Legislature(2019 - 2020)GRUENBERG 120

04/25/2019 03:00 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 139 AK PERM. FUND CORP. PROCUREMENT EXEMPTION TELECONFERENCED
Heard & Held
*+ HB 132 PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS TELECONFERENCED
Heard & Held
*+ HJR 6 CONST. AM.:PERMANENT FUND & DIVIDEND TELECONFERENCED
Heard & Held
*+ HJR 18 CONST AM: PERMANENT FUND; POMV;EARNINGS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 25, 2019                                                                                         
                           3:03 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Zack Fields, Co-Chair                                                                                            
Representative Jonathan Kreiss-Tomkins, Co-Chair                                                                                
Representative Gabrielle LeDoux                                                                                                 
Representative Andi Story                                                                                                       
Representative Adam Wool                                                                                                        
Representative Sarah Vance                                                                                                      
Representative Laddie Shaw                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Jennifer Johnston                                                                                                
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 139                                                                                                              
"An Act  providing an exemption  from the state  procurement code                                                               
for  the acquisition  of investment-related  services for  assets                                                               
managed by  the Board  of Trustees of  the Alaska  Permanent Fund                                                               
Corporation."                                                                                                                   
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 132                                                                                                              
"An Act  relating to the  Alaska permanent fund; relating  to the                                                               
earnings  reserve   account;  relating  to  the   permanent  fund                                                               
dividend; relating to deposits into  the permanent fund; relating                                                               
to  appropriations to  the dividend  fund and  general fund;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 18                                                                                                   
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating to the Alaska permanent  fund and to appropriations from                                                               
the Alaska permanent fund.                                                                                                      
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 6                                                                                                    
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to the Alaska permanent fund and the permanent fund                                                                    
dividend.                                                                                                                       
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 139                                                                                                                  
SHORT TITLE: AK PERM. FUND CORP. PROCUREMENT EXEMPTION                                                                          
SPONSOR(s): REPRESENTATIVE(s) JOHNSTON                                                                                          
                                                                                                                                
04/17/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/17/19       (H)       STA, FIN                                                                                               
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
BILL: HB 132                                                                                                                  
SHORT TITLE: PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS                                                                              
SPONSOR(s): REPRESENTATIVE(s) WOOL                                                                                              
                                                                                                                                
04/15/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/15/19       (H)       STA, FIN                                                                                               
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
BILL: HJR 18                                                                                                                  
SHORT TITLE: CONST AM: PERMANENT FUND; POMV;EARNINGS                                                                            
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS                                                                                    
                                                                                                                                
04/24/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/24/19       (H)       STA, JUD, FIN                                                                                          
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
BILL: HJR 6                                                                                                                   
SHORT TITLE: CONST. AM.:PERMANENT FUND & DIVIDEND                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       STA, JUD, FIN                                                                                          
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROBERT ERVINE, Staff                                                                                                            
Representative Jennifer Johnston                                                                                                
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HB  139   on   behalf   of                                                             
Representative Johnston, prime sponsor.                                                                                         
                                                                                                                                
ANGELA RODELL, Executive Director                                                                                               
Alaska Permanent Fund Corporation (APFC)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing on HB                                                             
139.                                                                                                                            
                                                                                                                                
NATHANIEL GRABMAN, Staff                                                                                                        
Representative Adam Wool                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HB  132   on   behalf   of                                                             
Representative Wool, prime sponsor, with  the use of a PowerPoint                                                               
presentation.                                                                                                                   
                                                                                                                                
BRUCE TANGEMAN, Commissioner                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Introduced HJR  6 on  behalf of  the House                                                             
Rules Standing Committee, sponsor, by request of the governor.                                                                  
                                                                                                                                
WILLIAM MILKS, Senior Assistant Attorney General                                                                                
Legislation & Regulations Section                                                                                               
Civil Division (Juneau)                                                                                                         
Department of Law (DOL)                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided a  sectional analysis for HJR 6, on                                                             
behalf  of  the  House  Rules  Standing  Committee,  sponsor,  by                                                               
request of the governor.                                                                                                        
                                                                                                                                
