $800,000 if the
legislature had inflation-proofed the fund the past couple
of years. He did not believe the sky was falling. He
thought the state may need to figure out how to live off
lower budgets. He urged the legislature to leave the PFD
alone.
RICHARD HELLER, SELF, CHUGIAK (via teleconference), had a
case against the State of Alaska. He provided a personal
story. He was very concerned about his case. He served in
the military and had been denied the PFD while serving in
Iraq. He opposed touching the dividend. He thought it was
taboo to be talking about taking the people's dividend. He
also mentioned all the money being spent on international
travel. He encouraged generating new revenues.
7:28:50 PM
JAMES SQUYERS, SELF, RURAL DELTANA (via teleconference),
spoke in opposition of HJR 23. He stated the only thing
guaranteed in the resolution was a decrease in the PFD and
the enshrining of a three-quarter vote to draw from the
ERA. He stated the idea had proven problematic and had led
to increased budgets when applied to the CBR. He did not
support a reduction the PFD and thought the language "may
appropriate" was indicative of nefarious intent. He
mentioned other bills in the legislature and encouraged
members to take up HJR 34, the companion bill to SJR 1. He
did not support the passage of HJR 23.
7:30:33 PM
MIKE COONS, SELF, PALMER (via teleconference), opposed HJR
23. He spoke about his involvement with a conservative
national organization. He believed making HJR 23 a
committee bill was offensive to legislative members who
were not supportive of the legislation. He disagreed with
the 33/67 split. He stated that the current administration
and House Majority had decreased the PFD. He thought the
state would be stealing the money of the people. He urged
members to kill the bill. He reminded members of the
upcoming election.
7:32:35 PM
HERMAN MORGAN, SELF, ANIAK (via teleconference), opposed
the bill due to the 33/67 split. He argued against big
government. He thought the legislature would end up taking
all the money. He spoke of the boost in the economy based
on the PFD. He thought SB 91 was a terrible experiment. He
also thought Medicaid would bankrupt the state. He thought
the legislature was potentially destroying the state. He
opposed all the give-away programs. He spoke of Alaska once
being a great land. He thought the state was at a
crossroads. He thanked the committee for his time.
7:36:22 PM
LYNETTE CLARK, SELF, FOX (via teleconference), opposed HJR
23. She thought there should be an ERA. She read from the
Alaska Constitution. She thought establishing a new account
was unnecessary. She talked about the new subsections in
the resolution. She spoke against the 33/67 split. She
thought subsections (d) through (f) were a continuation of
the theft of Alaskans' PFD. She thought the resolution
needed much more work. She continued to reference portions
of the Alaska Constitution. She reemphasized that she
opposed HJR 23. She spoke in favor of HJR 34 and SJR 1. She
was sad that Alaska had turned in to what it was presently.
She thought Alaska should be living within its means.
7:41:23 PM
KURT SCHMITT, SELF, DELTA JUNCTION (via teleconference),
opposed HJR 23. The PFD program had been very successful,
and the Permanent Fund had been growing by leaps and
bounds. He thought the three-quarter vote would lead to
taking more money from the Permanent Fund. He opposed the
33/67 split. He thought the words "may" or "shall" were
both unacceptable. He did not believe spending had been
reduced enough. He disagreed with taking the people's money
and urged a 50/50 split. He believed the net effect of the
resolution would be a major reduction of the Permanent
Fund.
7:44:50 PM
WILLIAM TOPEL, SELF, ANCHORAGE (via teleconference),
opposed HJR 23. He shared that he had arrived in Alaska in
1966. He liked that the resolution would go to the vote of
the people and he like that there was no change to the
Permanent Fund. However, he did not like the 33//67 split.
The preferred a 50/50 split. He also disagreed with setting
the amount of the PFD. He could agree to a 5 percent POMV
draw with a range to accommodate changes in market
conditions. He did not agree with a three-quarter majority
vote. He advocated properly inflation proofing the fund. He
supported the "shall" language. He also urged a change in
the governor's ability to appoint the members of the Alaska
Permanent Fund Corporation. He did not support the bill as
written and asked the legislature to pass SJR 1 or HJR 34.
