Legislature(2019 - 2020)SENATE FINANCE 532

07/08/2019 09:00 AM BICAMERAL PERMANENT FUND WORKING GROUP

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
09:04:48 AM Start
09:06:43 AM Presentations from Working Group Teams
09:51:07 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentations from Working Group Teams TELECONFERENCED
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
             BICAMERAL PERMANENT FUND WORKING GROUP                                                                           
                          July 8, 2019                                                                                          
                           9:04 a.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Co-Chair                                                                                                  
Representative Jennifer Johnston, Co-Chair                                                                                      
Senator Shelley Hughes (via teleconference)                                                                                     
Senator Bert Stedman                                                                                                            
Representative Adam Wool                                                                                                        
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Kelly Merrick (via teleconference)                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Donald Olson                                                                                                            
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Elvi Gray-Jackson                                                                                                       
Representative Sara Hannan                                                                                                      
Representative Harriet Drummond                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATIONS FROM WORKING GROUP TEAMS                                                                                          
                                                                                                                                
- "Statutory $3,000 Dividend"                                                                                                   
- "Alaska with a $1,600 dividend"                                                                                               
- "A Surplus Permanent Fund Dividend for 2019"                                                                                  
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SORCHA HAZELTON, Staff                                                                                                          
Representative Kelly Merrick                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT: Co-presented  a  white paper  for a  surplus                                                             
dividend on behalf of Representative Kelly Merrick.                                                                             
                                                                                                                                
RANDY RUARO, Staff                                                                                                              
Senator Bert Stedman                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT: Co-presented  a white  paper on  the surplus                                                             
dividend amount report on behalf of Senator Stedman.                                                                            
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
9:04:48 AM                                                                                                                    
CO-CHAIR  CLICK  BISHOP  called   the  Bicameral  Permanent  Fund                                                             
Working  Group  meeting to  order  at  9:04 a.m.  Senate  members                                                               
present at the  call to order were Senators  Stedman, Hughes (via                                                               
teleconference), and Co-Chair Bishop.                                                                                           
                                                                                                                                
Senators Wielechowski and Gray-Jackson were also present.                                                                       
                                                                                                                              
9:06:43 AM                                                                                                                  
CO-CHAIR  JOHNSTON  announced   House  Bicameral  Permanent  Fund                                                               
Working  Group   members  present  were   Representative  Kreiss-                                                               
Tomkins, Wool, and  Merrick (via teleconference). Representatives                                                               
Hannan and Drummond were also present.                                                                                          
                                                                                                                              
9:06:58 AM                                                                                                                  
CO-CHAIR  STEDMAN commented  that he  was out  of state  when the                                                               
Bicameral  Permanent   Fund  Working  Group  previously   met  on                                                               
6/28/19.                                                                                                                        
                                                                                                                                
^Presentations from Working Group Teams                                                                                         
             Presentations from Working Group Teams                                                                         
                                                                                                                                
9:07:43 AM                                                                                                                    
CO-CHAIR BISHOP  announced the only  item on the agenda  would be                                                               
presentations  from the  working  group teams.  He  said that  he                                                               
would  start  with the  full  statutory  permanent fund  dividend                                                               
presentation  by   Senator  Hughes  and   Representative  Kreiss-                                                               
Tomkins.                                                                                                                        
                                                                                                                                
9:08:02 AM                                                                                                                    
REPRESENTATIVE KREISS-TOMKINS  presented the  white paper  on the                                                               
statutory $3,000 permanent  fund dividend on behalf  of the team.                                                               
He  asked  his  co-author,  Senator  Hughes,  to  weigh  in  with                                                               
comments or corrections.                                                                                                        
                                                                                                                                
He referred to the work  product titled "Statutory Permanent Fund                                                               
Dividend" dated  July 7,  2019. He  said the  co-authors, Senator                                                               
Hughes and himself,  wanted to emphasize several  points, some of                                                               
which  were  not in  the  work  product  but merit  emphasis.  He                                                               
characterized this  working group  team as having  a constructive                                                               
working  relationship   and  a   healthy  tension  that   led  to                                                               
discussions.  Some  statements  in  the document  may  have  more                                                               
equity  for one  co-author than  the other,  but they  ultimately                                                               
approached this  task with a  consensus and  concurrence mindset.                                                               
He related that  a huge amount of material was  cut [from Senator                                                               
Hughes'  report   titled  "Statutory  Permanent   Fund  Dividend,                                                               
Permanent Fund  Working Group Assignment,"  dated June  27, 2019]                                                               
because they could  not reach agreement, but it was  done so in a                                                               
respectful  manner.  He  commented  that if  the  footnotes  were                                                               
eliminated, their  co-authored white  paper might reach  the two-                                                               
page limit. He  recognized Buddy Whitt, staff  to Senator Hughes,                                                               
and his staff, Kevin McGowan, for their assistance.                                                                             
                                                                                                                                
