Legislature(2021 - 2022)ADAMS 519
03/22/2022 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB281 || HB282 | |
| Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 281 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 22, 2022
9:05 a.m.
9:05:37 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:05 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division
SUMMARY
HB 281 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 281 was HEARD and HELD in committee for
further consideration.
HB 282 APPROP: MENTAL HEALTH BUDGET
HB 282 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the agenda for the meeting. The
committee would continue the amendment process on the
operating budget. He relayed the committee would pick up
where it left off the previous day.
HOUSE BILL NO. 281
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
HOUSE BILL NO. 282
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making capital
appropriations and supplemental appropriations; and
providing for an effective date."
9:06:32 AM
^AMENDMENTS
9:06:36 AM
Co-Chair Foster noted the committee would begin with
Amendment L7.
Representative Johnson MOVED to ADOPT Amendment L7, 32-
GH2686\R.22 (Marx, 3/18/22) (copy on file):
Page 77, line 30, through page 78, line 4:
Delete all material and insert:
"(c) The sum of $3,360,567,100 is appropriated from
the earnings reserve account (AS 37.13.145) as
follows:
(1) $1,680,283,550 to the dividend fund (AS
43.23.045(a)) for the payment of permanent fund
dividends and for administrative and associated
costs for the fiscal year ending June 30, 2023;
(2) $1,680,283,550 to the general fund for the
fiscal year ending June 30, 2023."
Reletter the following subsections accordingly.
Page 78, line 8:
Delete "appropriations"
Insert "appropriation"
Page 104, line 23
Delete "sec. 26(d)"
Insert "sec. 26(c)(l)"
Page 105, line 14
Delete "and(d)-(f)"
Insert "(c)(l), (d), and (e)"
Representative Josephson OBJECTED.
Representative Johnson explained the amendment would use 50
percent for the Permanent Fund Dividend (PFD) and 50
percent for government from the statutory percent of market
value (POMV) draw from the Permanent Fund Earnings Reserve
Account (ERA). The amendment did not necessarily change the
amount. She noted that the amendment did not address the
energy rebate currently in the budget. She noted it might
be appropriate to have an amendment to take out the energy
rebate if Amendment L7 was adopted. She had brought the
amendment forward to clarify what was included in the
budget. She stated the legislature had spent a lot of time
talking about the topic and building good faith with the
people of Alaska on the path forward and how the
legislature intended to pay a PFD. She relayed they had the
chance to vote on a different plan the previous day and it
had not passed. The amendment would do for the people of
Alaska what the legislature had said it would do.
Co-Chair Foster believed a 50/50 dividend equated to a PFD
of about $2,500.
Representative Johnson believed it was $2,550.
Co-Chair Foster asked Mr. Painter to address the committee.
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
agreed that the under the amendment the PFD was estimated
at $2,550 per person.
9:11:43 AM
Vice-Chair Ortiz referenced the amendment sponsor's
statement that the amendment was another statutory piece.
He asked for clarification on what statute Representative
Johnson was referring to. He was concerned the amendment
put the cart before the horse in terms of what came out of
the legislative fiscal policy working group. He believed
the working group had discussed a fiscal plan with the goal
of eventually getting to a 50/50 PFD, but there were things
that had to happen first or simultaneously. He highlighted
that the group had spoken about added revenue and cost
reductions. He was opposed to the amendment at present
because he thought it went down a path that was not clearly
sustainable in the future and may set expectations in the
public that it was the plan the legislature had arrived at.
He remarked that the legislature had not come to the
consensus of a 50/50 plan without establishing some of the
other things the fiscal working group identified should be
established.
Representative Josephson stated his primary concern was
that they would be masking deficit spending because of oil
price spikes and an epidemic. He noted those things would
not be there forever. He stated his main problem with the
amendment was that it ignored lessons learned from 2014 to
2021. He opposed the amendment.
9:14:46 AM
Representative Carpenter agreed that the fiscal policy
working group had recommended a comprehensive fiscal plan
including multiple components of fiscal reform. He pointed
out that the amendment reflected what was currently taking
place, but with different fund sources. He stated that the
$3.36 billion listed in the amendment was the POMV draw. He
stated that currently, the funds were pulled from the ERA
and transferred to undesignated general funds (UGF). He
explained the amendment proposed following statute by
pulling the funds from the ERA and depositing $1.68 billion
into dividend fund and $1.68 billion for government
spending. He stated that the current bill included $800
million for the PFD and $800 million from the dividend fund
for energy relief, which totaled $1.68 billion. He pointed
out that all the amendment was doing was acknowledging that
the statute specified pulling the money from the ERA and
splitting it 50/50. He elaborated the amendment just drew a
different number than in the Amendment L6 discussed the
previous day because there were two statutes on the books
that specified how to define income. He stated that
Amendment L6, the statutory PFD, drew 21 percent of net
earnings. He explained it meant there was a larger transfer
from the ERA. He highlighted that the 5 percent POMV
transferred less from the ERA. Currently, the entire amount
was transferred into the General Fund. The Amendment L7
merely specified the draw was supposed to be split 50/50.