MIKE BARNHILL, Director of Policy                                                                                               
Office of Management & Budget (OMB)                                                                                             
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Answered questions  during the  hearing on                                                             
HJR 6.                                                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:03:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS   called  the   House  State   Affairs  Standing                                                             
Committee meeting to order at  3:03 p.m.  Representatives LeDoux,                                                               
Story,  Wool,  Vance,  Shaw,   Kreiss-Tomkins,  and  Fields  were                                                               
present at  the call to  order.  Also present  was Representative                                                               
Johnston.                                                                                                                       
                                                                                                                                
        HB 139-AK PERM. FUND CORP. PROCUREMENT EXEMPTION                                                                    
                                                                                                                              
3:04:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced that the  first order of business would                                                               
be HOUSE  BILL NO. 139, "An  Act providing an exemption  from the                                                               
state procurement code for  the acquisition of investment-related                                                               
services  for assets  managed by  the  Board of  Trustees of  the                                                               
Alaska Permanent Fund Corporation."                                                                                             
                                                                                                                                
3:04:23 PM                                                                                                                    
                                                                                                                                
ROBERT  ERVINE, Staff,  Representative Jennifer  Johnston, Alaska                                                               
State Legislature,  on behalf  of Representative  Johnston, prime                                                               
sponsor of HB 139, paraphrased  from the sponsor statement, which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     House  Bill  139  adds  an  exemption  to  the  state's                                                                    
     procurement code  that would  let the  Alaska Permanent                                                                    
     Fund Corporation  (APFC) be exempt  from the  code when                                                                    
     evaluating and managing assets.                                                                                            
                                                                                                                                
     In a  recent effort to  cut costs and  increase revenue                                                                    
     margins, pressure has been placed  on the APFC to bring                                                                    
     more of  their fund  management in-house.  With markets                                                                    
     changing quickly,  it is important  that they  have the                                                                    
     tools to quickly evaluate and manage investments.                                                                          
                                                                                                                                
     Under  existing law,  APFC is  exempt from  the state's                                                                    
     procurement  code  when  it acquires  income  producing                                                                    
     assets or delegates  its investment authority. However,                                                                    
     they  must comply  with  the  state's procurement  code                                                                    
     when  evaluating and  managing the  assets in  which it                                                                    
     invests.  This  bill will  allow  them  to perform  due                                                                    
     diligence in a timely manner.                                                                                              
                                                                                                                                
     This exemption will improve  APFC's ability to identify                                                                    
     subject matter experts,  gather professional background                                                                    
     information and  negotiate contracts in under  10 days,                                                                    
     compared  to the  minimum 54  days  required under  the                                                                    
     state's procurement  code. The change proposed  in this                                                                    
     bill will  allow an  expeditious timeline  that closely                                                                    
       aligns with the pace of the markets in which APFC                                                                        
     works.                                                                                                                     
                                                                                                                                
      Allowing APFC the exemption in HB 139 will give them                                                                      
       the tools they need to meet the added demands that                                                                       
     Alaskans are placing on the fund.                                                                                          
                                                                                                                                
3:05:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STORY asked  for the  number of  investments that                                                               
would be exempt from the procurement code under HB 139.                                                                         
                                                                                                                                
3:06:37 PM                                                                                                                    
                                                                                                                                
ANGELA   RODELL,  Executive   Director,  Alaska   Permanent  Fund                                                               
Corporation (APFC), responded that APFC  expects HB 139 to affect                                                               
about eight to ten decisions annually.                                                                                          
                                                                                                                                
REPRESENTATIVE STORY  asked whether money would  be saved through                                                               
the procedures proposed under HB 139.                                                                                           
                                                                                                                                
MS. RODELL  answered that  it is  her belief  that there  will be                                                               
some cost  savings.  The  APFC would  be able to  acquire subject                                                               
matter  experts   itself  instead  of  relying   on  third  party                                                               
contractors  to  acquire  subject matter  experts  and,  thereby,                                                               
generating cost savings to the state and to the fund.                                                                           
                                                                                                                                
REPRESENTATIVE  VANCE asked  for  an explanation  of the  current                                                               
procurement code under which APFC operates.                                                                                     
                                                                                                                                
