Legislature(2021 - 2022)ANCH LIO DENALI Rm

06/09/2021 03:00 PM JUDICIARY

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Audio Topic
03:00:42 PM Start
03:01:17 PM HJR7|| HB37|| SJR18
04:59:50 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time & Location Change --
+= HJR 7 CONST. AM: PERM FUND & PFDS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
Senator Von Imhof & Representative Wool
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                       Anchorage, Alaska                                                                                        
                          June 9, 2021                                                                                          
                           3:00 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Matt Claman, Chair                                                                                               
Representative Liz Snyder, Vice Chair (via teleconference)                                                                      
Representative Harriet Drummond                                                                                                 
Representative Jonathan Kreiss-Tomkins (via teleconference)                                                                     
Representative David Eastman (via teleconference)                                                                               
Representative Christopher Kurka (via teleconference)                                                                           
Representative Sarah Vance (via teleconference)                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 7                                                                                                    
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to the Alaska permanent fund, appropriations from the                                                                  
permanent fund, and the permanent fund dividend.                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR  7                                                                                                                  
SHORT TITLE: CONST. AM: PERM FUND & PFDS                                                                                        
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/18/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/21       (H)       STA, JUD, FIN                                                                                          
04/20/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/20/21       (H)       Heard & Held                                                                                           
04/20/21       (H)       MINUTE(STA)                                                                                            
05/04/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/04/21       (H)       Heard & Held                                                                                           
05/04/21       (H)       MINUTE(STA)                                                                                            
05/06/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/06/21       (H)       Moved CSHJR 7(STA) Out of Committee                                                                    
05/06/21       (H)       MINUTE(STA)                                                                                            
05/10/21       (H)       STA RPT CS(STA) 4DNP 2NR 1AM                                                                           
05/10/21       (H)       DNP: CLAMAN, EASTMAN, VANCE, TARR                                                                      
05/10/21       (H)       NR: STORY, KREISS-TOMKINS                                                                              
05/10/21       (H)       AM: KAUFMAN                                                                                            
05/14/21       (H)       FIRST SPECIAL SESSION BILL                                                                             
05/14/21       (S)       FIRST SPECIAL SESSION BILL                                                                             
05/24/21       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
05/24/21       (H)       Heard & Held                                                                                           
05/24/21       (H)       MINUTE(JUD)                                                                                            
05/26/21       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
05/26/21       (H)       Heard & Held                                                                                           
05/26/21       (H)       MINUTE(JUD)                                                                                            
06/02/21       (H)       JUD AT 1:00 PM ANCH LIO DENALI Rm                                                                      
06/02/21       (H)       Heard & Held                                                                                           
06/02/21       (H)       MINUTE(JUD)                                                                                            
06/04/21       (H)       JUD AT 1:00 PM ANCH LIO DENALI Rm                                                                      
06/04/21       (H)       Heard & Held                                                                                           
06/04/21       (H)       MINUTE(JUD)                                                                                            
06/09/21       (H)       JUD AT 3:00 PM ANCH LIO DENALI Rm                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR NATASHA VON IMHOF                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During the hearing on CSHJR 7(STA),                                                                      
provided a PowerPoint presentation, titled "Concepts pertaining                                                                 
to the Alaska Permanent Fund and Dividends," dated 6/9/21.                                                                      
                                                                                                                                
REPRESENTATIVE ADAM WOOL                                                                                                        
Alaska State Legislature                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on CSHJR 7(STA),                                                                      
provided remarks pertaining to HB 37.                                                                                           
                                                                                                                                
KEN ALPER, Staff                                                                                                                
Representative Adam Wool                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    During   the  hearing  on  CSHJR  7(STA),                                                             
provided a  PowerPoint presentation,  titled "A  Small Tax  and a                                                               
Moderate Dividend: Towards a  Sustainable Fiscal Solution," dated                                                               
6/9/21.                                                                                                                         
                                                                                                                                
MIKE BARNHILL, Deputy Commissioner                                                                                              
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered question  from the committee during                                                             
the hearing on CSHJR 7(STA).                                                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:00:42 PM                                                                                                                    
                                                                                                                                
CHAIR MATT  CLAMAN called the House  Judiciary Standing Committee                                                             
meeting to  order at 3:00  p.m.  Representatives  Drummond, Kurka                                                               
(via  teleconference), Snyder  (via  teleconference), and  Claman                                                               
were present  at the call  to order.  Representatives  Vance (via                                                               
teleconference),   Kreiss-Tomkins   (via   teleconference),   and                                                               
Eastman  (via  teleconference)  arrived  as the  meeting  was  in                                                               
progress.                                                                                                                       
                                                                                                                                
^hb37                                                                                                                           
^sjr18                                                                                                                          
               HJR 7-CONST. AM: PERM FUND & PFDS                                                                            
                                                                                                                                
[Contains discussion of HB 37 and SJR 18.]                                                                                      
                                                                                                                                
3:01:17 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced  that the only order of  business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  7,  Proposing  amendments  to  the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund,  appropriations from the permanent  fund, and the                                                               
permanent  fund  dividend.    [Before  the  committee  was  CSHJR
7(STA).]                                                                                                                        
                                                                                                                                
CHAIR CLAMAN stated that today,  the committee would hear invited                                                               
testimony  from  Senator von  Imhof  and  Representative Wool  on                                                               
alternative  proposals related  to  the percent  of market  value                                                               
(POMV) structure,  revenue, the  earnings reserve  account (ERA),                                                               
and  the  permanent  fund  dividend (PFD).    He  explained  that                                                               
Senator  von  Imhof's presentation  relates  directly  to SJR  18                                                               
while Representative  Wool's proposal relates directly  to HB 37.                                                               
He  noted that  the  House Judiciary  Standing  Committee is  not                                                               
hearing SJR  18 or  HB 37; however,  because the  proposal before                                                               
the  committee [CSHJR  7(STA)] relates  to  the Alaska  permanent                                                               
fund and  dividends, it is  appropriate to consider  the concepts                                                               
behind other proposals before the legislature.                                                                                  
                                                                                                                                
3:02:52 PM                                                                                                                    
                                                                                                                                
SENATOR NATASHA  VON IMHOF, Alaska State  Legislature, introduced                                                               
a  PowerPoint presentation,  titled "Concepts  pertaining to  the                                                               
Alaska Permanent Fund  and Dividends" [hard copy  included in the                                                               
committee packet].   She began on slide 2, which  read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Why are we having this discussion?                                                                                         
                                                                                                                                
     ? To follow statute? or not.                                                                                               
     ? Costs the state $325 million for every $500 divided                                                                      
     check                                                                                                                      
     ? 80/20 rule                                                                                                               
                                                                                                                                
SENATOR  VON IMHOF  explained that  every  year, the  legislature                                                               
puts together  a budget  that pays for  all of  state government.                                                               
Additionally, since 1982,  the PFD has been included  as a budget                                                               
line   item.     She  reported   that  currently,   the  dividend                                                               
calculation is  in statute and  has been untouched for  33 years.                                                               
However,  in  2016, under  the  Bill  Walker administration,  the                                                               
statute was  ignored for the first  time and the governor  set an                                                               
arbitrary dividend amount of $1,000  per person.  This prompted a                                                               
lawsuit  filed  by  Senator Wielechowski  against  the  State  of                                                               
Alaska  [Wielechowski v.  State],  which  questioned whether  the                                                             
1976   amendment  to   the  Alaska   Constitution  exempted   the                                                               
legislature's  use   of  the  permanent  fund   income  from  the                                                               
constitution's anti-dedication  clause.  On August  25, 2017, the                                                               
[Alaska] Supreme  Court ruled that  the legislature's use  of the                                                               
permanent  fund income  is subject  to  normal appropriation  and                                                               
veto  budgetary process,  which  means that  the legislature  can                                                               
follow the statute  or not.  Senator von Imhof  expounded that as                                                               
the appropriating body,  the legislature can choose  to fund, not                                                               
fund,  or  short fund,  any  particular  program, department,  et                                                               
cetera.   She highlighted that  it costs the  state approximately                                                               
$325  million  to pay  a  dividend  of  $500 to  every  qualified                                                               
Alaskan.  She questioned whether  the "better investment" is $325                                                               
million in the  form of a $500  check to every citizen  or a $325                                                               
million investment  in projects, which would:   create year-round                                                               
jobs to  support families; build  roads that  connect communities                                                               
and  provide access  to resources;  and repair  bridges, schools,                                                               
and other infrastructure.   She addressed the  80/20 rule, noting                                                               
that the Pareto principle states  that for many outcomes, roughly                                                               
80 percent of consequences come from 20 percent of the causes.                                                                  
                                                                                                                                
3:06:00 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF continued discussing  the 80/20 rule  on slide                                                               
3, which  includes a  graph, titled  "Senate Finance  CS3 General                                                               
Funds  With Governors  [sic]  50/50  PFD."   She  opined that  80                                                               
percent of  [the legislature's] time  and energy is spent  on one                                                               
budget item  that accounts  for 24  percent of  the budget.   She                                                               
stated her  belief that it  paralyzes the legislature  from doing                                                               
anything else and will eventually  financially cripple the state;                                                               
furthermore,  it is  creating deep  philosophical fissures  among                                                               
the legislature and citizens.   She articulated that the dividend                                                               
is part of Alaska's culture  and history, adding that many people                                                               
depend  on  it.    Nonetheless, she  posited  that  the  dividend                                                               
calculation must be solved into  something that is affordable and                                                               
sustainable  over time  to allow  the legislature  to take  steps                                                               
forward to rebuild and reimagine [the state's] future.                                                                          
                                                                                                                                