9:16:56 AM
Representative Wool clarified that the amendment would use
50 percent of the POMV draw for PFDs, but it would not
eliminate the existing 25 percent for energy relief [in the
current bill]. He stated the PFD would end up being 75
percent of the POMV draw. He estimated the PFD would be
closer to $3,900 per person and a total of $2.4 billion. He
thought the amount was beyond the legislature's intent.
Representative Thompson asked how much was available from
the ERA using the POMV formula for FY 23.
Mr. Painter answered that the full amount available for the
POMV draw was $3.36 billion as shown on line 3 of the
amendment.
Representative Rasmussen MOVED to ADOPT conceptual
Amendment 1 to Amendment L7 to remove the energy rebate
from the budget if the amendment passed.
Representative Josephson OBJECTED. He requested to ask Mr.
Painter a question. He noted that a member of the committee
may have suggested there was a 50/50 law specifying that 50
percent of the draw should go to PFDs. He asked if there
was such a law.
Mr. Painter replied that the current law was 50 percent of
statutory net income. Additionally, there was the statute
directing the POMV draw to the General Fund. The governor's
proposal was to replace the PFD statute with 50 percent of
the POMV draw, but it was not current statute. He explained
that following statute would look like Amendment L6 [heard
the previous day]. He clarified that 50/50 was not current
law and was part of the governor's proposal.
Representative Wool spoke in objection to the conceptual
amendment. He explained that the amendment would not change
the dollar amount in the budget bill. He explained that the
current bill broke the funding out into a PFD and energy
relief, but the conceptual amendment would mean all of the
funds were classified as the PFD. He pointed out that high
oil prices would not be around forever, and the energy
relief was meant to help people offset high fuel costs. He
stated that the money in the current bill was for energy
relief and a 25 percent PFD.
9:20:44 AM
Representative Thompson asked Representative Rasmussen to
restate the conceptual amendment.
Representative Rasmussen explained that the conceptual
amendment specified that if Amendment L7 passed, the energy
rebate would be removed.
Co-Chair Foster clarified that when the language had been
included in a previous amendment, Mr. Painter had clarified
that another section would be added to remove the energy
relief check.
Mr. Painter agreed. He explained that the conceptual
amendment would add a section to Amendment L7 to delete
Section 47, the energy relief check in the current bill.
Vice-Chair Ortiz was opposed to the conceptual amendment.
He detailed that the amendment communicated to the public
the legislature had arrived at a path of a 50/50 split, but
that was not the case. He pointed out that they had not
done the legwork the fiscal policy working group had talked
about. He stated it set an incorrect and unsustainable
expectations. He noted the energy relief distribution was
in recognition that oil prices and fuel costs were high. He
clarified it was a one-time relief payment.
9:23:39 AM
Representative Johnson provided a brief summary of the
$1,200 energy relief payment provided under former Governor
Sarah Palin [in 2008]. The appropriation had been
completely separate from the PFD. She explained the payment
had been recognition of high energy costs that helped the
Permanent Fund but hurt Alaskans. She thought the issue was
being conflated when there was discussion about not really
wanting to have a PFD but there would be an energy check.
She stated that energy relief was not in statute. She
thought it may be a good thing to consider as she
recognized there were some unbelievably energy high costs.
She used filling a truck up with fuel as an example. She
stated it was a good conversation to have but it was not
tied to the PFD. She relayed it was a hard amendment and a
big move for her to put forward. She had supported an
amendment by Co-Chair Foster [the previous day]. She
clarified that the amendment was not energy related, it was
the PFD.
Representative Carpenter pointed out that with the
exception of discussion on the removal of the energy relief
payment, they were largely talking about rhetoric. He
pointed out that whether the committee approved the
conceptual amendment and the underlying amendment or
whether the underlying amendment failed, they were still
spending $1.68 billion from the dividend fund to pay a PFD
and a relief payment. He explained that either action
communicated the legislature's intention to do something
with the Permanent Fund earnings. He stated there were
dividing lines within the legislature about which way to
go. He stated that failing both of the amendments would be
communicating something that no one in the fiscal policy
working group agreed to. He explained it was important to
recognize that either option would communicate the
legislature's intention on what it chose to do with
Permanent Fund earnings.