MS. RODELL relayed that APFC  is under the full state procurement                                                               
code, and  the only  exemption is  for the  investment decisions.                                                               
For example, APFC  is not subject to the procurement  code to buy                                                               
a bond or to hire a money manager.                                                                                              
                                                                                                                                
REPRESENTATIVE VANCE asked for the  length of time in the current                                                               
procurement process.                                                                                                            
                                                                                                                                
MS. RODELL  answered that the  length of time  is about 50  to 60                                                               
days, including notifications and appeals.                                                                                      
                                                                                                                                
REPRESENTATIVE  VANCE  asked  whether  HB 139  would  waive  that                                                               
process, so that someone could be hired within a few days.                                                                      
                                                                                                                                
MS. RODELL responded, "That is correct."                                                                                        
                                                                                                                                
REPRESENTATIVE VANCE  commented that she understands  the need to                                                               
respond  quickly  to investment  opportunities.    She asked  why                                                               
there is  need for  the proposed change  considering the  fund is                                                               
performing well.                                                                                                                
                                                                                                                                
MS. RODELL offered  that if APFC can streamline  the process, use                                                               
staff  resources to  directly acquire  the needed  expertise, and                                                               
not  rely on  third parties  in  order to  avoid the  procurement                                                               
process,  it  can  be  much  more  opportunistic  and  timely  in                                                               
accessing  investments   and,  therefore,  get   more  investment                                                               
return.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  VANCE  questioned  how procedures  under  HB  139                                                               
would prevent  the "good old  boy" type  of hiring of  which many                                                               
people are suspicious.                                                                                                          
                                                                                                                                
MS. RODELL answered  that the APFC trustees and  staff take their                                                               
fiduciary responsibility very seriously.   The proposed exemption                                                               
is meant to  confirm the underlying thesis of  an investment, not                                                               
give a "good  old boy" a subject matter waiver  or steer business                                                               
in  any one  direction.   The  APFC has  instituted processes  to                                                               
prevent  such from  occurring, and  the fund  results demonstrate                                                               
the efficacy of those processes.                                                                                                
                                                                                                                                
REPRESENTATIVE   VANCE   asked   for  an   elaboration   of   the                                                               
requirements for hiring investors.                                                                                              
                                                                                                                                
MS. RODELL  explained that  the process  for hiring  managers and                                                               
investment advisors is  in the APFC Board  of Trustees investment                                                               
policy.  The  policy is a living document that  the board reviews                                                               
annually  to ensure  that  the policy  continues  to reflect  the                                                               
procedures and  the goals of  the fund.   Within that  policy are                                                               
manager selection  rules and requirements;  the APFC  is required                                                               
to  use  the  board's  general  consultant  to  assist  with  the                                                               
selection  process;   and  a  process  for   alternative  manager                                                               
searches is  outlined in the policy.   She offered that  a series                                                               
of  questionnaires  are used  for  the  selection process.    The                                                               
process is like  the [state] procurement process  absent the time                                                               
periods and state contracting requirements.                                                                                     
                                                                                                                                
3:13:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  stated that  she was under  the impression                                                               
that the  proposed legislation would  allow APFC to  retain third                                                               
party  people, which  currently  must be  accomplished under  the                                                               
procurement code.   She asked for confirmation  that Ms. Rodell's                                                               
testimony is that  APFC currently relies on a  consulting firm to                                                               
make the hires, and HB 139  would allow APFC to hire the [subject                                                               
matter experts] directly.                                                                                                       
                                                                                                                                
MS. RODELL  replied that  currently APFC can  hire a  fiduciary -                                                               
someone with specific  responsibility to manage fund  money.  The                                                               
proposed  legislation would  expand  APFC's  hiring authority  to                                                               
include subject matter experts relevant  to a specific investment                                                               
idea.    For  example,  APFC   wants  to  directly  invest  in  a                                                               
biotechnology idea and not use  a fiduciary, but because it lacks                                                               
the underlying expertise  [in the subject matter],  it would like                                                               
to  consult  with a  medical  person.    Currently APFC  must  go                                                               
through the  state procurement process to  find that professional                                                               
service.  She  stated that APFC is asking for  a procurement code                                                               
exemption to acquire that professional service.                                                                                 
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  whether  the  state's  procurement                                                               
code, not personnel code, would be used to hire state employees.                                                                
                                                                                                                                