9:09:44 AM                                                                                                                    
SENATOR HUGHES  also recognized Sonja Kawasaki,  staff to Senator                                                               
Wielechowski, for  her efforts  to assist  the team  by providing                                                               
background and  citations. Although the  appendix is not  part of                                                               
the report, she said that it  was attached to her original report                                                               
[dated  June 27,  2019]  and  is relevant  to  the  July 7,  2019                                                               
report. She said she would also make it available to members.                                                                   
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS referred to page  3 that has a list                                                               
of  appendices. He  said he  would make  certain these  items are                                                               
made   available   [online   as    PFG   meeting   documents   at                                                               
www.akleg.gov/basis].                                                                                                           
                                                                                                                                
9:11:13 AM                                                                                                                    
SENATOR  HUGHES said  considerable time  was spent  on the  white                                                               
paper, including that  the co-authors spent about  five hours and                                                               
made numerous calls to finalize the report.                                                                                     
                                                                                                                                
9:11:48 AM                                                                                                                    
REPRESENTATIVE   KREISS-TOMKINS  began   with  a   broad  summary                                                               
statement. As  co-authors of  the white  paper for  the statutory                                                               
permanent  fund dividend,  he and  Senator Hughes  considered the                                                               
socio-economic  impacts  of  the  statutory  $3,000  dividend  in                                                               
isolation, independent  of other  budget decisions.  Most members                                                               
would agree that the permanent  fund dividend (PFD) is a positive                                                               
and powerful  institution in  Alaska. Some  bullet points  in the                                                               
white paper speak to the nuances  and complexities of the PFD but                                                               
all things being  equal, Alaskans having $3,000  extra dollars is                                                               
seen  as   generally  positive.  The  co-authors   also  reviewed                                                               
research,  primarily  from  the   UAA  Institute  of  Social  and                                                               
Economic   Research,   University   of  Alaska   Anchorage   that                                                               
quantifies or evaluates the effects  of the PFD as an institution                                                               
in the State of Alaska.                                                                                                         
                                                                                                                                
He said that the fund  sources probably reflect the trajectory of                                                               
this working  group, the legislature,  and the state as  a whole.                                                               
[The Division  of Legislative Finance], the  Office of Management                                                               
and  Budget  (OMB),  Commonwealth  North, and  many  others  have                                                               
evaluated this topic. A basic  tension exists between the size of                                                               
the permanent  fund dividend, the  size of the  operating budget,                                                               
and the amount  of overall state revenue. The  co-authors did not                                                               
discover a  fourth missing variable.  They agreed that of  all of                                                               
the  available   fund  sources  for   a  statutory   $3,000  PFD,                                                               
overdrawing or overspending  the permanent fund in  excess of the                                                               
Percent of  Market Value  (POMV) was the  least desirable  or the                                                               
worst   possible   option.    The   co-authors   have   different                                                               
perspectives on the  balance of fund sources, but  they did agree                                                               
on that point, he said.                                                                                                         
                                                                                                                                
9:14:47 AM                                                                                                                    
SENATOR HUGHES  directed attention  to the  appendix list  at the                                                               
top of page 3. In addition  to the figures and analysis provided,                                                               
the  co-authors   applied  the  same  items   to  the  short-term                                                               
financials for  a full statutory  PFD based on the  budget before                                                               
the  legislature. In  addition, they  analyzed estimated  figures                                                               
based on  OMB's right-sized  budget for FY2020.  It was  based on                                                               
the data from the National  Council of State Legislatures' (NCSL)                                                               
national average  of state and  federal funding plus  50 percent.                                                               
Further, they did  additional runs using OMB's  "50/50 POMV based                                                               
on the current  FY 2020 budget" and the "50/50  POMV based on the                                                               
FY2021 (Barnhill) right-sized budget."                                                                                          
                                                                                                                                
9:15:58 AM                                                                                                                    
REPRESENTATIVE KREISS-TOMKINS mentioned  that the co-authors also                                                               
discussed potential revenue sources to  pay a full permanent fund                                                               
dividend  versus the  sustainability of  the permanent  fund. The                                                               
team was  tasked with  the necessity of  a grand  compromise that                                                               
would reflect  the existence  and validity of  each of  the three                                                               
major  perspectives in  Alaska:  1) pay  the  full statutory  PFD                                                               
funded through operating  budget reductions; 2) pay  the full PFD                                                               
funded by raising revenues; and 3)  reduce the size of the PFD to                                                               
reflect  a balance  between the  operating  budget and  revenues.                                                               
Although he and  Senator Hughes were not necessarily  in the same                                                               
camp, they agreed  that to work, a grand  compromise must reflect                                                               
the  validity  of the  perspectives  and  equity from  all  three                                                               
groups.   Furthermore,  the   co-authors  believe   there  is   a                                                               
mathematical  imperative and  an  unsustainability with  existing                                                               
fund sources. This  means that the state does not  have the funds                                                               
from existing  fund sources to  continue on an interim  basis, so                                                               
it is important that the grand compromise happens this year.                                                                    
                                                                                                                                