SENATOR VON  IMHOF proceeded  to slide 4,  which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Decision Points:                                                                                                           
                                                                                                                                
     ? Statute versus Constitution                                                                                              
        ? Taxes: Do we institute personal taxes on every                                                                        
     citizen in order to pay a dividend?                                                                                        
                                                                                                                                
SENATOR VON  IMHOF addressed the  first decision point:   putting                                                               
the  dividend calculation  in  statute  versus the  constitution.                                                               
She reiterated  that statutes dealing with  appropriations can be                                                               
overwritten through the budgetary process.   She conveyed that on                                                               
principle, she is  against putting any fiscal  or economic policy                                                               
into the constitution because it  would financially devastate the                                                               
state in  the event of an  economic downturn.  However,  she said                                                               
she agrees  with the governor  that the  issue must be  solved to                                                               
stabilize and  protect the state's  financial health.   She added                                                               
that  to reach  a  resolution  for this  unique  problem, she  is                                                               
proposing  a unique  solution  that puts  the  dividend into  the                                                               
constitution by  creating a  dedicated fund.   She  addressed the                                                               
second  decision  point:   instituting  personal  taxes on  every                                                               
citizen to  pay a  dividend.   She opined that  it does  not make                                                               
sense to  tax the  wages of  one person  only to  deposit his/her                                                               
money into the personal checking account of a neighbor.                                                                         
                                                                                                                                
SENATOR VON IMHOF  advanced to slide 5, which lists:   revenue at                                                               
$4,731,600; agency  at $3,857,820;  debt at  $145,268; retirement                                                               
at  $341,985;   fund  capitalization  at  $165,873;   capital  at                                                               
$268,28; with a  total expenditure of $4,779,233.   The resulting                                                               
surplus/deficit  is shown  as a  deficit of  $47,633.   She noted                                                               
that currently, the  state has roughly enough revenue  to pay for                                                               
its expenditures.                                                                                                               
                                                                                                                                
3:08:49 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF  turned to slide 6, which  shows a side-by-side                                                               
comparison  of  the  Alaska Resource  Ownership  Revenue  Account                                                               
(ARORA)  plan and  the governor's  50/50 plan.   She  pointed out                                                               
that  under the  governor's plan,  half of  the POMV,  or roughly                                                               
$1.5 billion, would  be taken from revenue, leaving  a deficit of                                                               
$1.6  billion  [bottom  figure   highlighted  in  yellow].    She                                                               
emphasized that  because of Alaska's  small population,  of which                                                               
less  than half  is currently  employed,  it would  take both  an                                                               
income  tax and  a "hefty"  sales tax  to close  the gap  for the                                                               
governor's  proposal.   She  reiterated  that  everyone would  be                                                               
paying taxes to receive a dividend.                                                                                             
                                                                                                                                
3:09:39 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF continued  to slide 7,  which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Decision Points (continued):                                                                                               
                                                                                                                                
     Reasons for a larger dividend:                                                                                             
                                                                                                                                
      ? Prioritize the Dividend over everything else: Cut                                                                       
     the budget to pay the dividend                                                                                             
         ? Downsize Government: Use the dividend to put                                                                         
      downward pressure on the budget (but lack of revenue                                                                      
     does that)                                                                                                                 
        ? Wealth Ownership State: It's our oil. It's our                                                                        
     wealth. It's our asset. (What about the liabilities?)                                                                      
                                                                                                                                
SENATOR  VON  IMHOF  reported that  currently,  government  costs                                                               
roughly  $4.5  billion.    Additionally,  the  current  statutory                                                               
dividend would  cost the  government roughly  $2.1 billion.   She                                                               
expressed  her  belief   that  it  would  be   difficult  to  cut                                                               
government services  in half.   She  acknowledged that  there are                                                               
inefficiencies   in  the   bureaucracy;   however,  she   likened                                                               
government efficiencies  to fat  in a  piece of  meat, suggesting                                                               
that "it's  marble throughout  the entire  enterprise -  it takes                                                               
time and thought  to decrease the government."   Furthermore, she                                                               
said the  lack of revenue  puts downward pressure on  the budget.                                                               
She addressed  the notion of  the wealth ownership  state, adding                                                               
that to  some degree,  she agrees  that "it's  our oil,  it's our                                                               
wealth, it's our assets."   However, she pointed out that there's                                                               
still liabilities and the cost  of the roads, schools, and public                                                               
safety.  She asked, "Who pays for that?"                                                                                        
                                                                                                                                
3:10:53 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF proceeded  to slide 8,  which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     In summary, the Decision Points are:                                                                                       
                                                                                                                                
     ? Statute versus Constitution                                                                                              
     ? The perceived fairness of the calculation                                                                                
       The sustainability of the calculation  can Alaska                                                                        
     afford it over time?                                                                                                       
     ? The size of the dividend                                                                                                 
                                                                                                                                
SENATOR  VON  IMHOF  noted that  she  considered  these  decision                                                               
points when creating her proposal.                                                                                              
                                                                                                                                
3:12:13 PM                                                                                                                    
                                                                                                                                
SENATOR  VON IMHOF  outlined  her proposal  [the  ARORA plan]  on                                                               
slide 9, which read as follows [original punctuation provided]:                                                                 
                                                                                                                                
     ALASKA RESOURCE OWNERSHIP REVENUE ACCOUNT (ARORA)                                                                          
                                                                                                                                
      ? Transfer $6.7 billion from the current traditional                                                                      
     Permanent Fund to create an ARORA dividend fund                                                                            
         ? Put the ARORA fund into the Constitution, so                                                                         
     protected                                                                                                                  
     ? 5% POMV of the ARORA fund to pay annual dividends                                                                        
      ? 12.5% of Royalties will be deposited into the fund                                                                      
      each year (50/50 split with the traditional deposit                                                                       
     into the Permanent Fund)                                                                                                   
     ? Dividend will grow over time                                                                                             
                                                                                                                                
SENATOR  VON  IMHOF  stated  that   under  her  proposal,  a  new                                                               
constitutionally protected, solely  dedicated dividend fund would                                                               
be created.   The fund  would pay out  5 percent of  its earnings                                                               
each year solely  for dividends, which would  ensure that [future                                                               
generations] continue to receive  dividends well into the future.                                                               
She noted  that the $6.7  billion figure  is based on  the unpaid                                                               
permanent fund  dividend from 2016-2023  when this  account could                                                               
theoretically be  formed.  She  emphasized that this  unique fund                                                               
would  be   entirely  separate  from  the   "traditional"  Alaska                                                               
Permanent  Fund, which  pays for  the  government.   Furthermore,                                                               
since the  ARORA account  would be  constitutionalized, dividends                                                               
would  be guaranteed.    She  added that  the  dividend would  be                                                               
untouchable  and  protected.    At first,  she  said,  the  ARORA                                                               
account would have  a 5 percent POMV draw, which  would be around                                                               
$335 million  per year for  a dividend of approximately  $500 per                                                               
person.  This would grow over time, she noted.                                                                                  
                                                                                                                                
3:14:09 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF  progressed to slide 10, which  shows the value                                                               
of  the Alaska  Permanent  Fund  as of  4/30/21  as:   ERA  $18.3                                                               
billion and Principal  $59.5 billion.  Slide 10  also shows ARORA                                                               
at $6.7  billion.   She explained that  under her  proposal, $6.7                                                               
billion would be taken from the ERA to create the ARORA fund.                                                                   
                                                                                                                                
SENATOR VON  IMHOF continued to  slide 11, which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Traditional Endowment Remains                                                                                              
                                                                                                                                
     ? Traditional endowment remains                                                                                            
     ? Consolidate Permanent Fund Earnings Reserve Account                                                                      
     (ERA) into the Principal                                                                                                   
     ? Put 5% POMV into the Constitution                                                                                        
     ? 12.5% of Royalties will be deposited into the fund                                                                       
                                                                                                                                
SENATOR VON IMHOF noted that  similar to the governor's proposal,                                                               
she supports turning the permanent  fund into a true endowment by                                                               
folding the ERA into the  principal and constitutionalizing the 5                                                               
percent  POMV, which  would protect  the fund  in the  long term.                                                               
She stated  that 5 percent  is the  "tried and true"  number that                                                               
has been  tested over time  by endowments and  foundations around                                                               
the world.   She said it's  the number that maintains  the health                                                               
and growth of funds.                                                                                                            
                                                                                                                                
3:15:21 PM                                                                                                                    
                                                                                                                                
SENATOR  VON IMHOF  proceeded  to slide  12,  which compares  the                                                               
traditional  Alaska permanent  fund, with  an endowment  of $71.1                                                               
billion, and  ARORA, with  $6.7 billion, both  of which  have the                                                               
following:   endowment; 5 percent  POMV draw;  constitution; 12.5                                                               
percent  of royalties;  and fund  government.   In contrast,  the                                                               
traditional permanent  fund would  fund the government  while the                                                               
ARORA fund would fund the dividend.                                                                                             
                                                                                                                                
3:15:52 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF advanced to  slide 13,  which is a  graph from                                                               
the   Legislative   Finance    Division   (LFD)   depicting   the                                                               
unrestricted general  fund (UGF)  revenue/budget in  the millions                                                               
between fiscal  year 2021  (FY 21)  and FY  30.   The key  to the                                                               
graph shows:   Revenue in blue;  ERA Draw in red;  Permanent Fund                                                               
Plan  in green;  ARORA Fund  Draw  in lavender;  CBR/SBR Draw  in                                                               
orange;  the budget  shown as  a black  dotted line;  and "Budget                                                               
Less Dividends" shown  as a black solid line.   The amounts range                                                               
from zero to  $8,000.  She explained that both  the ARORA account                                                               
and the permanent  fund are expected to grow at  6.2 percent each                                                               
year, and  the operating budget  is assumed to grow  by inflation                                                               
of about 2 percent each year.   She pointed out that budgets tend                                                               
to grow  more than inflation,  suggesting that there  will always                                                               
be downward  pressure on the  budget.   She noted this  model was                                                               
stress  tested  by  LFD  and  proved  to  be  sustainable  during                                                               
volatile market cycles while continuing to grow over time.                                                                      
                                                                                                                                