MS. RODELL responded that APFC  does not use the procurement code                                                               
to  hire  people.    She  explained  that  she  is  referring  to                                                               
professional service contracts with subject matter experts.                                                                     
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  for confirmation  that the  experts                                                               
would not be hired as employees but retained as contractors.                                                                    
                                                                                                                                
MS.  RODELL answered,  "That is  correct."   She stated  that the                                                               
experts would be  hired to opine on a specific  subject matter in                                                               
their fields  of expertise,  such as  engineering, biotechnology,                                                               
technology, or software.   The APFC would ask the  experts to use                                                               
their expertise to opine on  the business validity of a potential                                                               
investment.                                                                                                                     
                                                                                                                                
REPRESENTATIVE LEDOUX mentioned that she  is confused by the term                                                               
"hire."   She offered that  MS. Rodell is referring  to retaining                                                               
an  expert as  a third-party  contractor and  not an  employee of                                                               
APFC.                                                                                                                           
                                                                                                                                
MS. RODELL concurred.                                                                                                           
                                                                                                                                
3:16:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  expressed that  currently APFC can  spend up                                                               
to $100,000 without being subject  to the state procurement code;                                                               
therefore, an expert could be paid up to that amount.                                                                           
                                                                                                                                
MS. RODELL  agreed that  the state  procurement code  has limited                                                               
exception for under $100,000.                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL asked whether  an expert opinion costing over                                                               
$100,000 is common and asked  for confirmation that the amount is                                                               
the cost  for an opinion and  not a percentage of  the investment                                                               
or return.                                                                                                                      
                                                                                                                                
MS.  RODELL responded,  "That is  correct."   She added  that the                                                               
cost depends on the time  spent reviewing all the information and                                                               
writing an opinion.  She said  that part of the challenge is that                                                               
the shorter the  time frame available for the  review, the higher                                                               
the cost.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  WOOL offered,  "$100,000 a  week, I  guess that's                                                               
acceptable."                                                                                                                    
                                                                                                                                
MS. RODELL mentioned that at  times there are teams of reviewers;                                                               
therefore,  the procurement  may involve  the work  of an  entire                                                               
group.                                                                                                                          
                                                                                                                                
REPRESENTATIVE WOOL asked for confirmation  that an investment by                                                               
APFC is not subject to the procurement code.                                                                                    
                                                                                                                                
MS. RODELL answered, "That is correct."                                                                                         
                                                                                                                                
REPRESENTATIVE WOOL asked whether  a real estate investment, such                                                               
as purchasing a  skyscraper, can be made without  adhering to the                                                               
procurement code.                                                                                                               
                                                                                                                                
MS. RODELL answered, "That is correct."                                                                                         
                                                                                                                                
REPRESENTATIVE WOOL  offered that  the procurement code  needs to                                                               
be followed when getting advice  on the building being intact, if                                                               
the advice is $150,000.                                                                                                         
                                                                                                                                
MS. RODELL answered, "Exactly."                                                                                                 
                                                                                                                                
REPRESENTATIVE WOOL  suggested that the  cost of an opinion  on a                                                               
major skyscraper is substantial.                                                                                                
                                                                                                                                
MS. RODELL replied, "It can be."                                                                                                
                                                                                                                                
3:19:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS asked for an  example of how obtaining the expert                                                               
opinion on  investments has produced significant  returns for the                                                               
corporation  and how  giving APFC  the ability  to contract  with                                                               
experts would provide the opportunity for more returns.                                                                         
                                                                                                                                