9:18:13 AM                                                                                                                    
SENATOR HUGHES pointed out that she and Representative Kreiss-                                                                  
Tomkins  had  a  slight  difference in  their  perspectives.  She                                                               
suggested  that  unsustainability   from  Representative  Kreiss-                                                               
Tomkin's perspective meant that the  state cannot continue to pay                                                               
the current  PFD. However, she would  frame it from the  point of                                                               
view that it was due to  an unsustainable budget. She offered her                                                               
belief that the Earnings Reserve  Account (ERA) was sufficient to                                                               
continue to pay the PFD. However,  she agreed that it must all be                                                               
considered together.                                                                                                            
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS  said that this also  speaks to the                                                               
three viewpoints stated in the report [on pages 3-4.                                                                            
                                                                                                                                
     (1) the budget itself is unsustainable and needs to be                                                                     
     reduced to exist within the current level of revenues                                                                      
     thereby allowing payment of a statutory PFD;                                                                               
                                                                                                                                
      (2) the size of the PFD is unsustainable and must be                                                                      
     changed in order to fund services; and                                                                                     
                                                                                                                                
        (3) Alaska needs to enact more revenue to pay a                                                                         
     statutory PFD and to fund services.                                                                                        
                                                                                                                                
He said that  as Senator Hughes pointed out,  a political process                                                               
consideration  for Alaskans  and  the  legislature would  ideally                                                               
mean  passing a  proposal  this  year to  allow  a  full year  of                                                               
review,  deliberation, and  dialogue with  Alaskans prior  to the                                                               
2020  election  cycle. This  would  be  preferable to  trying  to                                                               
introduce  something  in 2020.  The  co-authors  agreed that  any                                                               
proposal should have  an element of unbreakability  to settle the                                                               
question and avoid  the year-to-year tug of war  that occurs with                                                               
the PFD.  A constitutional amendment  or statutory  change should                                                               
be a  tool employed  as part  of the  compromise to  provide that                                                               
unbreakability and generational certainty  for the permanent fund                                                               
dividend.  Therefore,  legislators  should forward  the  solution                                                               
this  year. Constitutional  amendments  must be  ratified by  the                                                               
voters  so passing  a proposal  this  year would  provide a  full                                                               
year's  time   for  dialogue  and  deliberation   with  Alaskans.                                                               
Otherwise, the legislature  could pass something in  May 2020 and                                                               
have a bum-rush through the summer  up to the fall election cycle                                                               
to hold that conversation.                                                                                                      
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS said  that he  and Senator  Hughes                                                               
would  like the  record  to  reflect something  else  not in  the                                                               
report, which  is PFG  eligibility. Although  this matter  is not                                                               
core  to  any of  the  questions,  the  PFG should  consider  PFD                                                               
eligibility  and   make  recommendations  since   eligibility  is                                                               
interrelated to  the broader and  bigger questions.  He commented                                                               
that was a side point of concurrence.                                                                                           
                                                                                                                                
9:21:41 AM                                                                                                                    
SENATOR   HUGHES   emphasized   the   importance   of   reviewing                                                               
eligibility requirements particularly if  any changes are made to                                                               
current statutes.  If the  historic formula  were to  be adjusted                                                               
downward and fewer  people were eligible, it  would help increase                                                               
the  PFD  and  make  it   more  palatable  for  the  public.  She                                                               
highlighted  some positives  in the  report's bullet  points that                                                               
Representative  Kreiss-Tomkins did  not  specifically point  out.                                                               
She  encouraged  members and  the  public  to read  the  specific                                                               
points, no matter where individual  legislators are on the scale.                                                               
She said  that the co-authors  strived to make [the  white paper]                                                               
readable.                                                                                                                       
                                                                                                                                
9:23:25 AM                                                                                                                    
REPRESENTATIVE  KREISS-TOMKINS  and Senator  Hughes  acknowledged                                                               
the excellent process and working relationship.                                                                                 
                                                                                                                                
9:23:34 AM                                                                                                                    
CO-CHAIR  JOHNSTON  said she  appreciated  the  well thought  out                                                               
white paper and  was grateful that the team  reached agreement on                                                               
a  number of  issues. She  offered  her belief  that this  report                                                               
would be  helpful for the  finance committees as  the legislature                                                               
moves forward on this issue.                                                                                                    
                                                                                                                                
9:24:10 AM                                                                                                                    
SENATOR HUGHES added that she  mentioned at the last meeting that                                                               
she  submitted a  longer document  under the  SJR 5  document and                                                               
appendices were available online.                                                                                               
                                                                                                                                
9:24:56 AM                                                                                                                    
CO-CHAIR BISHOP echoed Co-Chair Johnston's comments.                                                                            
                                                                                                                                
CHAIR BISHOP  announced the  next presentation  would be  a white                                                               
paper on  a surplus  permanent fund  dividend by  Senator Stedman                                                               
and Representative Merrick.                                                                                                     
                                                                                                                                
9:25:22 AM                                                                                                                    
SENATOR  STEDMAN   deferred  to  his  staff,   Randy  Ruaro,  and                                                               
Representative Merrick's  staff, Sorcha  Hazelton to  deliver the                                                               
report.                                                                                                                         
                                                                                                                                
