Legislature(1999 - 2000)
03/28/2000 08:07 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 28, 2000
8:07 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Joe Green
Representative Jim Whitaker
Representative Bill Hudson
Representative Beth Kerttula
Representative Hal Smalley
Representative Scott Ogan
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 137
"An Act relating to the municipal dividend program; and providing
for an effective date."
- MOVED CSHB 137(STA) OUT OF COMMITTEE
HOUSE BILL NO. 411
"An Act relating to the market value of the permanent fund and to
distribution of income of the permanent fund; and providing for
an effective date."
- MOVED CSHB 411(STA) OUT OF COMMITTEE
HOUSE BILL NO. 387
"An Act prohibiting governmental entities, including
municipalities and school districts, from restricting a person's
free exercise of religion."
- BILL HEARING POSTPONED
PREVIOUS ACTION
BILL: HB 137
SHORT TITLE: MUNICIPAL DIVIDEND PROGRAM
Jrn-Date Jrn-Page Action
3/15/99 454 (H) READ THE FIRST TIME - REFERRAL(S)
3/15/99 454 (H) CRA, STA, FIN
2/03/00 (H) CRA AT 8:00 AM CAPITOL 124
2/03/00 (H) Moved CSHB 137(CRA) Out of Committee
2/03/00 (H) MINUTE(CRA)
2/04/00 2085 (H) CRA RPT CS(CRA) 1DP 4NR 1AM
2/04/00 2085 (H) DP: KOOKESH; NR: MURKOWSKI, HALCRO,
2/04/00 2085 (H) DYSON, JOULE; AM: HARRIS
2/04/00 2085 (H) 2 ZERO FISCAL NOTES (DCED, REV)
2/04/00 2085 (H) REFERRED TO STATE AFFAIRS
2/17/00 (H) STA AT 8:00 AM CAPITOL 102
2/17/00 (H) Heard & Held
2/17/00 (H) MINUTE(STA)
3/16/00 (H) STA AT 8:00 AM CAPITOL 102
3/16/00 (H) Scheduled But Not Heard
3/21/00 (H) STA AT 8:00 AM CAPITOL 102
3/21/00 (H) Heard & Held
3/21/00 (H) MINUTE(STA)
3/23/00 (H) STA AT 9:00 AM CAPITOL 102
3/23/00 (H) Heard & Held
3/23/00 (H) MINUTE(STA)
3/28/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 411
SHORT TITLE: DISTRIBUTION OF PERMANENT FUND INCOME
Jrn-Date Jrn-Page Action
2/16/00 2221 (H) READ THE FIRST TIME - REFERRALS
2/16/00 2221 (H) STA, FIN
2/16/00 2221 (H) REFERRED TO STATE AFFAIRS
2/18/00 2240 (H) COSPONSOR(S): DAVIES
2/22/00 (H) STA AT 8:00 AM CAPITOL 102
2/22/00 (H) Heard & Held
2/22/00 (H) MINUTE(STA)
2/29/00 (H) STA AT 8:00 AM CAPITOL 102
2/29/00 (H) Bill Postponed
2/29/00 (H) MINUTE(STA)
3/28/00 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street, Suite 200
Juneau, Alaska 99801
POSITION STATEMENT: Provided information on HB 137.
MARY GRISWOLD
PO Box 1417
Homer, Alaska 99603
POSITION STATEMENT: Testified in opposition to HB 137.
REPRESENTATIVE ALAN AUSTERMAN
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
POSITION STATEMENT: Testified as sponsor of HB 411.
CHERYL FRASCA
Fiscal Policy Council of Alaska
PO Box 93050
Anchorage, Alaska 99509
POSITION STATEMENT: Commented on HB 411.
MARY GRISWOLD
PO Box 1417
Homer, Alaska 99603
POSITION STATEMENT: Testified in support of HB 411.
ACTION NARRATIVE
TAPE 00-24, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:07 a.m. Members present at the
call to order were Representatives James, Hudson, Kerttula, and
Smalley. Representatives Green, Ogan, and Whitaker arrived as
the meeting was in progress.
HB 137-MUNICIPAL DIVIDEND PROGRAM
Number 0089
CHAIR JAMES announced the first order of business is HOUSE BILL
NO. 137, "An Act relating to the municipal dividend program; and
providing for an effective date."
REPRESENTATIVE MOSES said that had the legislature done this bill
when he first introduced it several years ago it would have
eliminated the initiative [property tax cap] the state now has
before it. He explained that he believes that HB 137 is a
proper use for permanent fund (PF) surplus earnings and it is a
good bill. He noted that there are many things that the
legislature can do with HB 137 down the line to take things out
of budget. He commented that the state does many things in
communities that no other state does and he could even envision
doing an education program through it. He hoped that the
committee can move HB 137 out today.
Number 0182
CHAIR JAMES indicated that in 1995, the legislature had appointed
some of Alaska's brightest folks to a long-term task force to try
to figure out how to balance the budget over the long term. The
task force had put together a very determined study and had come
back with a recommended solution which the legislature promptly
threw in the trash. In retrospect, it seems to her that the
legislature would have been a lot better off if it had been a
little bit more attentive to that particular plan and would not
have boxed itself in regarding so many areas today. She
emphasized that the legislature has a huge job ahead. The way
she sees HB 137 operating, if it were to pass, is that no matter
what long-term plan the legislature may establish, HB 137 would
continue to work as long as there is a PF. She recognized that
HB 137 could work with any other plan that might go forward.
Number 0337
REPRESENTATIVE MOSES said he agreed with Chair James' assessment
of HB 137 and also agreed that the legislature should have paid
more attention to the long-term task force study.
CHAIR JAMES observed that sometimes the legislature is "too soon
old and too late smart" and even lets public opinion get in the
way. Public opinion is extremely important, but legislators as
leaders have a responsibility.
KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML),
said AML held its legislative conference last week and filled the
room with folks who were extremely enthusiastic about the HB 137
concept. The reason they were enthusiastic is because HB 137 is
a first step toward a long-range financial plan. He explained
that he does not believe that there is anybody that does not
think there needs to be some new source of revenue in state
budget to make it work. He noted that the AML folks were excited
about HB 137 because it actually shows Alaskans that PF earnings
can be used in a way that is acceptable to people and benefits
the public.