SENATOR VON  IMHOF turned  to slide 14,  which displays  the same                                                               
graph from  slide 13  with the addition  of the  governor's 50/50                                                               
plan.  She explained that each  of the red bars represent over $1                                                               
billion in deficits each year,  which would require high taxes on                                                               
citizens or  an extra  draw on  the ERA.   She stated  her belief                                                               
that  overdrawing the  ERA each  year  is bad  policy because  it                                                               
would eventually liquidate the permanent fund.                                                                                  
                                                                                                                                
3:18:29 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF  progressed to slide 15, which  read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     What does this solve?                                                                                                      
                                                                                                                                
     1. Constitution: Can't override                                                                                            
     2. No new individual taxes to pay a dividend                                                                               
     3. Vote of the People to create the ARORA account                                                                          
     4. Simple to understand                                                                                                    
     5. Dividend no longer competes with other spending                                                                         
        6. Share wealth ownership 50/50 with government                                                                         
     through royalty split                                                                                                      
     7. Downward pressure on government spending                                                                                
                                                                                                                                
SENATOR VON  IMHOF explained  that carving out  a portion  of the                                                               
current  traditional  permanent  fund  and  creating  a  separate                                                               
dedicated  dividend  fund  offers   a  compromise  solution  that                                                               
combines several perspectives into a single plan.                                                                               
                                                                                                                                
3:20:05 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF continued to  slide 16, which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     In summary:                                                                                                                
                                                                                                                                
     ? Completely hands off solution                                                                                            
     ? Legislature can focus on other things                                                                                    
       ? Improves the efficiency and productivity of the                                                                        
     legislature                                                                                                                
      ? No new individual taxes required to pay a dividend                                                                      
     under the ARORA plan                                                                                                       
     ? Stabilizes the financial future of our state                                                                             
                                                                                                                                
3:20:48 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN invited questions from the committee.                                                                              
                                                                                                                                
3:21:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KURKA   suggested  the  [ARORA  plan]   would  be                                                               
"insulting"  to Alaskans  who have  called for  a return  to full                                                               
[statutory] dividend payments.  He  asked for clarification as to                                                               
why the plan would be beneficial.                                                                                               
                                                                                                                                
3:22:30 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF explained that  she took the approach of trying                                                               
and  find  a  balance  between  providing  the  highest  dividend                                                               
without  instituting personal  taxes.   She  said she  considered                                                               
different  analyses  on  state  sales and  income  taxes  by  the                                                               
Department  of   Revenue  (DOR)  and  the   Tax  Foundation  from                                                               
Washington, DC,  both of which  indicated that  significant taxes                                                               
would be  required in the  form of an income  and a sales  tax in                                                               
order to  pay for a 50/50  plan.  Additionally, according  to the                                                               
Institute of  Social and  Economic Research  (ISER), there  is an                                                               
opportunity cost  to taking money  from an individual or  a small                                                               
business to  pay for state  taxes.   She offered her  belief that                                                               
taking  money from  individuals  to pay  a  dividend defeats  the                                                               
purpose.   She opined that she  is coming from an  economic angle                                                               
whereas she  offered her understanding that  Representative Kurka                                                               
is coming from a philosophical or political point of view.                                                                      
                                                                                                                                
3:24:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SNYDER  stated  her   belief  that  reducing  the                                                               
dividend  is   essentially  asking   lower  income   Alaskans  to                                                               
disproportionately  shoulder the  burden of  closing the  state's                                                               
budget gaps.  She pointed out  that there is value in maintaining                                                               
a  larger fund  because it  provides opportunity  and flexibility                                                               
for investments  that could yield  larger returns.  She  asked if                                                               
projections  have  indicated  that there  would  be  "opportunity                                                               
costs" to transferring $6.7 billion into the new dedicated fund.                                                                
                                                                                                                                
3:26:27 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF answered that  [the transfer of  $6.7 billion]                                                               
would  result  in  "little  to no"  problem  because  under  this                                                               
proposal,  the Alaska  Permanent  Fund  Corporation (APFC)  would                                                               
manage both  the ARORA fund  and the traditional  permanent fund.                                                               
She  speculated  that based  on  previous  testimony from  Angela                                                               
Rodell, APFC would still have  access to the same investments and                                                               
would continue  to have the same  total amount of $80  billion to                                                               
invest however  it sees fit.   She  indicated that some  would be                                                               
invested  from the  ARORA  account and  some  from the  permanent                                                               
fund.                                                                                                                           
                                                                                                                                
3:27:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SNYDER  directed attention to Section  3 and asked                                                               
if  anything would  prevent future  legislatures from  augmenting                                                               
the dividend from [the permanent  fund] even if the ARORA account                                                               
were in existence,  which would result in the same  cycle that is                                                               
occurring now.                                                                                                                  
                                                                                                                                
3:28:18 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF said the  initial dividend calculation would be                                                               
taken  from the  ARORA account.    She considered  a scenario  in                                                               
which the  state was making  a lot  of money from  oil production                                                               
and after funding government, there  was a surplus of $1 billion.                                                               
Under that scenario, she explained,  part of the surplus could go                                                               
towards a secondary or  augmented dividend, deferred maintenance,                                                               
a larger capital  budget, et cetera.  She further  noted that the                                                               
legislature could add money to the ARORA account at any time.                                                                   
                                                                                                                                
3:29:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SNYDER inquired about  the differences between the                                                               
ARORA  plan  and  the  legislation  sponsored  by  Representative                                                               
Merrick [HB  202], which [proposes  funding the dividend  with 30                                                               
percent of all royalties].                                                                                                      
                                                                                                                                
3:30:08 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF said  she is not  familiar with  that proposal                                                               
[by Representative  Merrick].  Nonetheless,  she said  the Alaska                                                               
Constitution  specifies  that 25  percent  of  the royalties  are                                                               
deposited  into the  fund each  year.   She  referenced a  second                                                               
provision that  stipulates another  amount.   She added  that she                                                               
felt comfortable  addressing only  the 25  percent because  it is                                                               
more "clear cut."                                                                                                               
                                                                                                                                
CHAIR CLAMAN offered  his understanding that there  is a statute,                                                               
which  is sometimes  followed  and other  times  not, wherein  50                                                               
percent of the  royalties "are put into the dividend."   He added                                                               
that  according  to the  Legislative  Audit  Division, there  are                                                               
competing views on that additional 25 percent.                                                                                  
                                                                                                                                
3:31:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE asked whether the  extra 25 percent would go                                                               
into the UGF, as it is not addressed in the current proposal.                                                                   
                                                                                                                                
3:32:20 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF said she is  not fully cognizant of which wells                                                               
from  what location  at  what oil  rate go  to  the general  fund                                                               
versus  the permanent  fund.   Regardless, she  said "across  the                                                               
total, 25 percent goes into the  permanent fund."  She added that                                                               
she  is open  to discussion.   She  reiterated that  her proposal                                                               
solely  addresses  the base  25  percent,  which would  be  split                                                               
between the two funds [the ARORA fund and the permanent fund].                                                                  
                                                                                                                                
3:33:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE pointed  out that  one of  the purposes  of                                                               
protecting  the  permanent  fund  is  to  turn  an  unsustainable                                                               
resource  into a  sustainable  one.   She  expressed interest  in                                                               
exploring her previous question further.   She asked if under the                                                               
ARORA plan, the dividend amount would be formula driven.                                                                        
                                                                                                                                
3:34:27 PM                                                                                                                    
                                                                                                                                
SENATOR  VON  IMHOF  reiterated  that  the  $6.7  figure  is  the                                                               
estimated  amount of  "unpaid  dividends"  from 2016  anticipated                                                               
through 2023.   Further, it is  the same number that  in essence,                                                               
provides  the maximum  amount, based  on economic  affordability,                                                               
that could be  taken from the permanent  fund without instituting                                                               
new taxes.  She said she  approached this proposal as an economic                                                               
and mathematical exercise, adding that  she attempted to find the                                                               
largest  affordable dividend  that  wouldn't require  instituting                                                               
new taxes.   She explained that  applying a 5 percent  POMV would                                                               
allow for  approximately $330-$350 million per  year depending on                                                               
the growth, which would apportion a $500 dividend.                                                                              
                                                                                                                                
3:35:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE asked  why the  ARORA fund  would need  a 5                                                               
percent POMV  when the traditional  statutory formula  has worked                                                               
these  past 30-plus  years without  hurting the  principle.   She                                                               
surmised  that  if  the  ARORA fund  were  specifically  for  the                                                               
dividend, the  traditional calculation  would still  work without                                                               
overdrawing the fund.                                                                                                           
                                                                                                                                
3:36:20 PM                                                                                                                    
                                                                                                                                
SENATOR VON  IMHOF shared her understanding  that the traditional                                                               
calculation is 21 percent of  statutory income, which is realized                                                               
income.  She  added that realized income indicates  that you must                                                               
sell  something  to get  [the  income].   She  characterized  the                                                               
history of the  dividend as volatile, pointing out  that the POMV                                                               
structure provides a more predictable dividend.                                                                                 
                                                                                                                                
3:37:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE remarked:                                                                                                  
                                                                                                                                