9:26:05 AM                                                                                                                    
SORCHA  HAZELTON,  Staff,  Representative Kelly  Merrick,  Alaska                                                               
State  Legislature, Juneau,  said the  team comprised  of Senator                                                               
Stedman and Representative Merrick  was tasked with analyzing the                                                               
impacts of  a surplus  dividend. In doing  so, they  assumed that                                                               
the POMV draw would first  fund state government and legislation,                                                               
the operating  budget, and the  capital budget. Anything  left in                                                               
the general fund  would be divided among  Alaskans. The permanent                                                               
fund dividend amount would be  based on a number of calculations.                                                               
The  Legislative Finance  Division proposed  scenarios such  that                                                               
the PFD would  range from $865 to nearly $3,000.  The white paper                                                               
did  not consider  a  [$1,600  or $3,000]  PFD  since those  were                                                               
assigned to other  working group teams. They also  assumed a goal                                                               
of  no  deficit.  If  this   proposal  became  a  policy  of  the                                                               
legislature,  it would  be sustainable  since the  permanent fund                                                               
dividends would  always be paid  after funding  state government.                                                               
The co-authors did  not necessarily view the  surplus dividend as                                                               
the   best   option,   but   it   would   result   in   budgetary                                                               
sustainability.                                                                                                                 
                                                                                                                                
She said  the economic impacts  included in the white  paper were                                                               
not necessarily tied to a  specific dividend amount. She reviewed                                                               
the  social  impacts,  which  she   said  were  less  than  those                                                               
highlighted  in other  papers.  An ISER  report  suggests that  a                                                               
lower PFD  amount would  result in  lower substance  abuse crime.                                                               
That was the only impact that  was different than the other white                                                               
papers, she said.                                                                                                               
                                                                                                                                
9:28:31 AM                                                                                                                    
RANDY   RUARO,  Staff,   Senator  Bert   Stedman,  Alaska   State                                                               
Legislature,  Juneau,  added  that  the  surplus  dividend  model                                                               
suggests  a higher  priority should  be placed  on funding  state                                                               
government, with the permanent fund  dividend being paid with any                                                               
remaining revenue. However, all  state government spending is not                                                               
optional since  some court cases  mandate funding.  This includes                                                               
funding education  [Moore v. State  of Alaska] and  the Kasayulie                                                               
case. Since some  level of funding is required by  Article VII of                                                               
the Constitution  of the  State of  Alaska, there  is not  a pure                                                               
option between  state spending and  paying a dividend.  He agreed                                                               
that the  surplus dividend  option was  a sustainable  choice and                                                               
the legislature  had a  policy choice to  determine what  to fund                                                               
first.                                                                                                                          
                                                                                                                                
9:30:11 AM                                                                                                                    
REPRESENTATIVE  MERRICK added  that unless  the legislature  also                                                               
has a conversation  about a spending cap, the  size of government                                                               
will  grow,  and  nothing  will  be left  for  a  permanent  fund                                                               
dividend.                                                                                                                       
                                                                                                                                
9:30:45 AM                                                                                                                    
SENATOR STEDMAN pointed  out that the legislature  has a spending                                                               
limit and it  has not erased the dividend for  the last 30 years.                                                               
He said  the concept of using  surplus revenue in any  given year                                                               
for  a dividend  is part  of the  puzzle or  one of  the building                                                               
blocks. He  suggested that  the legislature  could go  north from                                                               
there as it  continues to look to the longevity  of the permanent                                                               
fund to  ensure it  remains in place  for future  generations. He                                                               
said he did  not think that the legislature  would ever eliminate                                                               
the permanent fund dividend.                                                                                                    
                                                                                                                                
9:31:56 AM                                                                                                                    
CO-CHAIR JOHNSTON  said she  was impressed  with all  three white                                                               
papers  and  that  the  $3,000   PFD  report  suggests  that  the                                                               
existence of the permanent fund  dividend had given the permanent                                                               
fund life.  It has protected the  fund from being used  for other                                                               
purposes,  which   would  otherwise   dissipate  the   fund.  She                                                               
characterized it as a good check and balance.                                                                                   
                                                                                                                                
She asked  whether the proposal for  a net dividend had  the same                                                               
type of  check and  balance and if  it presented  the legislature                                                               
with  the stress  level needed  to restrain  government spending.                                                               
For example, she  asked whether legislators would  be inclined to                                                               
cut the budget  in order to pay a higher  permanent fund dividend                                                               
under that proposal.                                                                                                            
                                                                                                                                
SENATOR  STEDMAN answered  that  the permanent  fund dividend  is                                                               
funded via  the earnings reserve  account of the  permanent fund,                                                               
which was not  how it was initially structured.  This created the                                                               
intent  to  have  the  public pay  attention  and  encourage  the                                                               
legislature not to spend the permanent fund.                                                                                    
                                                                                                                                