Number 0501
MR. RITCHIE commented that essentially the plan would distribute
an average of $125 per Alaskan in benefits, which could either be
increased service in police, fire, road maintenance or tax
offset. Over the past ten years, the biggest pressure on raising
property taxes in municipal governments has been cutbacks in
revenue sharing from $140 million down to this year's level of
$28 million in the House budget. When $110 million is cut per
year out of municipal revenues, it does affect taxes, it has to
and it has. He agreed that HB 137 would stop pressure to raise
property taxes, thus stabilizing property taxes, and AML thinks
the public would appreciate it. At the same time, the public can
tie the use of PF earnings directly to services that they think
are the most important which are fire, police, and roads. He
emphasized that AML thinks that HB 137 is something that the
public is going to think is a good idea and AML folks are going
back to communities to talk about it. He remarked that AML very
much hopes HB 137 moves on to the Finance Committee so that it
can be discussed in greater detail.
Number 0603
MARY GRISWOLD testified via teleconference from Homer and read
her testimony as follows:
I am opposed to HB 137 because although I support an
increase to municipal assistance, it should be funded
through the general fund after evaluation against other
spending priorities and available revenue. I am also
opposed to this bill because it promotes the current PF
earnings distribution calculation. The general fund
should receive a portion of PF earnings based on an
annual payout of 5% of the PF's market value similar to
provisions of HB 411.
Number 0652
CHAIR JAMES promised she would write an e-mail message to Ms.
Griswold in response to Ms. Griswold's concerns.
Number 0701
REPRESENTATIVE HUDSON said he believed that once HB 137 gets into
the Finance Committee, it could be coordinated and consolidated
with the principles of HB 411. He noted that HB 137 and HB 411
do not have to be mutually at odds with each other, rather the
two could easily be put together. Representative Moses has
recognized in HB 137 that the public has indicated by the
September 14, 1999 vote that they want to know where the money is
being spent, and HB 137 tells them exactly where it is being
spent. He commented that HB 137 tells exactly where the money is
coming from, and he does not believe that on a long-term basis HB
137 will have any major effect on the dividends. The legislature
has to have both a state and municipal long-term plan because
they are both serving the same constituents. He indicated that
HB 137 is the first step in marrying some sort of common plan
between local and state government. He emphasized that it can
all be done in a manner that does not adversely impact the
concepts which will be explained in HB 411.
Number 0889
REPRESENTATIVE KERTTULA moved Amendment 1, 1-LS0591\K.1, Cook,
3/24/00, which read:
Page 5, line 12, following "dividends':
Insert "appropriated and"
Page 13, line 26, following "section":
Insert "and subject to appropriation"
Page 13, lines 30 and 31"
Delete all material and insert:
"permanent fund dividends paid by the
Department of Revenue for the calendar year
immediately preceding the year the transfer
is made under this subsection; or"
Page 14, line 1, following "account":
Insert "on the date of the transfer under
this subsection"
CHAIR JAMES asked whether there was any objection. There being
none, Amendment 1 was adopted. She said Amendment 1 is a result
of the conversation the committee had with Jim Baldwin at the
committee's last meeting. She noted that according to Tam Cook,
who is a drafter of legislation, the amendment was not imperative
to make HB 137 constitutionally correct, but Ms. Cook's amendment
does make HB 137 clearer in that appropriations are an important
part of this issue, and the committee is not trying to violate
legislative constitutional mandate regarding appropriations. She
explained that Amendment 1 is clean-up language to make
absolutely sure that the money is appropriated from PF earnings
into the municipal dividend. She mentioned that Amendment 1 also
made it perfectly clear that dividends issued in the previous
year are being counted for this year in order to figure HB 137.
Number 0991
REPRESENTATIVE OGAN stated that he objects to Amendment 1 because
legislators are constantly doing "sleights of hand" in the
budget, and Amendment 1 is another sleight of hand. He
reiterated that HB 137 is written as a dedicated fund, and
Amendment 1 simply says HB 137 is not a dedicated fund. He said
that he believes that in spirit HB 137 is a dedicated fund and
though Amendment 1 might make HB 137 technically correct, he
objects to the amendment.
CHAIR JAMES replied that she was surprised because HB 137 is
exactly the same thing that is done with the PFD. She asked
Representative Ogan if he called the PFD a dedicated fund.
REPRESENTATIVE OGAN answered that he did not know if the PFD is
the same thing as HB 137. He said he needed to see the language.
CHAIR JAMES asked Representative Ogan if he thought the PFD was
an appropriation. She noted that there is statutory delineation
as to how the dividend is calculated, but the legislature
appropriates the money; if they do not, they are in trouble. She
explained that HB 137 is no more a violation of dedicated funds
than the PFD itself because it is exactly the same thing. She
commented that HB 137 is a municipal dividend while the PFD is a
personal dividend, and no one can dislike one without disliking
the other.
Number 1057
REPRESENTATIVE OGAN replied that he would not have an objection
but he has not looked at the language in the PF. He said he is
sure that Chair James is correct, and there are other funds that
are treated in the same manner. Nevertheless, he would prefer to
process HB 137 on a year-by-year appropriation basis through
legislative vote rather than do HB 137 by some kind of formula.
Number 1064
CHAIR JAMES said that HB 137 sets the formula, but that does not
necessarily mean folks are going to get it if it is not
appropriated, so it is still in the hands of the legislature.
She noted that HB 137 is only a mechanism to tell people at home
that the legislature is taking some of the PF earnings and
sending them back home to the people to help them with their
local needs, such as police, fire, emergency medical services
(EMS) and roads. She sees it as the legislature allocating $125
for every dividend that is sent out, which means that everybody
is getting a dividend plus $125, and the $125 goes to offset some
of the taxes or makes living at home much more comfortable.
Number 1127
A roll call vote was taken. Representatives Green, Hudson,
Kerttula, Smalley, Whitaker, and James voted for the amendment.
Representative Ogan voted against it. Therefore, Amendment 1
passed by a vote of 6-1.
CHAIR JAMES commented that she might just send a proposed CS
(which has not been presented to the committee) along with a
separate memo to the Finance Committee. Her proposed CS simply
creates the [municipal] dividend pool of money and distributes it
under the existing municipal assistance and revenue sharing plan.
She prefers HB 137 because she thinks HB 137 does encourage folks
who do not perform community services to start doing it. She
emphasized that money will be available to small communities to
provide services as outlined in HB 137, and she feels very
strongly about these particular issues. Every municipality ought
to be concerned about these issues, and she would like to help
them to develop concern since the issues are basic. She reminded
the committee that issues outlined in HB 137 are basic issues for
having any government in the first place and that all should
share in the cost for police, fire, EMS and roads.