     One  of the  reasons that  I've heard  people oppose  a                                                                    
     predictable dividend is so that  it is not looked at as                                                                    
     a welfare  check.  By  having the volatility,  it keeps                                                                    
     people closer  to their resource and  knowing that it's                                                                    
     going   to  fluctuate   based  upon   the  market   and                                                                    
     investments  every year,  and it  keeps people  engaged                                                                    
     that we are a resource state.                                                                                              
                                                                                                                                
REPRESENTATIVE VANCE  conveyed that she  is not a proponent  of a                                                               
predictable  dividend  "because  ... people  should  be  directly                                                               
engaged."  She questioned how the  CBR would grow under the ARORA                                                               
plan if [the state] is operating under limited revenue.                                                                         
                                                                                                                                
3:38:43 PM                                                                                                                    
                                                                                                                                
SENATOR VON IMHOF  answered, "By not taking any money  from it to                                                               
pay a dividend  each year."  She invited  Representative Vance to                                                               
engage with LFD for further explanation.                                                                                        
                                                                                                                                
REPRESENTATIVE  VANCE  sought  to clarify  whether  the  dividend                                                               
would be calculated  by formula or "by number"  under Senator von                                                               
Imhof's proposal.                                                                                                               
                                                                                                                                
3:40:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KURKA asked  whether the  ARORA plan  would "hold                                                               
harmless" those under government assistance.   He noted that when                                                               
individuals  on  government  assistance  receive  funds,  it  can                                                               
sometimes affect benefits.                                                                                                      
                                                                                                                                
3:41:04 PM                                                                                                                    
                                                                                                                                
SENATOR  VON  IMHOF  responded  that  she  had  no  intention  of                                                               
changing that aspect of current  statute and that it would remain                                                               
as is under her proposal.                                                                                                       
                                                                                                                                
REPRESENTATIVE   KURKA  characterized   Senator   von  Imhof   as                                                               
expressing   frustration   during   her   presentation   at   the                                                               
legislature's 80 percent focus [on  the dividend] and how much it                                                               
should be.  He asked when that 80 percent focus started.                                                                        
                                                                                                                                
SENATOR VON IMHOF  answered that it was likely  in 2015/2016 when                                                               
the  price of  oil  dropped down  to about  $29  and the  state's                                                               
revenue fell.   She explained that  she has been working  on this                                                               
for about five years now and  that the same conversation has been                                                               
happening for the duration of that time.                                                                                        
                                                                                                                                
REPRESENTATIVE  KURKA asked  whether she  would say  that the  80                                                               
percent focus  initially began when  the governor, and  later the                                                               
legislature, decided to  "stop following the law"  on the formula                                                               
for the dividend.                                                                                                               
                                                                                                                                
SENATOR VON  IMHOF replied that  several factors  occurred around                                                               
that time [2015/2016]  when the state had a drop  in revenue, the                                                               
expenses were  high, and  there was  no way to  pay for  it apart                                                               
from the CBR.  She  shared her understanding that individuals who                                                               
have  a "forward-thinking"  and global  perspective of  the state                                                               
could see  "the writing on the  wall" that the CBR  would soon be                                                               
liquidated and, eventually,  the ERA was going to  meet that same                                                               
fate.   She  speculated that  she and  Representative Kurka  have                                                               
different  philosophical views  on how  the state  should conduct                                                               
itself.   She stated that  she is  proposing a solution  to solve                                                               
this problem and acknowledged that it  will not be liked by some,                                                               
but that  there are  others that  will not want  to pay  taxes in                                                               
order to  pay a dividend.   She explained  that she is  trying to                                                               
represent  all   viewpoints  by  not  eliminating   the  dividend                                                               
entirely,  but by  providing something  that  will grow  overtime                                                               
while not instituting "debilitating" taxes on people.                                                                           
                                                                                                                                
3:44:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KURKA  inquired  about competing  priorities  and                                                               
questioned  whether  Senator  von  Imhof  prioritizes  government                                                               
spending on government programs.                                                                                                
                                                                                                                                
SENATOR VON IMHOF  responded that she prioritizes  the health and                                                               
solvency of the state.  She  shared her understanding of her job,                                                               
which she said is to look  at all the appropriations in the state                                                               
and  come up  with the  fairest  and most  "blended solution"  as                                                               
possible  that  provides  stability and  sustainability  for  all                                                               
Alaskans.   She  added  that  she does  not  think  of a  smaller                                                               
dividend as a tax but sees it as "less free money."                                                                             
                                                                                                                                
3:46:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND  asked  why  constitutionalizing  the  5                                                               
percent POMV  is an  exception to  Senator von  Imhof's expressed                                                               
intent to refrain from constitutionalizing formulas.                                                                            
                                                                                                                                
3:47:10 PM                                                                                                                    
                                                                                                                                
SENATOR  VON IMHOF  responded that  she  doesn't view  that as  a                                                               
formula.   She explained that  when there is a  per-user formula,                                                               
she sees  it as a prescribed  formula that "locks us  in" because                                                               
it mandates  a dollar value  and not  a rate.   She characterized                                                               
her proposal as  different because it addresses  the maximum that                                                               
could be  drawn, which she sees  as similar to the  Alaska Mental                                                               
Health Trust.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  DRUMMOND  speculated  that   it  is  due  to  the                                                               
Senator's earlier  statement that all the  sovereign wealth funds                                                               
have  landed on  that  percentage.   She  clarified  that she  is                                                               
trying to determine  whether that changes over  time depending on                                                               
the  market situation.   She  stated  that she  thinks 5  percent                                                               
should be the maximum, though it should ideally be less.                                                                        
                                                                                                                                
SENATOR VON IMHOF  offered clarification that 5  percent would be                                                               
the maximum  under her proposal,  and that the majority  of other                                                               
funds are also implementing a 5 percent maximum.                                                                                
                                                                                                                                
3:48:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND opined  that Senator  von Imhof  went in                                                               
the  right direction.   She  noted that  the commissioner  of DOR                                                               
wants to draw  an "exceptionally large" amount of  $3 billion and                                                               
was basing it on the fact  that Harvard University was doing just                                                               
that.     Representative  Drummond   pointed  out   that  Harvard                                                               
University's draw  does not provide  a majority of  the operating                                                               
funds to  the university  the way  Alaska's permanent  fund does.                                                               
She opined that [the 5 percent maximum] was a rational number.                                                                  
                                                                                                                                
3:49:47 PM                                                                                                                    
                                                                                                                                
CHAIR   CLAMAN   noted   that   currently,   under   the   Alaska                                                               
Constitution, 25 percent  of royalties go to  the permanent fund.                                                               
He  proposed to  Senator von  Imhof the  idea of  keeping the  25                                                               
percent in the permanent fund and,  if the ARORA fund is created,                                                               
taking, for  example, 10 percent or  12 percent on top  of the 25                                                               
percent  that would  go  into  the ARORA  fund.    He shared  his                                                               
understanding that Senator von Imhof's  proposal would not reduce                                                               
the royalties in  the permanent fund, but  instead would dedicate                                                               
some additional royalties into the ARORA  fund.  He asked for the                                                               
reasoning behind this.                                                                                                          
                                                                                                                                
SENATOR  VON IMHOF  said she  liked the  original 25  percent and                                                               
splitting it  is because it's  "in the spirit" of  the governor's                                                               
proposed 50/50 split.   She explained that  individuals have said                                                               
that it  would be ideal  to include the  dividend as part  of the                                                               
royalties and, given in the  resources in the state, "sharing the                                                               
wealth"  would be  desirable.   She explained  that she  has been                                                               
trying to  find a  blend that  meets these  various needs  but is                                                               
open to modeling other ideas.                                                                                                   
                                                                                                                                
CHAIR CLAMAN  asked for  verification that  the numbers  are from                                                               
LFD  and are  not the  numbers used  by the  governor, which  had                                                               
higher  permanent fund  earnings  and lower  inflation and  lower                                                               
"government numbers."                                                                                                           
                                                                                                                                
SENATOR VON IMHOF  responded yes, she has been  using the numbers                                                               
from LFD  which have been  used for  years and have  been stress-                                                               
tested against volatile markets.                                                                                                
                                                                                                                                
CHAIR CLAMAN asked  whether Senator von Imhof's  analysis is more                                                               
consistent with  LFD's perspectives on  the future than  with the                                                               
recent numbers seen from the governor.                                                                                          
                                                                                                                                
SENATOR VON IMHOF answered, "(Indisc.  -- overlapping voices) the                                                               
[Legislative] Finance numbers."                                                                                                 
                                                                                                                                
3:51:58 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN thanked Senator von  Imhof for her time and welcomed                                                               
Representative Wool.                                                                                                            
                                                                                                                                
3:52:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ADAM  WOOL, Alaska State Legislature,  provided an                                                               
overview of  his PFD proposal,  embodied in HB  37.  He  began by                                                               
expressing that it is his opinion  and the opinion of many others                                                               
that  the  current  PFD  formula is  not  sustainable,  which  he                                                               
characterized  as the  reason  why  the state  has  not paid  the                                                               
statutory PFD in "many, many, years."   He noted that the funding                                                               
of the PFD  has been restructured largely through  the passage of                                                               
Senate Bill  26 [during the Thirtieth  Alaska State Legislature];                                                               
however, Senate  Bill 26 didn't  change the formula for  the PFD,                                                               
which is not propitiate with  the rest of the state's government.                                                               
Currently, he noted, the state's  revenue is balanced through oil                                                               
and through the  POMV draw.  He  said that the state  can pay for                                                               
the  majority of  state services  [with  this revenue];  however,                                                               
there isn't much money left over  to finance a PFD in the $1,000-                                                               
$1,600 range,  to which many  people have become  accustomed, and                                                               
certainly not  in the  $2,000-$3,000 range,  as the  governor has                                                               
proposed.   He explained that anything  over a PFD of  $500 would                                                               
require  additional  revenue  or  budget cuts.    If  oil  prices                                                               
decline,  then there's  an additional  strain on  the budget,  he                                                               
said, or  if the capital  budget and deferred  maintenance become                                                               
(indisc.), then more revenue is needed.                                                                                         
                                                                                                                                