He cautioned  members not to  forget that the permanent  fund was                                                               
created to  help the  state with  its financial  challenges after                                                               
the oil  basin was depleted or  gone. It has done  that, he said.                                                               
He  acknowledged that  some tension  exists between  the dividend                                                               
and  the operating  budget. He  personally prefers  a predictable                                                               
and  robotic  structured process,  in  which  the permanent  fund                                                               
dividend would be paid out  regardless of the fiscal situation in                                                               
any given  year. He said  that could be created  by restructuring                                                               
the formula. He said that the  legislature was on the right track                                                               
for  many   years  and  he   hoped  that  once   the  legislature                                                               
restructured  the dividend  formula  it would  stand for  another                                                               
thirty or  forty years. He urged  the legislature and the  PFG to                                                               
have that as a goal.                                                                                                            
                                                                                                                                
9:34:59 AM                                                                                                                    
REPRESENTATIVE MERRICK  said that what Co-Chair  Johnston alluded                                                               
to  does  give  Alaskans  an  incentive to  be  involved  in  the                                                               
process.  However,   she  respectfully  disagreed   with  Senator                                                               
Stedman.  She reiterated  her earlier  point that  unless current                                                               
government spending changed, the  cost of government would slowly                                                               
eat away at the funds and  nothing would be left. She offered her                                                               
belief  that this  viewpoint was  shared by  many House  minority                                                               
members.                                                                                                                        
                                                                                                                                
9:35:53 AM                                                                                                                    
CO-CHAIR  BISHOP recognized  that  Senator von  Imhof joined  the                                                               
meeting  earlier.  He  advised members  that  Senator  Olson  was                                                               
enroute  Juneau via  Alaska Airlines  and  would arrive  sometime                                                               
soon.                                                                                                                           
                                                                                                                                
CO-CHAIR BISHOP announced that the  final presentation by Senator                                                               
Olson and Representative Wool was  to consider an option based on                                                               
a $1,600  dividend. He asked  Representative Wool to  present the                                                               
white paper based on a $1,600 dividend.                                                                                         
                                                                                                                                
9:36:21 AM                                                                                                                    
REPRESENTATIVE WOOL  said he  would read  the white  paper report                                                               
since many people  did not have a copy. He  explained that he and                                                               
Senator  Olson  were  tasked with  considering  the  $1,600  PFD,                                                               
including  reviewing  the  economic impact,  social  impact,  and                                                               
funding sources. He acknowledged  that others have identified the                                                               
value of having a permanent  fund dividend, including that it can                                                               
lift  people out  of poverty.  The  first presentation  indicated                                                               
some disagreement  about the  ancillary impact  on the  budget if                                                               
the legislature  were to pay  a full permanent fund  dividend [of                                                               
$3,000 in 2019].  He emphasized the other report  pointed out the                                                               
effect the PFD has on crime.  When the permanent fund dividend is                                                               
initially paid out property crime  decreases, but substance abuse                                                               
increases. He  said he  was unsure  what to  make of  that except                                                               
that perhaps  when the  dividend is  paid people  do not  need to                                                               
steal to obtain their substances for a period of time.                                                                          
                                                                                                                                
9:37:52 AM                                                                                                                    
REPRESENTATIVE WOOL  read the working group  report, "Alaska with                                                               
a $1,600 dividend."                                                                                                             
                                                                                                                                
     Introduction:                                                                                                              
                                                                                                                                
     The Alaska  Permanent Fund  Corporation (APFC,  or APF)                                                                    
     began  disbursing dividends  in 1982.  Since that  time                                                                    
     the  Permanent  Fund has  become  a  fixture in  Alaska                                                                    
     society.  This  Working   Group  has  convened  because                                                                    
     points of  view differ  greatly on  what the  future of                                                                    
     the  Permanent Fund  should  look  like. Regardless  of                                                                    
     one's  stance most  agree that  the Permanent  Fund has                                                                    
     changed  the way  Alaskans perceive  the role  of their                                                                    
     government  over  the  years since  its  establishment.                                                                    
     Notably,  Alaska does  not have  any kind  of a  broad-                                                                    
     based tax, such  as an income or sales tax  as a source                                                                    
     of revenue, and the Permanent  Fund is the only fund of                                                                    
     its kind  that delivers  dividend payments  directly to                                                                    
     its  citizens.  The  Permanent  Fund  dividend  program                                                                    
     wasn't created as a needs-based  program to inject cash                                                                    
     into  the hands  of  low income  families,  nor was  it                                                                    
     created  with  a  percentage of  overall  income  as  a                                                                    
     parameter, it  was created  as a  way to  keep citizens                                                                    
     more  involved in  the workings  of the  Permanent Fund                                                                    
     and to incentivize them to  prevent the government from                                                                    
     reckless spending  down of  the fund  that is  meant to                                                                    
     provide for generations to come.                                                                                           
                                                                                                                                
REPRESENTATIVE  WOOL suggested  that the  dividend was  unique to                                                               
Alaska.  However, he  wondered how  other sovereign  wealth funds                                                               
stay in  existence without  a dividend.  He recalled  that Norway                                                               
was  often cited  as a  country with  a sovereign  fund that  was                                                               
doing quite  well. He remarked  that the  5.25 POMV or  5.00 POMV                                                               
was another way to keep Alaska's permanent fund going.                                                                          
                                                                                                                                