MS.  RODELL  stated  that  APFC invested  $189  million  in  JUNO                                                               
Therapeutics between 2012-2013.   The investment opportunity came                                                               
directly to  APFC from  the group  forming JUNO  Therapeutics; it                                                               
was a  fast-track investment.  The  APFC was unable to  procure a                                                               
medical expert opinion in the  timeframe available for evaluating                                                               
the investment.   She said that the investment was  offered as an                                                               
IPO  (initial  public  offering)  in  2017  and  has  netted  the                                                               
permanent fund about $1.8 billion.   The investment was extremely                                                               
lucrative and  is the type  of investment  that APFC wants  to be                                                               
able to  pursue using one  of its  investment managers and  not a                                                               
third-party.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  whether using  a  fiduciary  means                                                               
using another investment manager,  and therefore, paying more for                                                               
the service.                                                                                                                    
                                                                                                                                
MS. RODELL responded, "That is correct."                                                                                        
                                                                                                                                
3:22:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked for  further explanation of the two                                                               
different types of  third parties - the third party  that APFC is                                                               
currently using  versus the  third party it  would use  under the                                                               
proposed legislation.                                                                                                           
                                                                                                                                
MS.  RODELL  explained that  currently  APFC  uses an  investment                                                               
manager third  party; under HB  139 it would use  a non-fiduciary                                                               
third party - one that is not an investment manager.                                                                            
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  if currently  that [third  party]                                                               
investment manager in  turn procures the services  of the subject                                                               
matter expert;  therefore, APFC is paying  the investment manager                                                               
as a middleman to obtain the expertise.                                                                                         
                                                                                                                                
MS.  RODELL responded,  "That is  correct."   She added  that the                                                               
investment manager  then invests some  of his/her own  money into                                                               
the investment alongside of APFC money.                                                                                         
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS  offered   that  under   HB  139,   the                                                               
corporation could cut the middle entities out of the equation.                                                                  
                                                                                                                                
MS. RODELL answered, "That is correct."                                                                                         
                                                                                                                                
REPRESENTATIVE  WOOL offered  that  currently APFC  is using  two                                                               
middlemen  - the  fiduciary and  the subject  matter expert;  the                                                               
proposed  legislation  would  eliminate the  fiduciary  and  APFC                                                               
could hire the  expert directly.  He asked whether  the intent of                                                               
the  proposed legislation  is to  save  money by  not paying  the                                                               
middleman.    He  also  asked whether  the  procurement  code  is                                                               
followed for hiring the fiduciary.                                                                                              
                                                                                                                                
MS.   RODELL  confirmed   that   eliminating  the   [third-party]                                                               
investment  manager does  save the  corporation the  cost of  the                                                               
manager's fees.   The proposed  legislation also enables  APFC to                                                               
react in a timely manner to investment opportunities.                                                                           
                                                                                                                                
REPRESENTATIVE  WOOL  asked  whether  APFC  pays  the  investment                                                               
manager an hourly rate or a percentage of the investment.                                                                       
                                                                                                                                
MS. RODELL  confirmed that APFC pays  a management fee that  is a                                                               
percentage  of the  investment.   She added  that the  investment                                                               
manager usually receives a percentage  of any profit-sharing over                                                               
and above attaining certain performance indicators.                                                                             
                                                                                                                                
REPRESENTATIVE  WOOL   suggested  that   APFC  enters   a  fiscal                                                               
relationship with the investment managers  for a period; under HB                                                               
139, APFC  would hire  the expert directly,  pay him/her  for the                                                               
service, make the investment, and "move on."                                                                                    
                                                                                                                                
MS. RODELL replied, "Correct."                                                                                                  
                                                                                                                                
3:26:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  offered  that  the  proposed  legislation                                                               
would save APFC a  great deal of money.  She  asked Ms. Rodell to                                                               
give an example  in which APFC would have liked  to have retained                                                               
a  [subject  matter  expert]  directly   but  had  to  retain  an                                                               
intermediary fiduciary.  She asked  what amount of money was paid                                                               
to the fiduciary.                                                                                                               
                                                                                                                                