Co-Chair Foster acknowledged Representative Justin Parish
in the room.
7:49:04 PM
MARTIN STEPETIN SR, SELF, JUNEAU, opposed HJR 23 and the
33/67 split. He supported efforts to balance the budget,
but he did not believe the people of Alaska would allow the
legislature to use the Permanent Fund. He advocated for a
balanced budget. He thought a tax would be necessary in the
near future. He believed continued cuts to the budget were
not sustainable. He reiterated his opposition to the
resolution.
7:51:29 PM
ED MARTIN, SELF, COOPER LANDING (via teleconference), spoke
in opposition of HJR 23. He relayed that 83 percent of the
voters did not want the Permanent Fund used. He believed
there were alternatives. He thought the answer to the
problem was looking at the constitution. He advocated
selling Alaska's land and developing its resources. He
thought the legislature was stealing the people's money. He
liked the notion of putting the issue to the vote of the
people. He did not trust the government because the
legislature had broken trust. He strongly opposed the
resolution. He continued to advocate for additional
resource development. He did not believe members had the
spirit of Alaskan pioneers.
7:55:39 PM
RONALD LARKIN, SELF, FAIRBANKS (via teleconference), spoke
against the legislation. He provided a history of the
Permanent Fund and how it worked. He did not support
cutting the PFD share from 50 to 33 percent. He stressed
that the proposed resolution would make paying the PFD
optional. He believed the bill demonstrated a surrender of
the legislature's responsibility. He stressed that the
legislature was already free to make similar statutory
changes. He thanked the committee.
7:58:50 PM
RANDY GRIFFIN, SELF, FAIRBANKS (via teleconference),
opposed HJR 23. He disagreed with enshrining the PFD in the
constitution. He believed at the time the Permanent Fund
was created there had been no discussion about paying out a
dividend to residents; the funds had been for state
government. He indicated that the Permanent Fund was a
state asset. He thought the PFD should be issued on a merit
basis, not as an income welfare payment. He stated that if
the PFD was enshrined in the state constitution a state
income tax would be passed. He thought the PFD should be
modeled after a private company - some companies did not
distribute a dividend to stock owners, while some did. He
had donated his past dividends back to the General Fund. He
advocated making government more efficient.
Co-Chair Foster recognized Representative Louise Stutes in
the audience.
8:02:31 PM
GARVAN BUCARIA, SELF, WASILLA (via teleconference), opposed
HJR 23. He thought Angela Rodell stated very clearly that
there should be no ad hoc draws from the Permanent Fund,
the problem with no cap to withdraws from the ERA, the need
to inflation proof the fund, and to ensure the fund's
stability. He stressed that stability could not be
maintained by threatening to constantly change the rules
APFC operated under. He thought the questions asked by the
members clearly confirmed the need for a study. He
disagreed with enshrining the dividend and urged members to
oppose the resolution.
8:04:55 PM
WILLIAM DEATON, SELF, CORDOVA (via teleconference), opposed
HJR 23. He did not believe the PFD was needed to fix the
budget. He thought additional cuts were needed. He did not
support funding for Planned Parenthood or the legislative
lounge food service. He supported Senator Wielechowski's
resolution SJR 1, which protected the PFD.
8:06:39 PM
WAYNE OZOSKY, SELF, WASILLA (via teleconference), opposed
HJR 23. He agreed with the way the constitution had been
drafted and believed it should stay that way. He thanked
the committee.
8:07:13 PM
BILL REINER, SELF, ANCHORAGE (via teleconference), was a
"no" vote on HJR 23. He thought APFC was on track with its
investments. He thought it was spooky when changes
occurred. He believed spending the Permanent Fund would
result in a depleted fund. He did not support bonding for
"everything under the sun." He thanked members for the
opportunity to speak.