9:39:06 AM                                                                                                                    
REPRESENTATIVE WOOL  said that when  the legislature  talks about                                                               
reducing the  permanent fund, the  percentage of income  is often                                                               
cited  since a  low-income  person losing  $1,000  would be  more                                                               
significantly   impacted.  However,   when  the   permanent  fund                                                               
dividend was created,  it was not billed as  a certain percentage                                                               
of anyone's income. Instead, it  was built on longevity. However,                                                               
basing it on  longevity was ruled unconstitutional,  so it became                                                               
a flat  dividend. The first  dividend was approximately  $300, he                                                               
said.                                                                                                                           
                                                                                                                                
9:40:02 AM                                                                                                                    
REPRESENTATIVE WOOL continued with "Economic Impacts.                                                                           
                                                                                                                                
     Economic  impacts:  A  1984 paper  published  by  UAA's                                                                    
     Institute  of  Social   and  Economic  Research  (ISER)                                                                    
     titled  "The Alaska  Permanent  Fund Dividend  Program:                                                                    
     Economic  Effects and  Public Attitudes"  outlines many                                                                    
     positive  economic   impacts  of  the   Permanent  Fund                                                                    
     Dividend  (PFD) program  and described  general support                                                                    
     among Alaskans  for the program. The  report finds that                                                                    
     lower-income  households are  more greatly  impacted by                                                                    
     the  dividend program  than  higher income  households.                                                                    
     Adjusted  for  inflation,  the average  payout  of  the                                                                    
     dividend  has been  about  $1100  since its  inception.                                                                    
     Actual  payment amounts  range from  about $300  in the                                                                    
     beginning to  a high  of just over  $2000 in  2015. The                                                                    
     amount of $1600 was the amount  paid out in 2018 and is                                                                    
     higher than the average  of the dividend payment amount                                                                    
     over the  last 10  years. Although there  are certainly                                                                    
     positive  economic impacts  of putting  $1.5B into  the                                                                    
     economy there are  also negative outcomes. Anecdotally,                                                                    
     we know  in recent times  many more purchases  are done                                                                    
     online  and go  to companies  headquartered outside  of                                                                    
     Alaska, so the  money often does not stay  in Alaska to                                                                    
     help  local  businesses.   Even  purchases  of  airline                                                                    
     tickets and  box-store purchases have little  effect on                                                                    
     the local economy.                                                                                                         
                                                                                                                                
He corrected  an error, noting  that the report says  the figures                                                               
were  "adjusted  for  inflation."  However,  the  permanent  fund                                                               
dividend figures in  his report were not  adjusted for inflation.                                                               
If so,  the average  amount would  be $1,600  to 1,700,  he said.                                                               
When the dividend  is paid, there is likely a  short-term bump in                                                               
some  employment, but  most  of  the PFD  is  spent on  box-store                                                               
purchases or airline tickets, he said.                                                                                          
                                                                                                                                
9:41:30 AM                                                                                                                    
REPRESENTATIVE WOOL continued with "Social Impacts."                                                                            
                                                                                                                                
     Social impacts:  As a sovereign wealth  fund the Alaska                                                                    
     Permanent Fund  is something of  an anomaly,  being the                                                                    
     only  one to  disperse  dividends. This  has created  a                                                                    
     unique perspective about the  purpose of the fund among                                                                    
     Alaskan residents,  which has  been noted by  Angela L.                                                                    
     Cummine  of The  University  of Oxford.  In a  research                                                                    
     article published  in Basic  Income Studies,  Volume 6,                                                                    
     issue  1  "Overcoming   Dividend  Skepticism:  Why  the                                                                    
     World's  Sovereign Wealth  Funds Are  Not Paying  Basic                                                                    
     Income Dividends," general  support of universal income                                                                    
     is  offered:  "The  PFD program  runs  irrespective  of                                                                    
     whether the State  of Alaska is in  surplus or deficit.                                                                    
     Also,  Universal Income  programs are  generally needs-                                                                    
     based so that they help  those that need the income and                                                                    
     don't go out  to every man, woman and child  as the PFD                                                                    
     does."                                                                                                                     
                                                                                                                                
     Every year, at least  25% of mineral resource royalties                                                                    
     must  be  put  into  the corpus  or  principal  of  the                                                                    
     Permanent  Fund,  regardless   of  whether  Alaska  can                                                                    
     balance its budget. During several  years over the past                                                                    
     decade, the  APF has  grown while  the state  budget of                                                                    
     Alaska has  faced deficits. Despite a  deficit in 2000,                                                                    
     the Legislature appropriated an  extra $250 million for                                                                    
     the   Permanent  Fund   principal  from   the  earnings                                                                    
     reserve.  From  the   Norwegian  perspective,  such  an                                                                    
     arrangement means the APF is  not achieving its purpose                                                                    
     of being  a savings  fund. The savings  are built  on a                                                                    
     fiscal illusion of surplus where  the obligation to pay                                                                    
     dividends   becomes   detrimental  to   the   long-term                                                                    
     financial health of the  state. The Legislature becomes                                                                    
     constrained,  as  the   dividend  becomes  an  expected                                                                    
     component of  an individual's  income. An  October 2003                                                                    
     poll  by  Dittman  Research Corp.  found  that  64%  of                                                                    
     Alaskans  believed that  they  were  entitled to  their                                                                    
     dividend, even  if Alaska has a  budget deficit (Lewis,                                                                    
     2004, P. 81)".                                                                                                             
                                                                                                                                