REPRESENTATIVE  WOOL acknowledged  that  the  budget is  balanced                                                               
right  now but  emphasized there  is a  small capital  budget and                                                               
there have been other factors:   neglect of deferred maintenance,                                                               
certain   catastrophes  like   wildfires  and   earthquakes,  and                                                               
climbing Medicaid expenses and medical  costs.  He continued that                                                               
the first PFD  was $1,000, but that it  represented a combination                                                               
of  the  first three  years.    He added  that  the  PFD was  not                                                               
originally  created  to  be  a supplemental  income  or  to  help                                                               
individuals in  "low-cash economies,"  but was simply  a dividend                                                               
from  oil  earnings.    He  acknowledged that  it  has  become  a                                                               
resource  for  lower-income  individuals   as  well  as  low-cash                                                               
economies; many  of these communities  have more cash  needs than                                                               
they used to when the PFD was first conceptualized.                                                                             
                                                                                                                                
3:57:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL  stated  that  his  proposed  bill,  HB  37,                                                               
includes a  proposed PFD  formula that  elicits returns  of about                                                               
$1,000 per person.   He explained that this  formula includes two                                                               
components:  one directly from  the oil and gas resource revenue,                                                               
which is 30  percent of royalty revenue and would  be about $500,                                                               
and the  other from 10 percent  of the POMV revenue,  which would                                                               
also equal  about $500.   He said that  this would create  both a                                                               
steady  and consistent  cash  stream  from the  POMV  and a  more                                                               
variable cash  stream from  the oil revenue.   He  explained that                                                               
this would  ensure that if  and when oil prices  decline sharply,                                                               
there would  still be a  PFD because of  the POMV component.   If                                                               
oil  increases,  the  royalties  will  go  up  and  increase  PFD                                                               
amounts.   It would  more directly  tie the  PFD to  the resource                                                               
from which it is sourced, he said.   He continued that [HB 37] is                                                               
"budget neutral," which  means that there is  a revenue component                                                               
to  the bill  in  the form  of  a  2.5 percent  income  tax.   He                                                               
acknowledged concerns about implementing  an income tax simply to                                                               
pay out  a PFD  but said  this would  not be  the purpose  of the                                                               
income tax.   The tax would  be to raise revenue  for the budget,                                                               
he explained, as  any PFD puts stress on the  state's budget.  He                                                               
said that  the budget  is currently paid;  however, paying  out a                                                               
PFD would come  out of the budget  and would result in  a hole in                                                               
the budget.                                                                                                                     
                                                                                                                                
4:00:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  continued by  recognizing that  although oil                                                               
prices have recently spiked, they  were low enough "not that long                                                               
ago" that  the state  would've had  a deficit,  even with  a zero                                                               
PFD.  He summarized that the  state needs more revenue, which [HB
37] would accomplish  through its revised PFD formula.   He noted                                                               
that  the 2.5  percent income  tax is  low enough  that most  PFD                                                               
recipients would still receive  a "net-positive" or "net-neutral"                                                               
check, and the PFD  could be used to pay the tax.   It would also                                                               
exempt individuals  making $12,500  or less, addressing  the need                                                               
for a full PFD for many low-income people.                                                                                      
                                                                                                                                
4:02:26 PM                                                                                                                    
                                                                                                                                
KEN  ALPER,   Staff,  Representative  Adam  Wool,   Alaska  State                                                               
Legislature,  introduced  a  PowerPoint presentation,  titled  "A                                                               
Small Tax and  a Moderate Dividend: Towards  a Sustainable Fiscal                                                               
Solution."  He began on slide  3, "What is Needed," which read as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Depending on  oil prices, Permanent Fund  earnings, and                                                                    
     future  budget  sizes,  the  next  couple  budgets  are                                                                    
     likely to  be approximately balanced with  a relatively                                                                    
     small (~$500) Permanent Fund Dividend.                                                                                     
                                                                                                                                
     Unless massive  budget cuts can be  achieved, two major                                                                    
     changes  must be  made to  balance Alaska's  budget for                                                                    
     the foreseeable  future and form  the centerpiece  of a                                                                    
     sustainable fiscal plan:                                                                                                   
     1.  Restructuring the  annual dividend  formula to  set                                                                    
     future dividends to about $1,000 per Alaskan                                                                               
     2. A combination of new  revenues (most likely a broad-                                                                    
     based  tax on  individuals) raising  approximately $500                                                                    
     million If higher dividends  are desired, revenues will                                                                    
     similarly  need  to  be higher.  ?but  first  a  little                                                                    
     background                                                                                                                 
                                                                                                                                
4:03:18 PM                                                                                                                    
                                                                                                                                
MR. ALPER continued to slide  4, titled "Ways and Means Committee                                                               
Process  Told  the  Story,"  which   read  as  follows  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Revenue declines, beginning in 2014                                                                                        
     ? Budget cuts and major draw-down of savings                                                                               
     ? Introduction of  POMV as a central  revenue feature ?                                                                    
     Ongoing structural deficits                                                                                                
     ? Lack of resolution of the Dividend question                                                                              
     ? Alaskans pay  the lowest state and  local taxes among                                                                    
     the 50 states Once a  consensus is reached that we need                                                                    
     additional revenue, new questions emerge:                                                                                  
     ? Pros and  Cons of Income Tax vs. Sales  Tax vs. Other                                                                    
        How much  revenue to  raise /  how large  should the                                                                    
     dividend be?                                                                                                               
     ? Structural and technical details of the bill                                                                             
                                                                                                                                
4:04:30 PM                                                                                                                    
                                                                                                                                
MR. ALPER advanced to slide  5, headlined "Last 10 years: revenue                                                               
declines,  budget  cuts,  and  (beginning   in  FY  19),  use  of                                                               
Permanent  Fund  earnings,"  which   depicted  a  chart  tracking                                                               
various aspects  of the  permanent fund.   He explained  that the                                                               
bars  in  the  foreground  of the  chart  represent  the  state's                                                               
budget.    He  read  through  the  chart's  key,  which  included                                                               
measures  such as  Agency Operations,  Permanent Fund  Dividends,                                                               
PFD  from ERA,  and the  Capital Budget.   He  noted that  the $1                                                               
billion dollar figure  represents roughly a $1,600  payout of the                                                               
PFD.                                                                                                                            
                                                                                                                                
4:07:29 PM                                                                                                                    
                                                                                                                                
MR. ALPER  proceeded to slide  6, headlined "Most of  the savings                                                               
that were  drawn down  2014-2021 were set  aside during  the high                                                               
oil  price  years  2007-2013," which  depicted  a  graph,  titled                                                               
"Alaska  Savings  Balances  in $Billions  (Other  Than  Permanent                                                               
Fund)."  He  explained that he likes this graph  because it shows                                                               
both the increases  and decreases of the PFD over  the years.  He                                                               
drew attention to the portion of  the graph that reflected a time                                                               
during  which  the   legislature  would  forward-fund  education,                                                               
meaning money  would be set  aside for  two years in  the future,                                                               
and,  therefore,  it  was  ensured  that  there  would  be  money                                                               
available for education.                                                                                                        
                                                                                                                                
4:08:58 PM                                                                                                                    
                                                                                                                                
MR.   ALPER   turned  to   slide   7,   titled  "Permanent   Fund                                                               
Corporation's Forecast,"  which included a graph  of UGF revenues                                                               
since 1969.   He directed particular attention to  the portion of                                                               
the graph that tracked the POMV.                                                                                                
                                                                                                                                
4:09:45 PM                                                                                                                    
                                                                                                                                
MR. ALPER progressed to slide  8, headlined "Even with higher oil                                                               
revenue  in the  Spring forecast,  the 10-year  plan shows  large                                                               
ongoing  shortfalls," which  depicted a  chart of  10-year fiscal                                                               
projections for unrestricted  revenues, unrestricted general fund                                                               
expenditures, and  the PFD.   He emphasized  that it has  been an                                                               
unusual year,  and the graph  on the slide represents  the second                                                               
version  of fiscal  projections, which  were done  in March  2021                                                               
after the spring revenue forecast.                                                                                              
                                                                                                                                
CHAIR CLAMAN  offered clarification  that all 10-year  plans have                                                               
been  proposed by  the executive  branch and  explained that  the                                                               
slide depicts LFD's analysis of  the governor's 10-year plan.  He                                                               
shared  his  understanding that  LFD  isn't  proposing a  10-year                                                               
plan.                                                                                                                           
                                                                                                                                
4:10:35 PM                                                                                                                    
                                                                                                                                
MR. ALPER explained that the slide represents an OMB document.                                                                  
                                                                                                                                
CHAIR  CLAMAN  pointed  out  that all  10-year  plans  have  been                                                               
proposed  by  the  governor,  and  that  there  have  been  three                                                               
separate proposals within the last seven months.                                                                                
                                                                                                                                