Number 1359
REPRESENTATIVE SMALLEY made a motion to move CSHB 137, version 1-
LS0591\K, Cook, 3/15/00, as amended, out of committee with the
attached fiscal note.
REPRESENTATIVE OGAN said he objected to the proposed CS because
on September 14, 1999 the voters overwhelmingly sent a message
and that message was reaffirmed by his trip to his district
convention last weekend. At his district convention, he heard
that the legislature should not do anything with the PF until
back-to-basics government is achieved, and the PF is protected.
He explained that HB 137 is "the cart before the horse." He
noted that Chair James seems to be willing to put forth many
different plans that use the PF or taxes, but he cannot get a
hearing on constitutional protection for the dividend. He has
requested a hearing for his bill a number of times, and she has
not consented to hear it. Without some discussion of
constitutional protection for the dividend and the mind set of
this committee to just put problem bills in Finance Committee,
then his bill should be sent to the Finance Committee too. He
reiterated that he objects to the proposed CS because it is
formula funding of different community projects, and he thinks it
more appropriate to make those decisions on a yearly basis based
on need and through public process rather than based on formulas.
He objected to the proposed CS in the strongest terms.
Number 1502
CHAIR JAMES asked Representative Ogan if next Tuesday was okay to
hear his constitutional amendment.
REPRESENTATIVE OGAN replied that next Tuesday would be wonderful.
He said he would remove his objection and write "do not pass" on
the bill sign sheet.
There being no objection, CSHB 137(STA) moved from the House
State Affairs Standing Committee.
HB 411-DISTRIBUTION OF PERMANENT FUND INCOME
[Also contains discussion of HB 124.]
Number 1638
CHAIR JAMES announced the next order of business is HOUSE BILL
NO. 411, "An Act relating to the market value of the permanent
fund and to distribution of income of the permanent fund; and
providing for an effective date."
Number 1667
REPRESENTATIVE HUDSON said there is a proposed CS "M" version to
HB 411 that needs to be adopted as a work draft.
REPRESENTATIVE KERTTULA made a motion to adopt the proposed CS
for HB 411, version 1-LS1443\M, Cook, 3/23/00, as a work draft.
There being no objection, proposed CSHB 137 was before the
committee.
Number 1763
REPRESENTATIVE HUDSON said that he believes that HB 411 is timely
and an essential part of the puzzle properly put before the
legislature this year. He explained that the proposed CS was
introduced to give the PF strength, security and stability far
into the future. The proposed CS allows for distributing income
from the PF as a percent of market value rather than the current
realized rate of return. In 1995 the long-range financial
planning commission recommended the market value approach for
long-term investment strategy, and Commonwealth North has also
recommended this blueprint for strengthening the fund. He
mentioned that the PF Board supports the percent of market value
approach and though it does not take a position on this or any
other bill, it believes distribution of assets of the fund is
entirely up to the legislature. He indicated that percent-of-
market value produces a distribution program that is more level
and is one of the reasons why the PF Board supports it. He
informed the committee that percent-of-market value protects
principal of the PF and maximizes predictability of annual
distributions, which he believes is good for the public as well
as the general fund. He emphasized that the proposed CS
preserves and grows the PF through statutorily required inflation
proofing which would be the first part of the assets that remain
in the fund and maintains the PFD at status quo or very nearly
status quo over the next ten years of its projected growth.
REPRESENTATIVE HUDSON remarked that the proposed CS allocates 75
percent of its income to the PFD and 25 percent by statute to the
general fund for the very first time. He said that he believes
that the proposed CS will produce stability in fund management
and afford a first ever contribution for the payment of what he
calls essential services. He did not specify services as in HB
137, rather he believes that, like any other undedicated asset to
the state, it is up to each and every legislature from here on
out. However, the proposed CS does do what he thinks he heard
from the September 14, 1999 vote in that the proposed CS holds
the dividend harmless.
REPRESENTATIVE HUDSON stated that the market-value approach is
something that has been used in many other major fund
investments. There are people from both the Division of Finance,
Department of Administration and the PF who can talk about
whether or not the terminology in the proposed CS does what it is
supposed to do. He had looked at the proposed CS from an overall
basis as part of a long-range fiscal plan, and the proposed CS is
only one essential element of the plan.
REPRESENTATIVE HUDSON said that before he ever presented a final
draft of the proposed CS, he had asked Jay Hammond if he would
come to Juneau to spend time to discuss where the state was, how
the proposed CS might fit into the overall equation, and what
other assets and changes were required ultimately to come up with
a balanced budget. He noted that a balanced budget is required
by law in statute, and the governor must present a budget with
revenues that cover the expenditures of that budget. He
explained that a balanced budget requirement is also placed upon
the legislature so both the governor and the legislature have the
responsibility statutorily, and he believes constitutionally, to
provide to the public a balanced budget on an annual basis. He
commented that the legislature has always accepted that and for
the last seven years, the legislature has funded the budget for
the most part out of unallocated income largely from oil, other
assets of the state and the constitutional budget reserve (CBR).
He mentioned that the CBR has shrunk from what it would have
been, which is approximately $5.5 billion today, had the
legislature not been nibbling away at it on an annual basis for
the last seven years down to about $2.8 billion in 2001.
REPRESENTATIVE HUDSON indicated that in order to reach
[understandable figures], he took anticipated general fund (GF)
expenditures over the next ten years and figured anticipated
unrestricted (GF) revenue. He informed the committee that
anticipated unrestricted GF revenue was subtracted from GF
expenditures to arrive at an estimated fiscal shortfall, and that
is the fiscal gap that many have spoken about over the years.
The first target of the proposed CS is the estimated fiscal gap,
and he applied the proposed CS to the fiscal shortfall. He went
to both the PF and fiscal "beancounters," and they gave the
figures as seen on the sheet labeled "Model Output for HB 411."
He said that the $759 million fiscal gap predicted for fiscal
year (FY) 2001 is not filled, but a part of the fiscal gap is
filled. If the legislature did business as usual, it would
simply take $759 million out of the CBR and continue to do that
until the CBR is gone. He reiterated that at that point in time,
the beginning of the end for the PFD would start because the only
other source of funding after the CBR is exhausted would either
be insupportable taxes and/or use of some of the assets of the
PF. He said that in FY 2001, the proposed CS would produce about
$390 million to offset the $759 million deficit.