8:09:53 PM
BENJAMIN WILLIAMS, SELF, NORTH POLE (via teleconference),
opposed HJR 23. He thought the legislature was not doing
its job. He had recently retired and was dependent on the
PFD.
Representative Wilson congratulated Mr. Williams on his
recent retirement.
8:11:25 PM
MIKKI BARKER, SELF, FAIRBANKS (via teleconference), opposed
HJR 23. She thought it was a travesty to reduce the PFD. In
her line of work she had seen the effect of the previous
reductions. She stressed that the PFD was significant to
low-income individuals. She provided examples of goods the
money was spent on. She was aware that a huge oil reserve
had recently been discovered in the Beaufort Sea. She
elaborated that the state would receive the money from the
discovery if the bill passed. She thanked the committee.
8:13:29 PM
DAVID STRICKLAND, SELF, DELTA JUNCTION (via
teleconference), spoke against HJR 23. There were several
people in his small town dependent on the PFD. He shared
that he lived off a limited income and depended on the PFD.
He disagreed with the legislature taking additional PFD
monies. He thought state spending was deplorable, wasteful,
and criminal. He noted the importance of being able to pay
for heating oil and electricity. He strongly opposed the
resolution and thought it was terrible. He thought it was
not right for the government to take more from the people.
8:16:06 PM
KAREN PERRY, SELF, CHUGIAK (via teleconference), strongly
opposed HJR 23. She spoke against taking the people's money
to grow government. She thought it was the legislature's
job to reduce government spending. She thought taking the
money from residents was the worst thing for the economy.
She would only support the 50/50 split. She encouraged
members to oppose taking money from the economy. She
thought the legislators voting to reduce the PFD needed to
be voted out of office. The voters of Alaska would be
cleaning house in 2018. She reminded members of the eighth
commandment.
8:18:50 PM
BONNIE LILLEY, SELF, ANCHORAGE (via teleconference), agreed
with the previous speaker. She opposed HJR 23. She had been
watching committee hearings and listening. She was a
regular person and currently looking for employment. She
opined the legislature was doing a poor job. She was
shocked by the passage of a criminal justice reform bill in
recent years (SB 91). She thought the legislature was not
interested in the people of Alaska. She posed the question
about when legislators were going to start representing the
people. She urged members to vote against the legislation.
She thought the PFD was important to the people.
8:22:25 PM
SALLY JOHNSON, SELF, PALMER (via teleconference), opposed
HJR 23. She thought the legislature was ruining Alaska. She
disagreed with the governor's natural gas pipeline project.
She thought the state was stealing from its people. She
stressed the need for people to eat and buy warm clothing.
She did not want a China pipeline. She urged a no vote for
HJR 23. She would not be voting for anyone that voted in
favor of the legislation.
8:24:07 PM
STEVEN WRIGHT, SELF, PALMER (via teleconference), opposed
HJR 23. He reported that he was running for lieutenant
governor. He opposed touching the PFD and stated that
people did not want the POMV structure. He thought a money
grab was in progress. He stated that the legislation would
hurt indigenous people who needed the funds to keep up with
inflation. He was a definite "no" on the resolution. He
indicated that 83 percent of the people in recent years
were opposed to the proposal. He agreed with the 50/50
split, which kept government in check. He underscored that
the people of Alaska were not happy.
8:26:44 PM
GAIL KOZLOWSKI, SELF, WASILLA (via teleconference), opposed
HJR 23. She thought the legislature wanted to get its hands
on the PFD, which had been set up for the people of Alaska.
She spoke of several people depending on the PFD. She spoke
of a woman who paid her pharmacy bill in October after the
issuance of the PFD. She stated that some people were truly
dependent on the PFD and some were not. She did not believe
the PFD was there for the legislature to take. She had seen
a tremendous amount of spending waste in government
agencies. She urged further spending cuts to Medicaid,
education, and salaries. She was opposed to a change to the
PFD. She urged members to consider HJR 34 or SJR 1 as an
alternative.
