Legislature(2019 - 2020)ADAMS ROOM 519
07/25/2019 09:00 AM House FINANCE
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| Audio | Topic |
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| Start | |
| HB2003 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB2003 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
SECOND SPECIAL SESSION
July 25, 2019
9:02 a.m.
9:02:51 AM
[Note: Continued from recessed meeting on Wednesday, July
24, 2019. See separate minutes for detail.]
CALL TO ORDER
Co-Chair Johnston called the House Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Jennifer Johnston, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
Representative Kelly Merrick (via teleconference)
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
Representative Adam Wool
MEMBERS ABSENT
Representative Ben Carpenter
ALSO PRESENT
Erin Shine, Staff, Representative Jennifer Johnston; Amanda
Ryder, Analyst, Legislative Finance Division;
Representative Tammie Wilson; Representative Sarah Vance;
Representative Sara Hannan.
PRESENT VIA TELECONFERENCE
Representative Kelly Merrick
SUMMARY
HB 2003 APPROP: PAYMENT OF PFD
CSHB 2003(FIN) was REPORTED out of committee with
seven "do pass" recommendations, one "do not
pass" recommendation, and one "amend"
recommendation.
Co-Chair Johnston reviewed the agenda for the meeting.
HOUSE BILL NO. 2003
"An Act making special appropriations for the payment
of permanent fund dividends; and providing for an
effective date."
9:03:49 AM
Representative Josephson discussed that some of the public
had asked the legislature not to give up their careers,
jobs, livelihoods, and dreams for Permanent Fund Dividend
(PFD) payments. He clarified that the bill as written
heeded those comments; it did not encroach in a competitive
way with dollars the legislature was trying to restore to
the budget. He supported the bill.
Representative Sullivan-Leonard requested to hear the
calculation of the breakdown for the percent of market
value (POMV) model. She also asked for a spreadsheet for
clarification.
9:05:06 AM
ERIN SHINE, STAFF, REPRESENTATIVE JENNIFER JOHNSTON, asked
for clarity on the specific information Representative
Sullivan-Leonard was interested in. She detailed that the
bill would appropriate $901,470,000, which had been
included in legislation previously considered by the
committee. The figure took some of the budget veto items
into consideration. The items that were not restored were
also calculated into the figure as well. She explained it
would leave a PFD of $1,336. If the Statutory Budget
Reserve (SBR) reverse sweep was achieved the PFD would
increase to $1,605.
Representative Sullivan-Leonard was looking at the
calculation of the POMV that arrived at the $1,336 PFD. She
asked if a 50/50 or 60/40 split was used.
Co-Chair Johnston responded that the bill used a net
dividend rather than a formula based dividend. The
structured POMV draw was being utilized as part of the
revenue source for the budget. The dividend in the bill was
built on funds available after balancing the budget. She
remarked that if SB 2002 was successful, the savings would
be used for the PFD in order to reach a compromise.
Co-Chair Johnston acknowledged that Representative Tammie
Wilson, Representative Sarah Vance, and Representative Sara
Hannan were present in the audience.
Representative Sullivan-Leonard addressed the existing
statute specifying the PFD formula that was supposed to be
followed. She stated that if the calculation was based on
the statutory formula and was divided 50/50 it would result
in a $2,200 PFD. She believed the PFD in the bill was not
based on a calculation.
Co-Chair Johnston answered that the bill included a net
PFD. She offered to have an analyst from the Legislative
Finance Division (LFD) provide information on the split.
Ms. Shine added that the 5.25 percent POMV for state
revenue in FY 20 was about $2.9 billion. Currently, there
was traditional revenue of approximately $2.3 billion, for
a total of $5.2 billion to spend on the state's costs. The
bill envisioned the state costs at about $5.2 billion. The
total left about $900 million [for the PFD], which was
included in the bill.
9:08:43 AM
Co-Chair Johnston asked LFD to provide the split for the
dividend in the bill. She asked for the split with the SBR
and the split without the SBR.
AMANDA RYDER, ANALYST, LEGISLATIVE FINANCE DIVISION,
answered that she did not have the information on hand. She
offered to follow up. She shared that the bill utilized the
5.25 POMV draw and drew from savings for the current PFD.
Representative Wool thought Representative Sullivan-Leonard
was asking what percentage POMV a $1,600 PFD would be. He
calculated a $1,600 PFD would be about 38 percent of the
draw (a split of 63/38 percent). He stated that HB 2002
started off as a surplus PFD of approximately $900, using
the money remaining after paying for a certain budget. He
remarked that the committee had taken the to other
communities and it had received significant public support.