REPRESENTATIVE HUDSON noted he had some other concepts to discuss
such as additional taxes or using the income of the CBR as
opposed to the principal. He explained that up to this point in
time it has been the practice of the legislature to use the
principal of the CBR, and he fears this will be the legislature's
practice this year. He commented that if the proposed CS and tax
mechanisms were adopted in order to help offset the fiscal gap,
the CBR balance would be preserved. In FY 2001, the PF principal
in unrealized earnings is $23.8 billion and in ten years goes to
$25.9 billion and the CBR balance, about which the legislature is
worried, would grow from $3.5 to $8.9 billion. He indicated that
the PF people had told him that they believe that this would be
the flow.
Number 2252
REPRESENTATIVE HUDSON informed the committee that the proposed CS
seeks to preserve the CBR, and just income from the CBR over a
ten year period will rise from $2.8 to $3.3 billion. The
proposed CS maintains a cushion where enough income is created.
There are people who say there is no constraint on government
growth, but he answers there is a 30-vote constraint on the House
of Representatives, so there will always be future Finance
Committees before whom legislators will have to make a case to
obtain super-majority vote.
REPRESENTATIVE HUDSON asked what the proposed CS does to
dividends. His primary goal with the proposed CS is to maintain
the PFD at its current level more or less, however, the status
quo cannot be maintained for the PFD because the CBR is being
eaten up. Once the CBR is gone, the next revenue source to be
attacked will be the PF earnings reserve. He said that in FY
2004 the PFD would be totally at risk, so the proposed CS
preserves the PFD. In FY 2001, the projected individual PFD is
$1,964 compared to $1,982, and in FY 2001, there is an $18
reduction, and in FY 2002, it is $33 per person. After that, the
individual PFD actually grows so people get more money (about
$211) with the proposed CS over a ten-year span.
REPRESENTATIVE HUDSON said he asked fiscal people for an idea of
how the dividend flow would go for ten years, and the result is
the chart entitled "Estimated Permanent Fund Dividend per Capita-
-HB 411 vs Status Quo." The dotted line on the chart exceeds in
value over the long term an asset to the average Alaskan. He
needed to also make certain that assets themselves (the PF) were
preserved, so he asked his fiscal people to graph out both the
CBR and the earnings reserve. He reminded the committee that the
greater the earnings reserve, the more stability there is in the
dividend pool and in fluctuations in investment earnings of the
PF. He has shared this formula with the Fiscal Policy Council of
Alaska, and it has written a statement which is in legislator
packets.
Number 2503
REPRESENTATIVE HUDSON said he is not talking about taxes in HB
411. He noted that HB 411 only talks about one form of
contribution that will preserve dividends and assets. He
commented that he thinks HB 411 ought to be done now because if
nothing is done now, the legislature will spend a minimum of $700
million between now and July of next year money out of the CBR or
the earnings reserve account. He mentioned that he believes that
if HB 411 is passed, $390 million would cover some of the $700
million owed and decrease the amount of money that would have to
come out of the CBR. He acknowledged that legislators are
hesitant to eat into the earnings reserve account. When the
legislature starts taking hundreds of millions of dollars from
the earnings reserve account, the legislature is in fact
beginning to see the decline of the assets that predicate the
PFD. If the PFD is to be preserved, assets preserved, the fiscal
gap filled, and the amount of money reduced that ultimately must
come from somewhere, Alaskans will have to consider some form of
across-the-board-statewide increased revenues, and it can only be
called taxes. He remarked that some legislators have not been
fearful in saying the word "taxes," although most legislators are
jumping ship.
Number 2656
REPRESENTATIVE ALAN AUSTERMAN said he is a co-sponsor of HB 411
so he would like to say something in support of it. He noted
that all legislators have recognized over time that the State of
Alaska has not had a very strong long-term fiscal plan, but the
legislature has tried to hold size of government down. Whether
just looking at cutting the budget or actually looking at trying
to find new revenues, a search is on for a long-term solution to
the state's budget woes. He commented that he feels that HB 411
is really an outgrowth of the September 14, 1999 vote. He
acknowledged Representative Ogan's feeling that the September
vote was an absolute "no" on anything involving the PF, but there
are other legislators who feel that the "no" vote said
"refiguring" needed to be done. He mentioned that he thinks the
legislature is at the point of refiguring and has come forward
with a plan that has some basis of restructuring what people said
"no" to. He indicated that he thinks that HB 411 brings
different options for people to look at. Whether legislators
feel that taxes are the right thing to do and what form of taxes
might be used, is a debate that both this committee and the
Finance Committee on the House and Senate side need to have. He
added that he thinks that the long-term planning process that the
legislature goes through needs to be started this year even
though it may not be completed. He said he supports the concept
of the proposed CS and asked the committee to move it forward to
the Finance Committee.
Number 2807
REPRESENTATIVE GREEN said that though he may have some problems
with the proposed CS, he thinks it is the right thing to do. He
explained that the great thing is to have plans, and he has
strongly proposed that fiscal plans should be done in the Finance
Committee. He asked Representative Hudson if he had run any
"what if" cases. Representative Green commented that he is
thinking what if the legislature had not been rather conservative
for the last eight years, what would have been the result to the
budget. For example, what would happen if there were a three-to-
six-year period of significantly increased spending, or what
would have happened if, in the especially critical early years,
the value of the plan had dropped five or ten percent. He is not
asking for those numbers, but he is just wondering when the
proposed CS gets to the Finance Committee, will "what if" cases
be available for review.
Number 2885
REPRESENTATIVE HUDSON replied that this plan is a computer model
and there have been numerous runs already of different types of
scenarios. He had asked the people who are managing the PF what
could be anticipated over a long term. They had answered that
for a long-term basis they had figured eight percent, but that
does not matter too much because the percentage is going to
change over time. Future legislators will have to adjust for
change. All the information is on the computer and available
when the proposed CS gets to the Finance Committee. If a person
from the public has a different idea, data is fed into the
computer model; the computer can crank out a different scenario
stating what the impact will be. He had ordered numerous
computer runs, and the one he is showing today is the latest
information and has had been cross checked more than any of the
others. As far as future growth is concerned, he does not think
that extraordinary growth will happen because of the fact that
the legislature must continue to rely on some assets of the CBR.