8:29:22 PM
ED KAISER, SELF, WASILLA (via teleconference), spoke
strongly against HJR 23. He stated it was a case where the
government could not live within its means, so it looked
for the easiest way to pick someone else's pockets. He
thought additional cuts were possible. He urged members to
stop growing government and taking money from the people.
He reiterated his opposition to the bill.
8:30:48 PM
BERT HOUGHTALING, SELF, BIG LAKE (via teleconference),
strongly opposed the resolution. He read a quote about the
possible disappearance of the PFD. He thought Democrats
were not telling the whole story. He mentioned SJR 1 that
would protect the Permanent Fund and the PFD. He relayed
the dividend amounts several years in the future if the
Permanent Fund and PFDs were left alone. He advocated
hearing SJR 1 and HJR 34. He thought those bills should be
placed on the floor for a vote.
8:34:24 PM
WILLIAM LAMBERT, SELF, NORTH POLE (via teleconference),
spoke against HJR 23. He suggested that Representative
Seaton did not comply with the rules. He argued that
certain members were hurting the State of Alaska. He hoped
that many members would be voted out of office. He thought
it was important to consider those people that were
struggling to pay their fuel bills. He spoke to the right
of the people to express themselves in the voting box.
Representative Wilson asked Mr. Lambert if he was in favor
of a 50/50 plan. [Mr. Lambert had already disconnected.]
8:38:22 PM
MICHAEL BOLL, SELF, WASILLA (via teleconference), spoke
against HJR 23. Based on the testimony he surmised Alaskans
were against the resolution. He suggested members to look
at additional reductions. He did not support cutting the
PFD. He agreed with other testifiers. He did not believe
the legislature's actions were right. He thanked the
committee.
8:40:31 PM
SARAH VANCE, SELF, HOMER (via teleconference), opposed HJR
23. She encouraged members to restore the trust of the
people. She opined that most Alaskans did not have
confidence in their representatives. She encouraged members
to consider how they could restore the public's trust. She
urged members to oppose the bill.
Co-Chair Foster provided the address for written testimony.
8:41:56 PM
LIBBY DALTON, SELF, FAIRBANKS (via teleconference), spoke
against HJR 23. She agreed with all the previous
testifiers. Alaska currently had the highest employment
rate in the country and the highest number of government
employees per capita. She thought the PFD was the most
equitable way to spread the royalties to the people of
Alaska. She encouraged additional budget cuts. She urged
members to avoid additional special sessions.
8:43:37 PM
HILDA LESTRON, SELF, SEWARD (via teleconference), testified
in opposition of HJR 23. She urged members to vote against
the resolution.
8:44:27 PM
ROBERT CHRISTIANSON, SELF, FAIRBANKS (via teleconference),
opposed HJR 23. He moved to the state 8 years prior. He had
not taken his PFD prior to 2014. He had started taking the
PFD due to the poor economy. He believed the money was for
the people and the government. He thought the legislation
was an overreach resolution. He urged members to do their
job. He spoke of running out of fuel three times in the
current winter because he and his wife invested their
children's PFDs for college. He thought members needed to
make additional reductions to the budget. He spoke of the
right to exercise his opinion in the voting box. He opposed
the resolution.
8:48:10 PM
MICHAEL SHELDON, SELF, PETERSBURG (via teleconference),
spoke in opposition of HJR 23. He shared that he was
running for governor. He thought the legislature was
breaking the law by not taking the issue to a vote by the
people of Alaska. He thought the budget was overly
inflated. He wanted to cut the budget by $1 billion every
year. He thought what was happening was an abomination. He
strongly opposed the resolution. He would be making changes
if he won the gubernatorial race in 2018. He opined that
Governor Walker had not done his job. The vote of the
people was necessary to make changes to the PFD.