     Middle ground  can be found  in this debate;  there are                                                                    
     options to provide funding  for adequate state services                                                                    
     such as  K12 education, public  safety, infrastructure,                                                                    
     Alaska Marine  Highway System,  and Pioneer  Homes, and                                                                    
     still  provide funding  for  a reasonable,  sustainable                                                                    
     Permanent Fund  dividend program to disburse  checks to                                                                    
     eligible Alaskans to spend as they desire.                                                                                 
                                                                                                                                
He added that he has since learned that not all universal income                                                                
programs were needs-based.                                                                                                      
                                                                                                                                
9:43:40 AM                                                                                                                    
REPRESENTATIVE WOOL turned to the funding sources. He stated                                                                    
that at the time this white paper was written, the budget                                                                       
contained enough for about a $900 permanent fund dividend.                                                                      
                                                                                                                                
     Funding  sources: What  funding sources  are needed  to                                                                    
     get to a $1600 PFD?  With the operating budget that the                                                                    
     House and  Senate passed to the  Governor, there exists                                                                    
     a $600 million  surplus, which would allow  for a $1000                                                                    
     PFD.  To  reach $1600,  we'd  need  an additional  $400                                                                    
     million                                                                                                                    
                                                                                                                                
     Where available  funding sources are to  get the needed                                                                    
     $400 million?                                                                                                              
                                                                                                                                
     1. Permanent Fund earnings reserve account                                                                                 
     2. General Fund                                                                                                            
     3. CBR                                                                                                                     
     4. Instituting a school head tax                                                                                           
     5. Abolishment of oil tax credits                                                                                          
     6. Instituting Income Tax                                                                                                  
                                                                                                                                
     Given the above  sources, it seems the CBR  is the only                                                                    
     one  that can  be achieved.  Tapping into  the earnings                                                                    
     reserve  goes against  [Senate Bill]  26 and  also will                                                                    
     overdraw the fund and put  it at risk. Tapping into the                                                                    
     general  fund will  cut  programs  beyond a  reasonable                                                                    
     level.  Any  type of  tax  increase  is very  difficult                                                                    
     politically and likely will be vetoed by the Governor.                                                                     
                                                                                                                                
9:44:45 AM                                                                                                                    
REPRESENTATIVE  WOOL commented  that [Governor  Dunleavy's vetoes                                                               
to  the  operating  budget  were just  released]  and  they  were                                                               
approximately  $400 million.  Many legislators  have heard  these                                                               
cuts have created a bit of a backlash, he said.                                                                                 
                                                                                                                                
9:45:10 AM                                                                                                                    
REPRESENTATIVE WOOL  turned to opportunity costs.  He pointed out                                                               
a typo  and read, "It  is NOT  obtainable without making  cuts to                                                               
state operations ?." He continued.                                                                                              
                                                                                                                                
     Opportunity cost or gains with  that level of dividend:                                                                    
     A $1,600  dividend is a  negotiated amount  and doesn't                                                                    
     directly  correlate   to  any  specific   equation.  It                                                                    
     matches  the dividend  disbursed in  2018. It  is [not]                                                                    
     obtainable  without  making  cuts to  state  operations                                                                    
     because  we  don't  foresee  having  a  surplus  of  $1                                                                    
     billion    for   PFD    checks   given    our   current                                                                    
     revenue/budget situation.                                                                                                  
                                                                                                                                
9:45:38 AM                                                                                                                    
REPRESENTATIVE  WOOL turned  to the  last section,  "New equation                                                               
proposal from  Rep. Wool."  He clarified  that this  proposal did                                                               
not reflect Senator Olson's viewpoint.                                                                                          
                                                                                                                                
     New equation proposal from Rep. Wool:                                                                                      
                                                                                                                                
     If an  equation is needed for  a $1600 PFD, I  may have                                                                    
     something that strikes a good compromise.                                                                                  
                                                                                                                                
     [House Bill] 132 is a  bill I introduced that would use                                                                    
     oil revenue  for the basis of  the PFD and not  use the                                                                    
     earnings of the  fund itself. This would  allow the PFD                                                                    
     to fluctuate  as the price  and production of  oil does                                                                    
     and would  only allow  large checks to  be paid  out as                                                                    
     long as  large revenue was  coming into the  state from                                                                    
     the resources  that we export.  This would  prevent the                                                                    
     state from  being obligated to  pay a large PFD  in the                                                                    
     event  that   oil  revenue  is  low,   similar  to  the                                                                    
     situation we are in now.                                                                                                   
                                                                                                                                