4:10:55 PM                                                                                                                    
                                                                                                                                
MR. ALPER continued  to explain slide 8, noting  that the revenue                                                               
forecast was updated in March  2021 to include higher oil prices,                                                               
which  was  incorporated   into  the  proposal.     He  drew  the                                                               
committee's  attention  to the  highlighted  yellow  line on  the                                                               
slide, which represents other  revenue sources under unrestricted                                                               
revenues on  the chart.  He  also noted the portion  of the slide                                                               
circled in  red [the  "Permanent Fund POMV  GF draw"  of $1,547.1                                                               
and "Permanent Fund POMV for PFD  (50 percent)" of $1,647.1 in FY                                                               
27], which  assumes that the POMV  would be drawn by  adhering to                                                               
the proposed 50/50 split.  He  explained that the POMV draw would                                                               
be the sum total of the  lines, "Permanent Fund POMV GF draw" and                                                               
"Permanent  Fund  POMV for  PFD  (50  percent)"  in  FY 27.    He                                                               
explained that due to the  five-year formula, the changes will be                                                               
"worked  through the  system" by  FY 27.   He  said that  the sum                                                               
total of the two circled numbers would be about $3.2 billion.                                                                   
                                                                                                                                
4:12:35 PM                                                                                                                    
                                                                                                                                
MR. ALPER  advanced to  slide 9,  headlined "The  revised 10-year                                                               
plan introduced this special session  includes larger future POMV                                                               
draws based  on recent  market gains,"  which includes  a revised                                                               
version of  the chart on slide  8.  He directed  attention to the                                                               
revised  numbers circled  in red:   the  "Permanent Fund  POMV GF                                                               
draw" and the "50 [percent] POMV  for PFD ($Millions)" - both now                                                               
showed $1,970.5  for FY 27.   He said that  the sum total  of the                                                               
circled numbers on this slide  would come to about $3.95 billion.                                                               
He  shared his  understanding that  the administration  has found                                                               
about  $600  million  per  year  in additional  POMV  draw.    He                                                               
continued  that this  is because  the recent  market changes  are                                                               
being considered  and it  is assumed that  these changes  will be                                                               
held in  the future.  He  stated that the proposal  relies on the                                                               
idea that  the permanent fund would  be pushed to $80  billion in                                                               
future annual draws.                                                                                                            
                                                                                                                                
4:13:38 PM                                                                                                                    
                                                                                                                                
MR. ALPER  proceeded to  slide 10, titled  "A 'Perfect  Storm' is                                                               
required for all these forecasts  to work," which read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     1. No major market correction in the next 9 years                                                                          
     2. Oil prices steadily increasing towards $71 / bbl in                                                                     
     2030                                                                                                                       
      3. Three more years of likely unobtainable operating                                                                      
     budget cuts and ongoing minimal capital budgets, with                                                                      
     below-inflation growth thereafter                                                                                          
                                                                                                                                
MR. ALPER  noted the chart on  the slide, which came  from Alexei                                                               
Painter of LFD, showing the  "Governor Minus LFD Baseline" fiscal                                                               
projections.   He noted that  this chart from  the administration                                                               
includes  projections that  are  very different  from those  from                                                               
LFD.                                                                                                                            
                                                                                                                                
4:14:54 PM                                                                                                                    
                                                                                                                                
MR. ALPER  turned to  slide 11,  "50/50 Dividend  Without Revenue                                                               
Crashes  the System,"  which  depicts an  LFD  analysis from  the                                                               
spring  of 2021,  prior to  the  release of  the revised  10-year                                                               
plan.  He  explained that it shows that a  50/50 plan without new                                                               
revenue would effectively "crash the system."                                                                                   
                                                                                                                                
4:15:32 PM                                                                                                                    
                                                                                                                                
MR.  ALPER progressed  to slide  12, headlined  "Alaska's current                                                               
revenue structure  hasn't kept pace  with our  changing economy,"                                                               
which included a graph that  shows that while the state's economy                                                               
is diversifying, the  state's revenue streams are not.   It shows                                                               
the  rise  and  fall  comparisons  from  1975  through  2015  of:                                                               
unrestricted   petroleum  revenue;   unrestricted  general   fund                                                               
revenue;  GDP  -  oil  and  gas; and  GDP  -  all  other  private                                                               
industries.  He noted that there  are a number of industries that                                                               
are  not taxed  and not  contributing  to the  operations of  the                                                               
state government.                                                                                                               
                                                                                                                                
4:17:03 PM                                                                                                                    
                                                                                                                                
MR. ALPER continued to slide  13, titled "Alaskans pay less state                                                               
and  local tax  than  any  other state,"  which  read as  follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Alaska is 5.8% in combined state and local taxes Next                                                                      
     lowest are Wyoming and Tennessee at 7.0%                                                                                   
                                                                                                                                
         If the PFD ($1,606 in 2019) was included as a                                                                          
     "negative tax", Alaska's effective state and local tax                                                                     
     rate would be about 1.7%                                                                                                   
                                                                                                                                
MR. ALPER referred to the map  of the United States also included                                                               
on  the  slide,  entitled  "State-Local  Tax  Burdens  by  State,                                                               
Calendar Year  2019," and explained  that Alaska ranks  number 50                                                               
at a 5.8 percent tax burden.                                                                                                    
                                                                                                                                
4:18:55 PM                                                                                                                    
                                                                                                                                
MR. ALPER  advanced to  slide 14, titled  "Adding a  moderate tax                                                               
would not change  that much," which depicted a  chart showing the                                                               
per-capita state taxation  for all 50 states.  He  noted that the                                                               
black  bar represents  $700 million  in new  and increased  taxes                                                               
[based on a House income tax  bill from 2017], and said that even                                                               
with  that tax  added, Alaska  would still  be the  second lowest                                                               
taxed state in the country.                                                                                                     
                                                                                                                                
4:20:14 PM                                                                                                                    
                                                                                                                                
MR. ALPER proceeded  to slide 15, titled  "Revenue Options: Sales                                                               
vs.  Income," which  showed a  pie chart  comparing Alaskans  who                                                               
would pay  less under  income tax,  representing 81.5  percent of                                                               
the  pie,  to  Alaskans  who  would pay  less  under  sales  tax,                                                               
representing 18.5 percent of the pie.                                                                                           
                                                                                                                                
4:22:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA  expressed concern  about the  tax structure                                                               
when  looking at  adjusted gross  income (AGI).   He  stated that                                                               
many Alaskans will  invest in real estate, for  example, and have                                                               
assets that they would then liquidate  when they are older to pay                                                               
for  increased living  expenses,  such as  healthcare.   He  said                                                               
there is  not a  more progressive  look at  capital gains  on the                                                               
federal level, and  this tax would penalize them.   He stated his                                                               
concern that the structure of  this proposal is like an inflation                                                               
tax or  a tax  on savings.   He  asked how  this would  deal with                                                               
capital gains for people who are liquidating assets.                                                                            
                                                                                                                                
4:23:14 PM                                                                                                                    
                                                                                                                                
MR. ALPER said the committee had  not dealt with the specifics of                                                               
the  tax yet.    He said  he  would push  back  against the  word                                                               
"penalize" because  the federal tax  code gives a lower  tax rate                                                               
for capital gains,  which he referred to as a  policy choice.  He                                                               
said this bill  would not tax all income at  the same 2.5 percent                                                               
rate.    He noted  it  is  also a  flat  rate,  as opposed  to  a                                                               
progressive rate that steps up as  people start earning more.  He                                                               
said  there are  other provisions  that tend  to shelter  capital                                                               
gains, which  may or may not  "carry forward" into the  bill.  He                                                               
stated that  those are the  kinds of technical details  that need                                                               
to be  discussed if Alaska is  going to take on  a statewide tax.                                                               
He expressed  his hope  that these  the type  of issues  would be                                                               
addressed later this fall during  a special session called by the                                                               
governor.                                                                                                                       
                                                                                                                                
4:25:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA  opined that so far,  the conversation seems                                                               
like  a continuance  of  the  previous presenter  in  terms of  a                                                               
paradigm shift  that's being asked  for.  He stated  that instead                                                               
of tying  PFDs to  a resource  that Alaskans  own in  common, the                                                               
suggestion is to  tax [Alaska citizens] to pay  for the dividend.                                                               
He characterized the proposal as  communist and asked whether the                                                               
presenters agree.                                                                                                               
                                                                                                                                
4:26:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  declined to  answer the  communism question.                                                               
He replied that [Alaska]  doesn't need a tax to pay  a PFD, as it                                                               
has been  done for quite a  while.  He opined  that the "paradigm                                                               
shift"  came after  Senate  Bill  26.   He  said  Alaska had  the                                                               
permanent fund, which  was paying a PFD solely,  and oil revenue,                                                               
which was  funding the state  budget solely  for many years.   He                                                               
explained that with the [oil] price  crash in 2013 and 2014, [the                                                               
state] didn't  have the revenue  to fund  the budget.   The first                                                               
thing the  state did, he  said, was  drain its savings  and, once                                                               
the  savings were  gone, the  state  started cutting  the PFD  in                                                               
2016.    He  continued  that   [the  legislature]  realized  that                                                               
although a  tax isn't  needed to  pay [the PFD],  if paid  out in                                                               
full, the  budget would take a  major hit.  He  discussed figures                                                               
and said  that when talking about  a PFD of $2  billion, a budget                                                               
of  $4   billion,  and  oil   revenue  of  $1-$2   billion,  [the                                                               
legislature] needs to  start questioning what to  prioritize.  He                                                               
asked  whether the  legislature is  going to  pay for  education,                                                               
health and social services, public  safety, or corrections, or if                                                               
the legislature  is going to  pay out a  check.  He  continued by                                                               
noting that the tax question  has been asked independently of the                                                               
PFD, summarizing  that the  budget is  under strain  and [Alaska]                                                               
needs new revenue.   He pointed out that some  people want to tax                                                               
oil  higher and  believe that  alone can  solve the  problem, but                                                               
others  do not  agree.   He shared  his understanding  that those                                                               
numbers don't  necessarily pan out,  especially with  [oil's] low                                                               
prices.  He concluded that taxes are  an issue, and the PFD is an                                                               
issue; they aren't  necessarily linked, but they are  part of the                                                               
same conversation.                                                                                                              
                                                                                                                                