As long as the 30-vote requirement remains on the CBR, whether
the "Ds" or the "Rs" are involved in government, he thinks that
checks and balances will exist. Extraordinary growth that was
seen back when Alaska had extraordinary income from two million
barrels of oil a day is not going to happen again.
Number 2963
REPRESENTATIVE GREEN said he is wondering if the proposed CS is
the most logical prognostication.
REPRESENTATIVE HUDSON answered in the affirmative.
REPRESENTATIVE GREEN noted he certainly subscribes to the
proposed CS but he thinks that along the way the legislature
should also have "what ifs." He asked if those "what ifs" would
be available for Finance Committee review. He asked what if
something went wrong with the prognostication then how bad would
it get.
TAPE 00-24, SIDE B
Number 2988
REPRESENTATIVE HUDSON answered that all of that information and
figures are available.
REPRESENTATIVE AUSTERMAN said that the assumptions around which
anything is built are very key to any discussion. As
Representative Hudson had said, the model is available and all
that has to be done is ask questions of the model. He did query
the computer model several occasions and asked what happens if
the market crashes in the year 2002. He noted that with the
market-value approach of this proposed CS, it shows the
difference between not having a market-value approach and having
status quo. He explained that status quo results in a rapid
crash whereas market value holds its value for two or three more
years after a market crash before a reaction is observable.
Number 2919
REPRESENTATIVE HUDSON said that he has a model that shows status
quo, and the legislature saw that last year. Last year the
legislature put out a plan that did everything possible to avoid
any new income taxes, sales taxes or major new wallet assets from
the average Alaskan person. The legislature had tried to do a
plan that was almost entirely from the PF, and that is why people
faulted the plan. He had spoken with Jay Hammond and Jay Hammond
felt that was the fault with the plan. Representative Hudson
mentioned that he thought that originally the PF was intended to
be a crutch when the traditional revenue stream was down to such
an extent that there was not enough money to pay for general
government. He indicated that the proposed CS, which is just one
element of a plan, does not preclude income taxes and so that
comports to what Jay Hammond has suggested as another essential
element. He is not pushing the whole plan, even though he has
been bold enough to present the whole plan, because he recognizes
that establishing major new tax mechanisms is an element where
the public really has to weigh in. He suggested that over the
interim the legislature should review, through the Ways and Means
Committee structure, the whole plan because the proposed CS is
just an element as is CSHB 137. He emphasized that the proposed
CS is just one little element that will attack a problem and
reduce the misery.
Number 2816
CHAIR JAMES stated that she was violently opposed to putting the
last issue out for vote [September 14, 1999 PFD issue vote], and
she had a hard time even voting on the plan itself. She
reiterated that every time she gets an opportunity to have a
dialogue with people, she asks their opinion about the September
vote. She said that the problem with that plan was two-fold.
Number one, it assumed that there would be no new taxes. Number
two, in the 20-year projection of the money that was going to be
spent, it assumed that most of the budget was going to remain
flat. Her concern about getting to a plan starts with the
budget, and she has not seen anyone come forward to say how much
the legislature should be spending. She indicated that how much
the legislature should be spending is critical. She agreed that
the legislature could go back over the issues that are not being
funded right now and ascertain if those are critical. She
acknowledged that the legislature has been putting off many
things that are not being done because of lack of funds. She
remarked that the minute the legislature takes away legislative
discipline to cut a certain amount of general fund spending out
of the budget, growth could just spring up like an India rubber
ball if there is no control.
CHAIR JAMES reminded the committee that the budget really has not
been cut that much. General fund spending has been reduced, and
she agrees with Representative Green that how much growth was not
allowed to get to a negative use of general funds can be
ascertained. However, the legislature filled up those issues
with money from other sources so the budget itself has been
growing and will continue to grow, even though $1 billion of
spending is the PFD. Her willingness to go forward with the plan
is based on determining how to project budget growth over the
next 20 years by population, cost of living, and paying for
things that absolutely need to be addressed that the legislature
is not funding now. No one has reviewed what spending is going
to be; rather everyone is looking at the amount of revenue that
covers the existing spending level. She is not convinced that
the existing spending level is too high or too low or whatever
because she simply does not know what it is. The language in the
statutory budget reserve, which only allows the budget to grow by
a certain percentage each year, calculated by population growth
and inflation, is an absolutely necessary part of any plan.
CHAIR JAMES noted that she supports the theory of management
based on market value as opposed to income and thinks that is
critical. Assuming that the public will only accept the current
level of dividends is also a problem because she believes that in
time the public could be convinced. If some people do not want
any government, then they can go live where there is no
government and no rules. By contrast, those who want to live in
society must have organization of how society works. The
organization should not be overly intrusive in personal lives but
should be as intrusive as it needs to be to ensure that each
person's rights are protected, and that costs money. Each person
needs a job, therefore, economic issues are important, so the
legislature has to remember that need. She agreed that
legislators have a role to play as leaders. She emphasized that
if it takes the legislature several years, probably three or four
years before the CBR is exhausted, to get the public to come
along on a plan that the public can accept, then she is willing
to do that.
CHAIR JAMES remarked that the proposed CS is the biggest public
policy issue that the legislature will ever face in the very near
future, and the House State Affairs Standing Committee is the
place to address it. She recognized that the proposed CS is a
policy issue, not just a money issue, in trying to figure how the
legislature should go forward. The issue is how do legislative
decisions affect people back home and people's attitude toward
government. She stated that it is an attitude issue that the
legislature has to address, consequently, that is why she thinks
all discussion in this committee is well worth it. She is
embarrassed that she has only two people on teleconference who
want to talk about the proposed CS. She has asked her people
back home about HB 411, and she has not heard anything. The fact
that the legislature has not heard anything means the public is
not even paying any attention to what the legislature is doing.
She explained that the public is just moving in its own world,
but it needs to weigh in on this issue because it is very
important; if the legislature passes anything without the public
weighing in, repercussions will be unrealistic. What the
legislature does must be accepted by the public because that is
who the legislature serves, yet at the same time, the legislature
must show leadership.
Number 2501
CHAIR JAMES mentioned that the 3/4 vote required for use of the
CBR does not always cut spending because she has seen when it
raised spending. The 3/4 vote is a very political hot button.