     I  understand that  many people  are reluctant  to make                                                                    
     such a  large change  in how we  calculate the  PFD and                                                                    
     feel  that  the PFD  should  be  more of  a  guaranteed                                                                    
     disbursement  regardless  of  state  resource  revenue.                                                                    
     This answers  the question:  "Should we  pay out  a PFD                                                                    
     check if oil  revenue goes to zero?"  Some would answer                                                                    
     no  and in  that case  a PFD  based on  oil revenue  is                                                                    
     appropriate.  HB132  uses  the  value  of  40%  of  oil                                                                    
     revenue,  which would  generate  a PFD  of about  $1400                                                                    
     based on this year's oil revenue.                                                                                          
                                                                                                                                
     If people  feel that  a PFD  check should  be disbursed                                                                    
     even if oil revenue is  zero, then I suggest the "20:20                                                                    
     Plan." The 20:20  plan would use a value of  20% of oil                                                                    
     revenue and 20% of POMV  draw to both contribute to the                                                                    
     PFD  check. The  POMV  draw value  is  very stable  and                                                                    
     predictable and  isn't as volatile  as oil  revenue and                                                                    
     would provide  a guaranteed base  for the PFD.  The oil                                                                    
     component would  add to the  POMV portion  depending on                                                                    
     how the  state's #1 industry  is performing  that year.                                                                    
     People equate  the PFD  to oil  revenue and  creating a                                                                    
     more  substantial   link  to   oil  and   possibly  gas                                                                    
     production is a  good way to keep  the public involved.                                                                    
     The 20:20  plan would yield  a $1600 PFD  using current                                                                    
     revenue and POMV values.                                                                                                   
                                                                                                                                
9:48:15 AM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
9:49:23 AM                                                                                                                    
CO-CHAIR BISHOP reconvened the meeting.  He made closing remarks,                                                               
noting  some  common  themes and  threads  throughout  the  three                                                               
[white  papers]. He  thanked the  working group  teams for  their                                                               
work.                                                                                                                           
                                                                                                                                
9:50:25 AM                                                                                                                    
CO-CHAIR JOHNSTON made closing remarks, expressing gratitude for                                                                
the time and effort that went into each of these papers.                                                                        
                                                                                                                                
9:51:07 AM                                                                                                                    
CO-CHAIR BISHOP adjourned the Bicameral Permanent Fund Working                                                                  
Group meeting at 9:51 a.m.                                                                                                      

Document Name Date/Time Subjects
01 - Surplus PFD - Permanent Fund Working Group Assignment, 8 July 2019.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
01A - What do we know about the effects of the Alaska PFD, Mouhcine Guettabi, 20 May 2019.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
02 - $1,600 PFD - Permanent Fund Working Group Assignment, 8 July 2019.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03 - $3,000 PFD - Permanent Fund Working Group Assignment, 8 July 2019.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03A1 - Appendix A - ISER 2016 Economic Impacts Study (Cover Page Only - Report on File).pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03A2 - Appendix A Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03B1 - Appendix B - Berman 2018 Resource Rents, etc. Among Alaskas Indigenous Peoples.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03B2 - Appendix B Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03C1 - Appendix C - ISER 2017 Families Study Research Summary.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03C2 - Appendix C Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03D1 - Appendix D - ITEP 2017 Revenue Study.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03D2 - Appendix D Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03E1 - Appendix E - ISER 2019 Summary of PFD Effects on Socio-Economic Well-Being.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03E2 - Appendix E Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03F1 - Appendix F - PFD Values Adjusted for Inflation 2018.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03F2 - Appendix F Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03J1 - Appendix J - Hammond Letter to House Finance Chair Al Adams (April 1, 2982).pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03J2 - Appendix J Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03K1 - Appendix K - House Finance Committee Chair Al Adams Committee Letter of Intent (May 14, 1982).pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03K2 - Appendix K Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03L1 - Appendix L Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03L2 - Appendix L- Long-term Projections - Full Statutory PFD_Current FY20 Budget.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03M1 - Appendix M - Long-term Projections - Full Statutory PFD_(Barnhill) Right-sized Budget ($1.3 Billion Cut).pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03M2 - Appendix M Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03N1 - Appendix N - Long-term Projections - 50% POMV PFD_Current FY20 Budget.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03N2 - Appendix N Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03O1 - Appendix O - Long-term Projections - 50% POMV PFD_(Barnhill) Right-sized Budget ($1.3 Billion Cut).pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03O2 - Appendix O Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03P1 - Appendix P - Hammond 1980 PFD Application Statement to Alaskans.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03P2 - Appendix P Cover Sheet.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03Q - Appendix Q - Financials Current Budget - 50-50 POMV PFD.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03R - Appendix R - Financials Current Budget - Statutory PFD.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03S - Appendix S - Financials Right-Sized Budget - 50-50 POMV PFD.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group
03T - Appendix T - Financials Right-Sized Budget - Statutory PFD.pdf JPFG 7/8/2019 9:00:00 AM
Bicameral Permanent Fund Working Group