He referenced Ms. Shine's earlier statement that if the SBR
was not swept, the surplus PFD would be approximately
$1,300. He highlighted the change from $900 to $1,300. He
asked if the PFD increase was based on restored cuts of
about $90 million. Alternatively, he wondered if something
else resulted in the increase.
Ms. Shine responded that there were three bills under
consideration by the legislature, one was under
consideration by the House Finance Committee [HB 2003]. She
explained that SB 2002 included the capital budget and the
reverse sweep, which used the Constitutional Budget Reserve
(CBR) as a fund source. She detailed that it freed up about
$172 million to $174 million. She relayed that if the
legislature accessed the SBR, as envisioned by HB 2003, it
would result in another $172 million. Currently, about $89
million of the governor's veto had not been restored. All
of the items she had listed were factored into the PFD
amount included in HB 2003.
9:11:56 AM
Representative Wool asked for verification that if the SBR
was not swept, the capital budget amount in SB 2002 would
have to be accounted for if the PFD was increased from $900
to $1,300. He asked for verification that SB 2002 included
$172 million in the SBR and approximately $170 million in
CBR funds for the capital budget.
Ms. Shine responded affirmatively.
Co-Chair Johnston asked Ms. Ryder to put her name on the
record.
Ms. Ryder complied.
Representative Josephson followed up on an earlier question
by Representative Sullivan-Leonard. He suggested that
without the reverse sweep the PFD in HB 2003 constituted a
31 percent draw and 69 percent for funding government. The
amount would increase to about 37 or 38 percent with the
SBR. He observed that the extra funds would not be part of
the POMV.
Representative Sullivan-Leonard asked Ms. Ryder to provide
some history about the calculation and disbursement of the
PFD in prior years. She discussed that in the past few
sessions PFDs were calculated, and half had been put back
into the Permanent Fund Earnings Reserve Account (ERA) and
half was distributed to the public. She asked how the
calculation had been done. She wondered if the POMV model
had been followed.
9:14:10 AM
Ms. Ryder responded that she was not the best person to
speak about the model. The POMV was 5.25 percent of the
total value of the Permanent Fund based on the average
balance of the previous five years. The method was based on
the endowment model where the maximum of a certain
percentage was drawn in order to avoid overdrawing and
losing value on an inflation adjusted basis. She addressed
the 5.25 percent and shared that when averaging backwards
the amount was 4.7 percent or so of the actual value.
Representative Sullivan-Leonard referenced Co-Chair
Johnston's discussion of the net value of the Permanent
Fund. She asked how the net value was different from the
original calculation of the POMV.
Ms. Ryder asked for clarification on the question.
Co-Chair Johnston explained her reference to "net." She
detailed that the calculation subtracted expenses from
revenues and the remaining surplus went to the PFD. There
had been an effort to be as balanced as possible. She
highlighted the necessity of compromise and explained that
in order to reach a $1,600 PFD, savings from the SBR were
included.
Representative Sullivan-Leonard thought the figures in the
bill appeared to reflect a split of 30 percent to the PFD
and 70 percent to government.
Representative Wool clarified that the 70/30 split did not
include the $172 million from the SBR. He liked the surplus
PFD that had been included in HB 2002. He highlighted that
HB 2003 would use savings to increase the PFD, which could
not be done every year.
Co-Chair Johnston agreed.
9:17:33 AM
Representative Tilton asked if there would be an
opportunity to offer an amendment.
Co-Chair Johnston asked if Representative Tilton had an
amendment prepared.
Representative Tilton replied that she ordered an amendment
from Legislative Legal Services that she had not yet
received. She relayed she could make a conceptual
amendment.
Representative Tilton MOVED to ADOPT Conceptual Amendment 1
(copy not on file):
Delete
Sections 1(a) and (b)
Insert
The amount authorized under AS 37.13.145(b) for the
transfer by the Alaska Permanent Fund Corporation
(APFC) on June 30, 2019, estimated to be
$1,944,000,000 is appropriated from the Earnings
Reserve Account, AS 37.13.145 to the Dividend Fund AS
43.23.045(a) for the payment of Permanent Fund
Dividends and for the administrative and associated
costs for the fiscal year ending June 30, 2020.
Co-Chair Johnston asked for verification that the
conceptual amendment would delete Section 1(a) and (b). She
asked if Representative Tilton had also said Section (c).
Representative Tilton replied that the amendment did not
include a Section (c). There was no such section in the
legislation.
Representative Knopp OBJECTED.
Representative Tilton spoke to her amendment. She indicated
there was a POMV statute and a statutory PFD statute. The
amendment would pay out the statutory PFD. She understood
the net divided concept, which had been discussed at length
on the House floor the previous day. She referenced recent
public testimony heard by the committee and pointed out
that it had been on vetoed items and had not focused on the
PFD the public expected for the current year. Additionally,
the ERA contained money from past dividends that were not
paid out.