She believes that no matter who is in power, Republicans,
Democrats or some independent, the whole budget process is very
cumbersome -- going through subcommittees to open public hearings
to the Finance Committee and then going to the floor for the
vote. Historically, a bill cannot be amended on the floor unless
it is an absolute oversight. Therefore, she thinks the 3/4 vote
to get money approved for every budget the legislature passes is
absurd. She envisioned establishing a fund with spending limits;
but if for some good reason, like an emergency or a special
project, the spending limit was exceeded, then, and only then,
call for the 3/4 vote. She indicated that that kind of fund
could be written into the proposed CS.
CHAIR JAMES informed the committee that the above-mentioned
thoughts are some of the things needed in an overall plan. She
would even be willing to vote on the House floor on just the
first part of the proposed CS, which puts the market value eight
percent into a fund and makes it effective another year down the
line when the legislature can have time to fill in the blanks.
However, she cannot support something that goes as far as the
proposed CS and still does not go far enough in reviewing the
overall state spending plan.
Number 2429
REPRESENTATIVE GREEN agrees that the proposed CS is a policy
decision, and this committee is a policy-making body. He
explained that policy is decided in this committee and detail is
decided in the Finance Committee. He is concerned that this plan
is only effective year-by-year because it is a bill that can be
redone by the next legislative session and asked if the proposed
CS needs stability if it is to succeed. To be effective, the
proposed CS needs to stay in effect. His concern is why go this
way rather than a constitutional change. He asked if the thought
behind the present choice was because the public is just not
ready for a constitutional change.
Number 2381
REPRESENTATIVE HUDSON replied that the proposed CS does not deal
with constitutionality or a constitutionally dedicated fund. He
had read that there was some concern about the tax implications
of constitutionally mandating a PFD because the federal
government could conceivably tax the assets or the income of the
PF on an annual basis. Therefore, there might be a possibility
of six, seven or eight million dollars going to the Internal
Revenue Service (IRS) if the legislature did something like that,
and the described taxation possibility is not in the proposed CS.
The proposed CS is only one piece, and the policy is that if
someone believes that the legislature is going to have to use
some of the earnings of the PF, the proposed CS is one way to do
it. He added that from a policy perspective, ultimately people
will have to pay taxes and use some of the assets of the PF. The
proposed CS provides a vehicle for discussion and public open
discussion regarding use of some of the PF assets.
Number 2185
REPRESENTATIVE HUDSON asked why the public has not weighed in on
this subject and answered the question himself by saying that the
legislature has not been serious. He reiterated that the
legislature has dragged its feet and has not given the public any
feeling of confidence that the legislature is prepared to step up
and try to resolve this subject. He said that the proposed CS is
just one piece, and HB 137, which the committee just passed, is
another little piece. He noted that HB 137 also affects the PFD
and asked if the committee was afraid of that bill. He commented
that the committee cannot be afraid because legislators are
elected to try to put good ideas out before the public and have
open discussion. He explained that open discussion is where
everybody weighs in on the mechanics of the proposed CS. Then
the proposed CS goes on to the Finance Committee where estimated
costs and estimated assets that will be derived from it are
discussed.
Number 2185
REPRESENTATIVE HUDSON said that the proposed CS is one piece that
everybody says has to happen, but it is not the end all and it
does not preclude income taxes. In fact, he is showing a very
conservative estimate of what is needed for spending over the
next ten years. Here on a very conservative basis is what
anticipated revenues will be for the next ten years. He
explained that the next step is to subtract one from the other
and the resulting figure is the deficit. He envisioned the
proposed CS as producing according to how the stock market
produces. He recognized that the proposed CS is not a referendum
on income taxes, sales taxes or increased oil taxes. He and co-
sponsors have been bold enough to say that they believe that
there is $350 million in arrears even using some of the earnings
as discussed in the proposed CS and some of the earnings from the
CBR. He said that the legislature does know one thing:
continuing to do what the legislature is doing from year to year
because it is politically expedient will cost the people their
PFD, and the legislature better be prepared to say that.
Number 2162
REPRESENTATIVE AUSTERMAN noted that he would never support
anything that would take away the legislature's ability to budget
for the State of Alaska and place that ability in the
Constitution of the State of Alaska. He does not want the public
to micro manage how the legislature does things. If the
legislature were to put the proposed CS into the constitution,
every year the legislature would have to go to the vote of the
people (depending upon what oil did or what the gas pipeline
might do), and it really needs to be tied all together as far as
budgeting is concerned.
CHAIR JAMES mentioned that according to her calculations, as long
as the legislature is balancing the budget out of the CBR as
opposed to the earnings of the fund, the legislature is using
cheaper money. The state does not make the same amount of income
off of the CBR as it does off of the earnings of the fund. She
is not fearful of continuing to balance the budget out of the CBR
until the legislature has a solution. She thinks the only way
the legislature could gain is if the CBR were put in the PF
itself. She is willing to do that and believes that it needs to
be done as part of the budget solution process. She is not even
past agreeing to put 100 percent of resource revenues into the PF
if the legislature has a plan that works over the long term and
balances the budget. If more money can be managed by the fund,
more income will be generated, and the better off the state will
be in the long run.
Number 2058
REPRESENTATIVE KERTTULA acknowledged that putting all revenue
together and having a steady income stream is one sure way to not
only protect the money but assure that money is available. She
explained her understanding as to how the proposed CS works as
follows: the proposed CS starts with the PF principal, the PF
earnings reserve, and the CBR; then the proposed CS leaves money
in the earnings reserve to continue to generate income; next the
proposed CS takes 5.3 percent of the market value of the PF; and
finally the proposed CS puts 75 percent of that 5.3 percent into
the PFD and 25 percent into the general fund. She remarked that
the more she thinks about this the more she likes it because
income will continue to be generated in the earnings reserve, so
that there will be a continual stream, and that is why the PFD
works. She concluded that not only is the dividend protected,
which people are absolutely adamant about, but the proposed CS
gives a solid income stream, and that is the other reason why the
fund has a more stable flow. The proposed CS is similar to
putting all of the money into one place, but the proposed CS does
this in the earnings reserve account.
Number 1974
CHAIR JAMES asked if there is a provision in the proposed CS that
allows the PF earnings reserve account to be put back into the PF
itself when the PF earnings reserve account reaches a certain
amount. She also asked if the proposed CS refers to eight
percent of the entire PF and PF earnings, not just PF earnings.
REPRESENTATIVE HUDSON answered in the affirmative.