9:28:03 AM
Representative Rasmussen stated there was a lot of nuance
in what the committee was trying to do. She remarked that
everyone had associated the energy rebate in 2008 with the
PFD. She did not believe the distinction would reach the
majority of the public. She believed for the most part
people were trying to live their lives and manage day to
day. She thought making a distinction that part of the
funding was a PFD and part was for energy relief would not
reach the general public. She believed the important thing
was that they would still be following the POMV. She stated
the legislature had the power to appropriate. She reasoned
that ultimately whatever amount the legislature decided on
would determine the PFD. She stated there was nothing in
the amendment or current budget restricting how the
legislature appropriated money in the next year. She
believed that if the PFD amount was smaller the next year,
which it likely would be, the public will feel the PFD was
cut again even though the energy rebate was just going
away. She remarked the nuance would go beyond most people.
She believed the amendment was a better path forward than
the current proposal.
Representative Thompson asked what happened to the $3.6
billion POMV draw if it was not used. He asked if the money
could be put back into the Permanent Fund corpus.
Mr. Painter replied that if the POMV was not appropriated
to the General Fund it could remain in the ERA, which could
be appropriated to the corpus of the fund. He stated that
with or without the amendment the entire amount would be
appropriated out, but if the legislature decided to reduce
the POMV draw the funds could be left in the ERA.
Representative LeBon referenced the energy rebate paid in
2008. He asked for verification the money had been paid
from oil revenues and not the ERA.
Mr. Painter confirmed the payment had been paid from the
General Fund.
Representative LeBon asked for verification that in a
manner consistent with the 2008 payment, the energy relief
check in 2022 would be paid from the General Fund.
Mr. Painter agreed.
Representative LeBon stated that the first PFD check of
$1,000 was paid around 1982. He detailed that it had been
made up of 1980, 1981, and 1982 PFDs held in litigation.
The initial formula had been struck down by the court as
being discriminatory for newer residents. He asked what
funding source had been used to pay the first several PFDs.
Mr. Painter replied that the funding had come from the
General Fund.
Representative LeBon asked if the size of the Permanent
Fund and its ability to generate earnings to pay the $1,000
was the reason it had been funded via the General Fund.
Mr. Painter answered that at the time there would have been
sufficient earnings to pay out the three years under the
formula, but there would not have been sufficient earnings
in a year to pay three years' worth. He elaborated that at
the time there had been a large surplus; therefore, the
decision had been essentially to help the Permanent Fund by
leaving the money in the Permanent Fund and paying it out
of the General Fund instead.
9:32:57 AM
Representative LeBon recalled the same. He believed the
legislature had wanted to provide the initial funding of
the PFD program through the ERA, but it made more sense
economically at the time to do it with UGF.
Vice-Chair Ortiz referred to Representative Rasmussen's
reference to the extra energy relief distribution in 2008
that had been separate from the PFD. He considered the
state's fiscal situation in 2008 compared to the current
fiscal situation. He underscored it was a different
ballgame. He elaborated that in 2008 the state had
substantial reserves and had not spent down the CBR and
other savings accounts. He stressed the legislature was
supposed to be fiscally responsible in the actions it took.
He agreed that the amount was the same whether they went
with the amendment and changed the distribution process,
but it communicated something different.
Vice-Chair Ortiz emphasized that giving an energy rebate
check recognized the existing circumstances that were both
positive and negative. He detailed that Alaskans were
experiencing high energy and other costs, but the state had
experienced a recent bump in oil prices, which provided the
latitude to make the one-time distribution. He highlighted
that the high prices would not necessarily continue in the
future. He underscored that the energy relief payment
communicated it was one-time supplement. He considered the
situation in 2008 and would love to be in that situation
compared to the current one. He stated it was up to the
legislature to communicate the best it could that the
current budget proposal was in response to the increase in
price resulting in high energy cost and increased revenue
for Alaska. He thought moving towards a 50/50 dividend
before other work identified by the working group had been
done was a bad policy.
9:36:50 AM
Representative Wool reflected on 2008 when the statutory
PFD had been paid and an additional amount had been paid
for energy relief. He thought people had understood there
were two different payments at the time. He stated that in
2009 Alaskans had received the PFD only. He thought
everyone had accepted the situation. He estimated oil
revenue was around $9 billion in 2009, which had been a
record year. He noted much of the money had gone into the
Constitutional Budget Reserve (CBR), which the state had
ended up using between 2014 until recently. He recalled
there had been an idea to tie the one-time energy relief in
2008 to purchasing oil, but it had been too complicated. He
reiterated it had been understood the amount was separate
[from the PFD] due to high oil prices. He wanted to keep it
that way.
Representative Carpenter stated they were making a policy
call to split the dollar figure into two payments. He
stated the legislature was making a policy call to refer to
part of the funding as an energy relief payment. He
wondered what an eight year old was supposed to do with a
relief payment. He asked if they were supposed to save it
in a college fund. He did not believe the people really
cared whether they got two separate checks with the same
dollar figure. He thought it was largely semantics what the
legislature was communicating. He would rather the
legislature communicate it was following the statute and
that it was trying to get to some agreement on what to do
with the PFD. He remarked there were obviously portions of
the legislature that did not agree on a 25/75 split of the
PFD. He was opposed to communicating that as the message to
residents. He did not believe the majority of Alaskans
wanted a 25/75 split of Permanent Fund earnings for the PFD
and state government respectively.