4:29:04 PM                                                                                                                    
                                                                                                                                
MR.  ALPER addressed  the communism  comment, noting  that taxing                                                               
the citizenry to  pay for government has been a  feature of every                                                               
form  of government  since  the beginning  of  civilization.   He                                                               
stated his belief  that it is a normal thing  that humans do when                                                               
they work  collectively.  He  opined that [the  legislature] must                                                               
decide  to what  extent  the annual  wealth  generated from  [the                                                               
permanent  fund] should  be  used to  help  [Alaskans] in  common                                                               
through  things  like schools  and  healthcare  or used  to  help                                                               
[Alaskans] as individuals through a PFD check.                                                                                  
                                                                                                                                
CHAIR  CLAMAN interjected  to ask  Mr.  Alper to  proceed to  the                                                               
explanation  of   Representative  Wool's  proposal   rather  than                                                               
continue the philosophical discussion.                                                                                          
                                                                                                                                
4:30:19 PM                                                                                                                    
                                                                                                                                
MR. ALPER progressed to slide  17, noting that the new [dividend]                                                               
formula is from CSHB 37(W&M), noting  that the bill is now in the                                                               
House State  Affairs Committee.   He stated that the  new formula                                                               
is 10 percent from the POMV  draw plus 30 percent of current year                                                               
oil and  gas royalties.   As seen in the  blue box on  the slide,                                                               
the calculation  is for  FY 23  based on  forecasted data  with a                                                               
POMV  under $3.2  billion, he  explained, which  is $319  million                                                               
towards  the dividend  at  10  percent.   The  sum  total of  the                                                               
royalty  includes  the  portion  that is  already  going  to  the                                                               
permanent fund corpus, which is  slightly less than $1.2 billion.                                                               
He  said 30  percent  of that  is $358  million,  and when  added                                                               
together,  it is  $677 million,  which results  in a  dividend of                                                               
just under  $1,000.  If  the projections are accurate,  he added,                                                               
that dividend would grow to  roughly $1200-$1,300 in the next few                                                               
years.                                                                                                                          
                                                                                                                                
4:32:38 PM                                                                                                                    
                                                                                                                                
MR. ALPER continued to slide  18, informing the committee members                                                               
that  part of  the dividend  is  tied to  [the permanent  fund's]                                                               
accumulated wealth, and that first,  $500 would always be tied to                                                               
the  fund  itself.    He  said the  second  $500  would  be  more                                                               
volatile,  explaining that  if oil  prices are  higher, then  the                                                               
dividend would  be higher  and - more  importantly -  [the state]                                                               
would  be able  to afford  it because  of the  additional royalty                                                               
revenue occurring at the  same time.  He went on  to say that the                                                               
bill  has  several  secondary  changes   that  would  impact  the                                                               
permanent fund.   He  said there is  a 25  percent constitutional                                                               
deposit  of  permanent fund  royalties  into  the corpus  and  on                                                               
certain  newer  leases signed  after  1979,  which is  about  one                                                               
quarter of  current production.   He said this bill  repeals that                                                               
section, so the constitutional 25  percent would remain in place.                                                               
He  said  that in  practical  terms,  in  the current  year,  $57                                                               
million would stay in the  UGF for appropriation and decrease the                                                               
deposit into the permanent fund corpus.                                                                                         
                                                                                                                                
MR  ALPER stated  that the  other  change is  an unrelated  issue                                                               
concerning the  "Amerada Hess" settlement.   He  characterized it                                                               
as an oddity within the permanent  fund where there is about $420                                                               
million that resulted from a  specific settlement nearly 30 years                                                               
ago.   He explained that there  was a royalty lawsuit  from which                                                               
Amerada Hess was  the first, alphabetically, of  about twenty oil                                                               
companies  within   the  state  that  challenged   their  royalty                                                               
payments.  As this was working  its way through the courts, there                                                               
was fear  that it might go  to a jury trial  and because anything                                                               
that  favored the  state  might lead  to  more royalty  payments,                                                               
which would lead  to a growing permanent fund that  would lead to                                                               
larger  dividends,   the  entire  population  of   Alaska  was  a                                                               
potentially  tainted jury  pool,  he explained.    A statute  was                                                               
passed to  set any money resulting  from this case aside,  and it                                                               
would not be used in the  PFD calculations in future years.  That                                                               
remains in statute,  he said.  He added that  the $420 million is                                                               
not  part  of  the POMV  and  it  is  not  part of  the  dividend                                                               
calculation.   He conveyed that  HB 37 would remove  that section                                                               
because it  is obsolete, and the  tainted jury pool from  1990 is                                                               
no longer an issue.                                                                                                             
                                                                                                                                
4:34:58 PM                                                                                                                    
                                                                                                                                
MR. ALPER advanced to slide  19, which summarized the income tax.                                                               
He stated  that it  is a  flat rate  tax of  2.5 percent  of AGI,                                                               
explaining  that 41  states have  a broad-based  income tax.   He                                                               
stated  that  [the  tax]  includes   everything:    wages,  self-                                                               
employment,  business  income,   S-Corporations,  capital  gains,                                                               
employment, retirement,  and so  forth.   He said  the "adjusted"                                                               
part  of   "adjusted  gross-income"  is  tied   to  the  standard                                                               
adjustments  in  the  federal   tax  code  and  lists  retirement                                                               
contributions, student  loan interest, alimony, and  a handful of                                                               
other items.   Itemized  deductions in the  federal tax  code, he                                                               
said, are  not part of this,  and therefore, would be  subject to                                                               
the tax,  such as (indisc.) interest,  charitable deductions, and                                                               
property taxes, for  example.  However, he noted that  in lieu of                                                               
that, this  bill offers  a standard deduction,  which is  tied to                                                               
the federal code.  A  single person's deduction would be $12,550,                                                               
the deduction  for head  of household,  single parent,  or single                                                               
adult with dependents would $18,800,  and joint would be $25,100,                                                               
he  clarified.    That  number   would  be  scaled  and  adjusted                                                               
automatically when  the federal government adjusted  its numbers,                                                               
he  offered.   He noted  that the  PFD is  considered non-taxable                                                               
income.   He said that means  that a family of  four who received                                                               
dividends  would not  be taxed  on roughly  the first  $29,000 of                                                               
their income,  and the tax would  only apply to the  amount above                                                               
that $29,000.   He  argued that this  largely eliminates  any tax                                                               
burden  on  the lowest  income  Alaskans;  further, the  dividend                                                               
would permanently go to those who need it the most.                                                                             
                                                                                                                                
4:37:07 PM                                                                                                                    
                                                                                                                                
MR. ALPER  proceeded to slide  20 and directed  attention towards                                                               
the graphic,  which came  from the  Institution for  Taxation and                                                               
Economic Policy  (ITEP), the consultant hired  by the Legislative                                                               
Budget and  Audit Committee last  fall.  He  said it looked  at a                                                               
variety  of different  tax plans.   This  graphic is  option two,                                                               
which represents  the original  version of  Representative Wool's                                                               
bill as  it was introduced  at the  beginning of the  session, he                                                               
said.  It  was the same 2.5 percent, but  the standard deductions                                                               
were   different,  he   explained,  noting   that  the   standard                                                               
deductions  were changed  by an  amendment in  the House  Special                                                               
Committee  on Ways  and Means.    He said  that bill  had a  $580                                                               
million  fiscal  note, which  lined  up  very closely  to  ITEP's                                                               
analysis.   He  directed the  committee to  look at  the graphic,                                                               
which shows  the effective  tax rate  on different  income levels                                                               
The bar on the left is the lowest  20 percent; it is a very small                                                               
0.3 percent that the tax  burden increases until reaching the top                                                               
level of  earners, where  it would  be a  flat rate  1.9 percent,                                                               
assuming there  will always be  some non-taxed income.   Based on                                                               
some  narrative information  within the  ITEP study  and his  and                                                               
Representative  Wool's own  work, he  estimated that  the current                                                               
version  of  the  bill  would  raise about  $545  million.    The                                                               
reduction  is because  of the  higher standard  deduction of  the                                                               
larger amount of untaxed income.                                                                                                
                                                                                                                                
4:38:31 PM                                                                                                                    
                                                                                                                                
MR. ALPER turned  to slide 21 and  said the way the  tax would be                                                               
structured is that while applying  for a PFD, Alaskans would have                                                               
the opportunity  to apply  their dividend towards  their tax  - a                                                               
"pick,  click, pay  your tax."    He clarified  that that  option                                                               
wouldn't be available to non-residents.                                                                                         
                                                                                                                                
4:40:03 PM                                                                                                                    
                                                                                                                                
MR.  ALPER progressed  to slide  22 which  laid out  the numerous                                                               
dividend  proposals from  the past  several years.   He  observed                                                               
that it has  clearly been a hot legislative topic.   He offered a                                                               
brief history  of Senate Bill  26, introduced Governor  Walker in                                                               
the 2017.   Mr.  Alper said  Senate Bill 26  had a  dividend very                                                               
similar to what Representative Wool is  proposing with HB 37.  He                                                               
noted that 40  percent of the POMV plus 20  percent of the direct                                                               
oil royalties would have been $1,300.   He stated that the Senate                                                               
based the bill first with a 25  percent POMV, and then it went to                                                               
the House  where it  passed with  a 33 percent  POMV.   It wasn't                                                               
until the end  of the 2018 session that  the conference committee                                                               
substitute that did not include  any technical provisions and did                                                               
not resolve  the dividend  issue, and  that is  why to  this day,                                                               
there  is still  a tension  in statute  between the  old dividend                                                               
formula, which  was intended to  be over-ridden, and  the current                                                               
POMV language,  which is  now governing how  much money  is taken                                                               
every year from the permanent fund.                                                                                             
                                                                                                                                