CHAIR JAMES said she feels a little nervous about letting the
earnings reserve get to $8 billion or whatever because it seems
to her that there ought to be a limit in that part of the
proposed CS. She explained that when there is a certain of money
it should revert back to the PF itself because there is an
advantage in investments.
Number 1910
REPRESENTATIVE AUSTERMAN noted that he had this discussion with
PF people, and they do have those figures of what would be in the
earnings reserve account (ERA) at all times to take care of any
major fluctuations.
REPRESENTATIVE HUDSON said that the ERA is always available to
the legislature. He explained that he had brought along a graph
that explains the billions of dollars that have been put into the
PF by legislatures since 1992. Just a few years back, the
legislature put $1 billion 200 million into the corpus of the PF,
and once that is done the legislature cannot take it out. He
mentioned that the only money the legislature can get out of the
PF corpus is income and that goes into the ERA. He does not even
profess to believe that the proposed CS is the absolute perfect
or even ideal thing. He asked the committee if it believed that
the legislature needs to use some of the earnings of the PF, that
the tap that provides the contribution to the general fund ought
to preserve and hold harmless the PFD, and that it ought to
provide for the growth of the PF and all of its assets. He
informed the committee that if it believes in those things, then
the proposed CS is the bill, though not in perfect form.
Number 1760
REPRESENTATIVE OGAN emphasized that he respectfully disagrees
with the sponsors of the proposed CS because he has a different
philosophy and different constituency. He stated that he
believes that the proposed CS hot wires PF money directly into
the general fund. He reminded the committee that the legislature
has the ability right now to spend the ERA with 21 votes in the
House and 11 in the Senate. He acknowledged that he is not
opposed to using the ERA at some point and thinks that the
legislature is going to have to do that but does not think that
the legislature is there yet. He remarked that he thinks the
legislature should wait because there is a presidential election
coming up and one of the candidates has openly endorsed opening
the Arctic National Wildlife Refuge (ANWR). Also, the price of
oil is high and the Organization of Petroleum Exporting Countries
(OPEC) is meeting now. He observed that ANWR is going to become
a national campaign issue and the scenarios that the sponsors are
pointing out, for example, scenarios representing that people
will lose their PFDs, is based on the assumption that Alaska will
not get ANWR, develop gas to liquids or have a gas pipeline.
REPRESENTATIVE OGAN stated that if the PF and the ERA are
considered similar to a retirement account, the proposed CS seems
to be at the stage where the retiree decides it is time to start
to live off of the income. However, he said that he thinks that
Alaska is a young state and in "state years" is like a teenager.
He noted that Alaska has a bright future, and he thinks it is a
little bit too early to get jumpy.
REPRESENTATIVE OGAN explained that what this issue boils down to
is trust and the people just do not trust the legislature to use
any earnings of the PF right now. He commented that the majority
of people do not understand the difference between the PF corpus
and the ERA and how those earnings are divided. He mentioned
that most people do not even know that the ERA is available right
now for the legislature to spend as general fund dollars. He
reiterated that until the legislature constitutionally protects
the PFD program and people have confidence that the PFD program
is safe, then and only then will they put their "holy water," so
to speak, on use of the earnings.
REPRESENTATIVE OGAN quoted a letter dated March 23, 2000 from
Michael and Rose Marie Citti at their request as follows:
Good Morning:
We are writing in strongest opposition to your latest
tax proposal. The people of Alaska voted
overwhelmingly last year against such a proposal. The
people of Alaska wish to see state spending reduced,
not increased or kept at the status quo. Your proposal
goes against the wishes of the vast majority of the
Alaskan people. Perhaps this is why Representative
Hudson is against a public vote.
We find it interesting that this proposal comes so late
in the legislative session. Perhaps it cannot stand
the light of day and needs to be pushed as fast as
possible. We suggest that it be put off until the next
legislative session as there is no pressing need for
funds this year. With study the legislature will come
to the same conclusion as the voters of Alaska and
Representative Scott Ogan; there is no need for new
taxes, we just need to re-prioritize state government
back to basics.
Why is it that government funding seems to be given a
higher priority than private enterprise and taxpayer
dollars. Why are the people of Alaska asked to pay
more so government can continue to spend? Has anyone
asked the people of the state of Alaska what they will
be forced to give up to pay these new taxes? Perhaps
all members of the legislature should stop and ask why
they were sent to Juneau and if they cannot do what the
voters want done, resign.
Number 1341
CHAIR JAMES replied to the quote by saying that she realizes that
every legislator comes from a different part of the state. She
noted that there are 40 different districts in the state and they
all have different interests, needs and situations. She
explained that a leader in this state has to address things that
the people in his/her district believe, but she also believes
that the representative must have discussions with people and
give them information that the representative has regarding
issues because many people do not have information. She
commented that state legislators have a responsibility to be sure
that everyone in the state is treated fairly and equally. She
mentioned that the budget process is one of those places where
the legislator addresses issues. She is convinced that the
legislature has been cutting muscle from the budget. Also she is
convinced that there is still fat in the budget, but she does not
believe she can get there because most decisions are
administrative, and until the administration is willing to review
where things could be done more efficiently, no meaningful cuts
will happen. If she were governor, the first thing she would do
is hire an expert to do an efficiency evaluation of how the state
does things because she is sure there are ways the state can be
more efficient than at present. She agreed that it does cost
money to change systems and nothing is cheap. She emphasized
that it is difficult to make long term goals achievable when
working with a spending plan made for one year at a time. She
acknowledged that the legislature has to do the best that it can.
Number 1181
CHERYL FRASCA, Fiscal Policy Council of Alaska, testified via
teleconference from Anchorage and read her testimony as follows:
My name is Cheryl Frasca and I am here on behalf of the
Fiscal Policy Council of Alaska. The Council, created
in late 1998, is a nonpartisan, nonprofit organization
dedicated to promoting long-term fiscal certainty for
the state through research and objective information
about Alaska's finances.
The Council believes that an important criterion for
any long-term fiscal proposal is whether it sustains
the real value of the state's financial assets because
these assets will be the primary source of revenues to
the state for the foreseeable future. To that end, we
applaud the work of Representative Hudson and the co-
sponsors of HB 411 for their willingness to step
forward and advance changes that will enhance the
Permanent Fund's long-term role in securing Alaska
fiscal future.