8:52:19 PM
JIM WEIDNER, SELF, FAIRBANKS (via teleconference), spoke
against the bill. He shared was a resident of Fairbanks for
45 years. He had worked with Governor Jay Hammond
campaigning for the Permanent Fund and the creation of the
dividend. The people voted to use some of the money from
the sale of oil to create a program that would benefit
everyone fairly and equally. The money was to be
distributed based on the number of residents in the state.
At the time there had been a question about creating a
Permanent Fund for the legislature. He relayed that in the
last 40 years billions of dollars from the sale of the oil
wealth had poured into the legislature with little
accountability. He urged members to support the concept of
constitutionalizing the PFD program, as it had been done
for years and years. In the state constitution it outlines
that the resources of Alaska were to benefit the people.
"The people" happened to be himself, his neighbor, the lady
down the street who was pregnant. He urged members to look
out for the future of Alaskans. He was truly disappointed
to see the dividends cut. He wanted to see the dividend
distributed as it always had been; one dividend check per
person.
8:56:41 PM
JOE SCHLANGER, SELF, WASILLA (via teleconference), spoke
against HJR 23. He mentioned Alaska being ranked number one
in crime and number one in unemployment. He did not support
the government taking Alaskan's PFDs. He lived under the
poverty level, but he paid for his own things. He did not
believe the legislature knew how to run government. He
stressed that the people were hurting and legislators did
not care. He urged members to stay away from the people's
money.
8:59:37 PM
LESLIE DODGE, SELF, HOUSTON (via teleconference), spoke in
opposition of HJR 23. She spoke of her financial troubles.
She's had to say no to her children several times because
of being short on money. People could not afford to live in
Alaska and could not afford to leave. She strongly opposed
HJR 23. She asked members to think about the children in
Alaska rather than worrying about the adults. She opined
that the legislature needed to live within its means.
9:03:28 PM
TOM LAKOSH, SELF, ANCHORAGE (via teleconference), spoke
against HJR 23. He appreciated that the committee was
considering a bill that would prevent a veto by the
governor; however, he did not think the bill was enough. He
spoke in favor of additional taxes in order to balance the
budget. He stated that the money from the PFD circulated in
the economy numerous times before going back to the
government. He also advocated issuing the PFD in the form
of a debit card that would have sales tax paid by Amazon or
other internet retailers. He urged members to vote against
the resolution.
9:07:04 PM
JOHN VANDIEST, SELF, PALMER (via teleconference), spoke
against HJR 23. He advocated amending the resolution to
reflect what the PFD was previously. He encouraged
additional cuts and implementing additional taxes rather
than touching the dividend. He would rather have a
progressive income tax than a cut to the dividend. He
believed the best thing the legislature could do was to
protect the PFD's original formula in a constitutional
amendment.
9:09:07 PM
JANET MCLAIN, SELF, PALMER (via teleconference), strongly
opposed HJR 23. As a teacher at a Title I school, she saw
how much the PFD mattered to the students she saw. She
believed consideration of taking the PFD was irresponsible
government. She spoke of how the PFD helped to provide
shoes and other essential items for students. She shared
that she provided shoes for some of her students in need.
The PFD helped many families purchase gym shoes, backpacks,
and food. She elaborated that some of her students had
never been outside Mat-Su; her school provided an
opportunity to travel to Whittier to get an Alaska
experience. She stressed it was not possible for some of
the children. She stressed that the PFD helped hard working
families and stimulated the economy. She suggested that if
a change had to be made that current recipients should be
grandfathered into the PFD program and no new applicants
would receive a dividend. She believed a cut to the PFD was
irresponsible. She urged members to vote against the
legislation.
Co-Chair Foster recognized Representative Geran Tarr in the
committee room.
HJR 23 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the meeting for the following day
and thanked those who called to testify. He relayed that
amendments to the bill were due the following day.
9:13:31 PM
Representative Wilson asked if Department of Fish and Game
would be present for the next meeting.
Co-Chair Foster was getting a nod from staff that someone
from the department would be in attendance.
ADJOURNMENT
9:13:53 PM
The meeting was adjourned at 9:13 p.m.