Representative Josephson MAINTAINED the OBJECTION to
conceptual Amendment 1.
A roll call vote was taken on the motion.
IN FAVOR: Rasmussen, Carpenter, Johnson, Thompson, Merrick
OPPOSED: Wool, Edgmon, Josephson, LeBon, Ortiz, Foster
The MOTION to adopt conceptual Amendment 1 to Amendment L7
FAILED (5/6).
Co-Chair Foster returned to Amendment L7. He shared that
his constituents had indicated their desire for a full PFD;
they did not want a compromise PFD. He remarked that until
statute was changed there could continue to be negotiations
for a smaller and smaller PFD. He would support paying the
full PFD until statute was changed. He did not support
Amendment L7.
Representative LeBon opposed the amendment due to the
fiscal uncertainty facing the state. He highlighted it was
only necessary to look back several months to see a price
of oil under $40 per barrel and the legislature had been
faced with the decision to overdraw the ERA above the 5
percent POMV draw or roll out a broad-based tax. He
reminded committee members it had not been long ago that
the legislature had been talking about the necessity of
implementing a broad-based in the near-term. He recalled
the only question to be answered had been whether the tax
would be on sales or income. He asked if anyone was talking
taxes at present. He suspected the price of oil would
someday modify itself. He underscored legislators should
all have learned that predicting oil prices was difficult
at best. He was concerned that locking in a 50/50 PFD meant
someday facing overdrawing the ERA or implementing a broad-
based tax.
9:43:58 AM
Representative Johnson provided wrap up on the amendment.
She requested to have someone from the Office of Management
and Budget (OMB) address the specific statutes at a later
time. She stated the 50/50 plan was in statute, but the
legislature was currently working under the POMV. She
remarked there were many comments about how wonderful the
work by the fiscal policy working group had been; however,
she noted that unfortunately the report had never been
accepted by the legislature. She pointed out that the ERA
draw had not been based on oil prices in the past, but on
Permanent Fund earnings. She highlighted that the Permanent
Fund had been going "gangbusters," but it did not seem to
matter what the earnings were, the legislature had shied
away from paying a full PFD whether it was the POMV or the
original Hammond plan.
Representative Johnson stated it was not about oil prices
going up and down or the volatile stock market. She
highlighted the legislature could come up with all kinds of
reasons to not pay, but there was a statute that had
brought the legislature to a standstill over the last four
years. She stated that she was hearing perhaps committee
members did not want a 50/50 PFD, but they had not moved
off of it. She emphasized there had been no statute to
change anything about the disbursement. She highlighted
that the governor had proposed a 50/50 POMV draw that
worked for the budget and did not leave holes. She thought
an energy rebate seemed silly to her. She remarked that
providing an energy rebate along with the PFD equated to
paying a 50/50 PFD.
Representative Johnson stated that every year was a
different ballgame and every year there were different
circumstances. She stated it was the reason for statutes to
hold the line on "where we're going and what we're doing."
She elaborated the legislature had thoughtful
considerations and she hoped they stood on the shoulders of
those who came before. She stated legislators could not
know everything, but they could learn from the past. The
economy and people were currently uncertain. She
highlighted the pandemic and businesses that were uncertain
where things were going and how they would stay afloat once
the federal money ended. She discussed it was very
difficult for a small business. She shared that she is a
small business owner and discussed the uncertainty.
Representative Johnson stressed that people needed the full
PFD. She stated it was not about money anymore but about
philosophy. She emphasized the current discussion was about
the same amount of money. She emphasized the legislature
owed the public to act in good faith. She stressed that no
one wanted to see Alaska go under and the public was
willing to stand with the legislature when it said it had
to make hard decisions. She stated the legislature was
losing credibility. She remarked that her constituents did
not want to have games played with them.
9:50:19 AM
Representative Josephson MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Johnson, Carpenter, Rasmussen
OPPOSED: Thompson, Wool, Edgmon, Josephson, LeBon, Ortiz,
Merrick, Foster
The MOTION to adopt Amendment L7 FAILED (3/8).
HB 281 was HEARD and HELD in committee for further
consideration.
HB 282 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster relayed that amendments would continue in
the afternoon meeting.
ADJOURNMENT
9:51:52 AM
The meeting was adjourned at 9:51 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 281 & HB 282 Op Budget Language Amendments 032022.pdf |
HFIN 3/22/2022 9:00:00 AM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Numbers Amendments 032022-2.pdf |
HFIN 3/22/2022 9:00:00 AM |
HB 281 HB 282 |