Representative Sullivan-Leonard supported Conceptual
Amendment 1. She stated that the ERA contained $19 billion
and the corpus of the Permanent Fund contained $66 billion.
She highlighted that earlier in the year there had been
overwhelming public testimony from seniors, students, and
families asking for a full statutory PFD. She believed the
people were tired of continuing to say they wanted the full
statutory PFD. The amendment would restore the PFD to the
statutory level.
9:21:49 AM
Co-Chair Johnston asked Representative Sullivan-Leonard how
much she had stated was currently in the ERA and Permanent
Fund corpus.
Representative Sullivan-Leonard replied that as of May
2019, there was $19 billion in the ERA and $66 billion in
the corpus.
Co-Chair Johnston clarified that the $66 billion was the
total balance, including the ERA.
Representative Knopp opposed the amendment. He agreed with
Representatives Tilton and Sullivan-Leonard that the two
statutes conflicted. He reasoned that no matter what the
legislature did, the solution would likely be in violation
of one of the statutes. He felt strongly that the issue was
about good, sound, fiscal policy. He stated that the
balance of the ERA really made no difference because if the
draw exceeded a sustainable amount, the fund would be
depleted. He reasoned it did not make a difference if the
balance was $100 billion or $10 billion in that regard. He
stressed that continuing to draw more than the fund earned,
the fund would be depleted in three to four years. He
believed it was bad fiscal policy to draw more than the
fund would earn.
9:23:44 AM
Representative LeBon spoke in opposition to the amendment.
He agreed with the previous speaker that it would be
irresponsible to over draw from the ERA. He suggested
reviewing the constitution and the amendment that passed in
1976 establishing the Permanent Fund. He relayed it was
necessary for the legislature to take direction from the
expectation of the voters (from that time) of the fund's
long-term sustainability for subsequent generations and the
protection of the fund in the constitution from any law.
Co-Chair Foster commented that the committee had received
public testimony in Anchorage, Wasilla, and Fairbanks on HB
2001. He detailed that HB 2001 was a two-part bill that
restored all of the governor's vetoes and paid a surplus
PFD of just over $900. He elaborated that the committee had
received myriad comments speaking to the topics. He
reported that 619 people had testified in person or on the
phone and 80 percent of the testifiers supported the bill.
Additionally, the committee had received 1,780 emails with
89 percent in support of the bill. He emphasized that the
bill had included a PFD and many people had spoken to it.
9:25:54 AM
Representative Josephson added there were likely additional
emails that had been received by the committee since the
previous week.
Representative Tilton provided wrap up on Conceptual
Amendment 1. She pointed out there had been discussion
about not borrowing from savings, but HB 2003 would borrow
from savings. She agreed on the need to look at the long-
term sustainability, but that was not currently under
consideration by the committee. She stressed there was
current law providing for a full statutory PFD. She
highlighted that lawmakers had not made the decision to
change how dividends were paid out. She noted that the bill
provided a net surplus dividend of the remaining funds
after government took its share. Her understanding was the
PFD provided by the bill would result in a 60/30 split. She
agreed there had been significant public testimony;
however, people had not all testified they were willing to
give up their PFD. She stated there had been much public
testimony about the line item vetoes. She had also heard
numerous people who were conflicted and wanted their PFD.
She believed many people probably wanted a PFD and all of
the services, but that was not sustainable. She pointed out
that there had been public testimony on a previous bill
where thousands of people had been unhappy with a $1,600
PFD; the individuals wanted a full statutory dividend.
Representative Knopp MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Merrick, Sullivan-Leonard, Tilton
OPPOSED: LeBon, Ortiz, Wool, Josephson, Knopp, Johnston,
Foster
Representative Carpenter was absent from the vote.
The MOTION to ADOPT Conceptual Amendment 1 FAILED (3/7).
9:30:11 AM
Vice-Chair Ortiz MOVED to report CSHB 2003(FIN) out of
Committee with individual recommendations.
Representative Tilton OBJECTED. She did not have any
further comments.
A roll call vote was taken on the motion.
IN FAVOR: Knopp, LeBon, Ortiz, Wool, Josephson, Foster,
Johnston
OPPOSED: Sullivan-Leonard, Tilton
Representative Merrick and Representative Carpenter were
absent from the vote.
The MOTION PASSED (7/2).
There being NO further OBJECTION, CSHB 2003(FIN) was
REPORTED out of committee with seven "do pass"
recommendations, one "do not pass" recommendation, and one
"amend" recommendation.
ADJOURNMENT
9:31:27 AM
The meeting was adjourned at 9:31 a.m.
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