With regard to HB 411, the central question for the
Council is whether Alaskans can expect that the real
value of the Permanent Fund to be the same or greater
in the future. In analyzing HB 411, we find that the
answer to this question is yes. The results of this
analysis are included in a copy of FISCAL SENSE, which
I hope is in your bill file. Our analysis is based on
a model developed for the Council by Dr. Scott
Goldsmith of the University of Alaska's Institute of
Social and Economic Research.
The Fiscal Policy Council has several other comments
that are included in a letter to Representative Hudson,
which is in your bill file. Briefly, these are:
1. Changing the payout method so the Permanent
Fund is treated as a trust in which there is
an annual draw will enhance stability in the
level of earnings annually available for
public purposes;
2. An annual payout rate that exceeds 5 percent
increases the chance of diminishing the
Fund's value over time. A higher payout
relies on an aggressive rate of return for
the Fund's investments and leaves little room
for downside error. In some years the Fund
may not earn enough to keep up with
inflation. As a result, in other future
years, higher returns will be necessary to
get back on track to protect the Permanent
Fund's value. A higher payout rate raises
that bar while a more conservative payout
rate reduces this risk.
3. Using a five-year average of the market value
to calculate the payout rate reduces the
impact of annual fluctuations on the Fund's
market value.
There are several other comments in the letter that
pertain to elements of an overall fiscal plan that are
not addressed in HB 411, so I won't go into these at
this time.
Number 0932
MARY GRISWOLD, testified via teleconference from Homer as
follows:
I strongly favor HB 411 as a better approach to long
term financial planning than SJR 33/HJR 47 or SJR
35/HJR 49. SJR 33 violates a purpose of the Permanent
Fund to provide for present AND future Alaskans, causes
problems for food stamp recipients and those needing
housing assistance, hinders orderly economic
stimulation, and results in a large federal income tax
bite for buy out recipients.
SJR 35 preserves the methodology of the Permanent Fund
earnings distribution but not the value of the annual
dividend because the undistributed income and
unrealized gains in the Earnings Reserve Account remain
subject to Legislative appropriation which could
dramatically reduce the principal upon which the
earning potential depends.
HB 411 moves the distribution of Permanent Fund
earnings to a percentage of market value approach which
protects the Permanent Fund principal, maximizes the
stability of annual distributions, promotes a long term
investment strategy allowing our equity investments to
reach their full potential, maintains the value of the
dividend program, and provides funding for essential
government services. Combined with reasonable taxes,
this bill will balance our budget and provide the
framework for a successful long term financial plan.
I strongly urge you to keep the payout at 5 percent.
This is commonly accepted as reasonable by most of the
country's large endowments. It is better to err on the
side of protecting the Permanent Fund's principal than
on the side of increased spending.
I also urge the legislature to start research on tax
options at the earliest moment, to come up with a
reasonable combination of sales and income taxes that
most fairly shares the burden for funding public
services among all those who benefit, including out of
state workers and tourists.
Number 0712
REPRESENTATIVE WHITAKER acknowledged that the legislature does
have a budget out of balance and from the beginning, it has
become very clear that there are a number of choices. He
reminded the committee that the budget can be cut -- or as some
people call it cost control. He remarked that he prefers the
term "cost control" because cost control can be used to achieve
efficiency whereas cutting may not achieve it. Nevertheless,
cutting the budget has been tried, and it has not resulted in
what Alaska needs. He recognized that another choice is to
utilize some earnings of the PF; the legislature tried that last
year as a complete fix, but it did not work because the people
said no. Obviously another choice is some form of taxation, and
the legislature should try that, recognizing that taxation is
part of the mix. He said that the fourth component is economic
growth. It is ironic that in a state as wealthy as Alaska that
the legislature refuses to recognize the wealth. Those four
things he has cited are increments to a plan, and he restated
them as follows: cost control, utilization of PF earnings, some
form of taxation, and economic growth. He explained that the
proposed CS plans to use PF earnings, and he supports it since he
thinks the proposed CS is reasonable and necessary.
Number 0538
CHAIR JAMES reiterated that it costs money to revise the way
things are done. She said that as long as the legislature is in
a cost containment and budget-cutting mode, discouragement will
be seen in economic development because there may not be people
to do permitting or to manage resources. Any real economic
development will not be observable until the legislature gets its
budget under control. Another issue is that as long as
additional tax on business looms as a potential to folks, people
will not be willing to go into business in this state. In the
whole scheme of things, the legislature must project long-term
stability in how the state deals with business people, not only
in regulations but also in taxing and other costs of doing
business in the state. She reiterated that the final
responsibility of making decisions belongs to the legislature,
and legislators were elected to make decisions. She emphasized
that the issues need to be studied thoroughly because the issues
are so multi-faceted.
Number 0389
REPRESENTATIVE WHITAKER made a motion to move CSHB 411, version
1-LS1443\M, Cook, 3/23/00, from committee with the attached zero
fiscal note.
REPRESENTATIVE OGAN objected. He said he will not support any
new taxes or any use of the PF until he sees that the legislature
has done all it can do to reduce the size of government at an
affordable level. He stated that he does not believe that the
legislature is there yet.
CHAIR JAMES stated that she will not vote for anything either for
the same reasons, with exception to HB 137, because HB 137 frees
up $46.9 million of general funds.
A roll call vote was taken. Representatives Green, Hudson,
Kerttula, Smalley, Whitaker, and James voted in favor of moving
the bill. Representative Ogan voted against it. Therefore, CSHB
411(STA) moved from the House State Affairs Standing Committee by
a vote of 6-1.
Number 0219
REPRESENTATIVE AUSTERMAN thanked the committee for moving the
bill forward because it will give the legislature an opportunity
to have continued discussion and bring it before the public so
that during the interim the legislature will be able to put
together some type of long range plan. He urged Chair James to
bring forward her income tax bill (HB 124) also.
CHAIR JAMES said the only reason she had presented HB 124 was to
start discussing taxation. She explained that she is totally
opposed to a graduated net income tax because she does not think
people should work harder and longer to make a smaller dollar.
She does not approve of piggybacking on the federal government
tax because it is flawed. The other thing that she wants to say
about HB 124 is that she is not going to forward it. Her
interest in having a tax plan that works is to have as little
administrative responsibility as possible. She mentioned that
her tax plan almost totally eliminates any requirement of audit,
so that saves in administrative costs. [End of discussion on HB
411 and HB 124.]
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:40
a.m.
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