4:41:57 PM                                                                                                                    
                                                                                                                                
MR. ALPER brought attention to slide  23 and opined that a $2,500                                                               
dividend, as  proposed by the  governor, is  a risky number.   He                                                               
stated  that  too  many  things   could  go  wrong  and  make  it                                                               
unaffordable.   Further,  [the proposal]  has not  resolved where                                                               
the rest  of the money  would originate.   He argued that  a $500                                                               
dividend, which  is what the  state can afford without  taxes, as                                                               
proposed  by Senator  von Imhof  and  Representative Merrick,  is                                                               
probably too low  to be acceptable to most Alaskans.   He went on                                                               
to say that  somewhere in the middle of that  is likely the right                                                               
answer.  He offered his belief  that a moderate tax bill, such as                                                               
Representative Wool's,  is the best  way to resolve  the entirety                                                               
of the fiscal deficit.  He  explained that there is about $600 in                                                               
new  revenue between  an  income  tax and  the  diversion of  the                                                               
royalties to the general fund,  and a dividend payment of roughly                                                               
the  same dimension,  he shared.   It's  codified in  statute and                                                               
gets  rid  of the  tension  and  uncertainty resolving  what  the                                                               
dividend is  going to  be; additionally,  it balances  the budget                                                               
for  the  foreseeable future  with  any  oil price  greater  than                                                               
roughly $50  per barrel.   He reiterated  that it would  take the                                                               
dividend off the table and enable Alaska to be a stable state.                                                                  
                                                                                                                                
4:43:28 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN invited questions from the committee.                                                                              
                                                                                                                                
4:44:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA stated that  income taxes could be difficult                                                               
to enforce and  collect.  He asked if the  tax would be collected                                                               
by DOR, how  many tax collectors would need to  be hired, and how                                                               
much it would cost.                                                                                                             
                                                                                                                                
4:44:38 PM                                                                                                                    
                                                                                                                                
MR. ALPER directed attention to the  fiscal note.  He said it was                                                               
envisioned that the Tax Division,  which currently administers 25                                                               
different taxes throughout  the state, would take on  the role of                                                               
the income  tax.  He  acknowledged that  there is a  large fiscal                                                               
note, adding that  about 65 new employees would  cost between $8-                                                               
$10  million  per  year.    Additionally,  he  pointed  out  that                                                               
somewhere between  1.5 to 2  percent of the revenue  raised would                                                               
be administrative  charges.   He said there  is also  a front-end                                                               
cost  of  about  $20  million   to  build  the  software,  forms,                                                               
outreach, and to get the system set up in the beginning.                                                                        
                                                                                                                                
4:45:44 PM                                                                                                                    
                                                                                                                                
MIKE BARNHILL,  Deputy Commissioner, Department of  Revenue, said                                                               
he  didn't have  anything  to add  to Mr.  Alper's  summary.   He                                                               
acknowledged that  there was  an interesting  "inner-tie" between                                                               
administering an  income tax on top  of a PFD tax  base, which is                                                               
something that  DOR had begun  to explore in connection  with the                                                               
progress of [HB 37.]                                                                                                            
                                                                                                                                
4:46:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA asked for verification  that with this plan,                                                               
the PFD  calculation amount  would be based  on a  statute, which                                                               
would still be  at the whim of the legislature  to fund; however,                                                               
the income  tax would not  be at the whim  of the people  to pay.                                                               
He asked what  would "force" the legislature to fund  the new PFD                                                               
formula.                                                                                                                        
                                                                                                                                
4:47:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL  acknowledged  that everyone  should  follow                                                               
laws.   He  agreed  that  the legislature  has  not followed  the                                                               
statutory formula  for the PFD, but  noted that it is  subject to                                                               
appropriation,  as  determined  by   the  Alaska  Supreme  Court.                                                               
Therefore,  he  posited  that   the  legislature  is  technically                                                               
following  the  law.   He  reiterated  that  the PFD  formula  is                                                               
unsustainable and  must be  changed so  that the  legislature can                                                               
follow it.   He stated his belief that everyone  wants to [follow                                                               
the statutes when  paying the PFD], and that  legislators on both                                                               
sides  of  the  aisle  have  looked for  an  option,  which  this                                                               
proposal offers.                                                                                                                
                                                                                                                                
4:48:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA  said he is  confused by the  sentiment that                                                               
the current  formula for the  PFD is unsustainable.   He observed                                                               
that two statutes were mentioned  earlier, Senate Bill 26 and the                                                               
traditional  PFD formula,  which  seem  to be  in  conflict.   He                                                               
opined that  if he were  to put them  "in concert," he  would pay                                                               
out  the  full  PFD.    He  opined  that  currently,  instead  of                                                               
government programs  getting "the  short end  of the  stick," the                                                               
people are.   He sought to clarify whether the  PFD or government                                                               
spending is unsustainable.                                                                                                      
                                                                                                                                
4:50:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL said a budget of  $4 billion in addition to a                                                               
$2  billion  PFD   and  revenue  at  less  than   $4  billion  is                                                               
unsustainable.  He  explained that [the legislature]  could pay a                                                               
$2 billion PFD  if $2 billion were cut from  the budget; however,                                                               
he maintained that  by cutting $2 billion from  the budget, every                                                               
state employee would have to be  fired and the budget would still                                                               
come up short.  He said  that is not feasible, realistic, or what                                                               
anyone  wants, which  is why  the PFD  was adjusted  downwards by                                                               
Governor  Walker  and  successive   legislatures.    He  recalled                                                               
passing  Senate  Bill  26,  which  changed  the  state's  revenue                                                               
portfolio;  however, he  said [the  legislature]  didn't fix  the                                                               
other  half  of  the  problem.   He  acknowledged  Representative                                                               
Kurka's perspective but reiterated his  belief that paying out $2                                                               
billion or  more in PFD  checks when  [the state] is  bringing in                                                               
$1.2  to 1.5  billion  in oil  and  $3 billion  in  POMV draw  is                                                               
unsustainable.                                                                                                                  
                                                                                                                                
4:53:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  recalled an  earlier statement  that this                                                               
proposal  would not  result in  hardworking Alaskans  leaving the                                                               
state.  He questioned whether that statement was based on data.                                                                 
                                                                                                                                
4:53:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL said  that  statement was  largely based  on                                                               
relative levels of  taxation in other states, of  which Alaska is                                                               
the lowest.   He pointed  out that  even if Alaska  implemented a                                                               
low  income  tax,  Alaska  would be  "pushed  into  number  two."                                                               
Furthermore, he  considered the  fact that  Alaska is  giving out                                                               
money  to people.   He  said if  that counteracted  the tax,  the                                                               
Alaska would be  back to "the lowest."  He  reiterated that there                                                               
is no  other place with  lower taxes  than Alaska.   He suggested                                                               
that other  quality of life  issues, such as employment,  cost of                                                               
living,  and climate  come  into  play more  than  taxation.   He                                                               
maintained that  Alaska's taxation  is so  low that  it shouldn't                                                               
deter people from moving to Alaska.                                                                                             
                                                                                                                                
4:54:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  opined that imposing an  income tax would                                                               
be a  deterrent to some  people choosing to  move to Alaska.   He                                                               
suggested  that [the  bill sponsor]  provide related  modeling on                                                               
Alaska and other states.                                                                                                        
                                                                                                                                
4:55:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL said  he would  take  that suggestion  under                                                               
advisement.                                                                                                                     
                                                                                                                                
4:55:41 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN sought  clarification on the 30  percent royalty and                                                               
where it would originate.                                                                                                       
                                                                                                                                
4:56:11 PM                                                                                                                    
                                                                                                                                
MR.  ALPER  offered an  example  in  which  an oil  producer  was                                                               
producing  oil on  state land  and  wrote the  state a  royalties                                                               
check  for  $1,000.   He  said  $250 or  $500  of  that would  be                                                               
designated  to the  permanent fund  corpus.   He noted  that this                                                               
depends on  the age of  the lease.  The  rest of that  revenue is                                                               
currently  UGF revenue,  he explained.   The  30 percent  royalty                                                               
that would go  towards the dividend, as envisioned  in this bill,                                                               
would come  out of the UGF  portion of the revenue,  he answered,                                                               
further noting that it would not change the deposit.                                                                            
                                                                                                                                
4:57:05 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  asked  whether  this   proposal  would  require  a                                                               
constitutional amendment.                                                                                                       
                                                                                                                                
4:57:25 PM                                                                                                                    
                                                                                                                                
MR. ALPER said  the proposal should not  require a constitutional                                                               
amendment. He expressed his belief  that Senator von Imhof's bill                                                               
is complicated and would  likely require implementing legislation                                                               
to clean  up the existing  language that speaks to  the permanent                                                               
fund deposits and dividend payments.                                                                                            
                                                                                                                                
4:57:54 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN suggested  proposing part  of this  structure as  a                                                               
constitutional amendment,  such that  the 30 percent  royalty and                                                               
10 percent POMV would be constitutionalized.                                                                                    
                                                                                                                                
4:58:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL said he is hesitant to constitutionalize                                                                    
monetary formulas and would rather do it statutorily.                                                                           
                                                                                                                                
4:59:11 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that CSHJR 7(STA) was held over.                                                                         
                                                                                                                                
4:59:50 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Judiciary Standing Committee meeting was adjourned at 5:00 p.m.