MS.  RODELL  referred  to the  previous  example  involving  JUNO                                                               
Therapeutics,  in which  APFC invested  $189  million and  netted                                                               
about $1.8 billion  after selling the stock.  She  stated that if                                                               
a fiduciary  was involved in  the transaction, he/she  would have                                                               
gotten a  $1 million  fee and 20  percent of  the profit-sharing.                                                               
The amount going to the fiduciary  would be in the millions.  She                                                               
said that  APFC is  pleased with its  return on  that investment.                                                               
She maintained, however, that decrements,  such as the $1 million                                                               
fee, cannot  be seen in a  $65 billion budget -  it "doesn't move                                                               
the  needle"; therefore,  discussing fee  savings is  a challenge                                                               
for APFC.   She emphasized that  fee savings is important  to the                                                               
corporation, and  the corporation is  always looking for  ways to                                                               
create  better  results for  the  people  of Alaska  through  its                                                               
investment activity.                                                                                                            
                                                                                                                                
3:30:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE  asked  whether   APFC  could  provide  the                                                               
legislature a  report next year  on the  savings under HB  139 if                                                               
passed.                                                                                                                         
                                                                                                                                
MS.  RODELL  responded  that  she  believes  that  tracking  that                                                               
information would be possible, especially  if the request is made                                                               
in advance.                                                                                                                     
                                                                                                                                
REPRESENTATIVE WOOL offered  that HB 139 would not  only save the                                                               
corporation money but extend to  it nimbleness, freedom, control,                                                               
and flexibility.                                                                                                                
                                                                                                                                
MS. RODELL concurred.                                                                                                           
                                                                                                                                
CO-CHAIR FIELDS stated that HB 139 would be held over.                                                                          
                                                                                                                                
3:31:25 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:31 p.m. to 3:33 p.m.                                                                       
                                                                                                                                
          HB 132-PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS                                                                      
                                                                                                                              
3:32:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced  that the next order  of business would                                                               
be HOUSE BILL  NO. 132, "An Act relating to  the Alaska permanent                                                               
fund; relating to  the earnings reserve account;  relating to the                                                               
permanent fund dividend; relating  to deposits into the permanent                                                               
fund;  relating  to  appropriations  to  the  dividend  fund  and                                                               
general fund; and providing for an effective date."                                                                             
                                                                                                                                
3:33:30 PM                                                                                                                    
                                                                                                                                
NATHANIEL GRABMAN, Staff, Representative  Adam Wool, Alaska State                                                               
Legislature, on  behalf of Representative Wool,  prime sponsor of                                                               
HB 132,  paraphrased from  the sponsor  statement, which  read as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
      HB 132 aims to maintain annual, oil-derived payments                                                                      
         to Alaskans while reducing the uncertainty in                                                                          
     government  funding inherent  in the  status quo.  This                                                                    
     will be accomplished by calculating  the PFD based on a                                                                    
     percentage of oil revenues.                                                                                                
                                                                                                                                
     The Alaska  Permanent Fund (PF)  is the  repository for                                                                    
     much of the  state's mineral wealth, with  most of that                                                                    
     wealth originally  derived from oil. Every  year, funds                                                                    
     are deposited into  the corpus of the PF,  and are then                                                                    
     invested  in  stocks,  bonds, real  estate,  and  other                                                                    
     financial  instruments.   Over  time,   this  principal                                                                    
     produces  earnings  from   which  Alaskans  receive  an                                                                    
     annual Permanent  Fund Dividend (PFD) check.  Given the                                                                    
     original  source of  the  corpus  funds, many  Alaskans                                                                    
     view the PFD as their share of the state's oil money.                                                                      
                                                                                                                                
     Historically, PFDs have been  based on a 5-year rolling                                                                    
     average of PF earnings.  Gubernatorial vetoes and lower                                                                    
     legislative  appropriation have  reduced the  amount of                                                                    
     the PFD from their statutory  value in each of the last                                                                    
     three years.  Barring a change, it  appears likely that                                                                    
     the  value  of the  PFD  will  continue to  be  debated                                                                    
     annually  by the  legislature, with  the proportion  of                                                                    
     the  Percentage of  Market  Value  (POMV) allocated  to                                                                    
     government services and the PFD constantly in flux.                                                                        
                                                                                                                                
     If  passed,  HB 132  would  ensure  steady funding  for                                                                    
     government services  by leaving the POMV  draw reserved                                                                    
     for  a specific  purpose rather  than split.  Residents                                                                    
     would  continue to  be paid,  with the  value of  their                                                                    
     annual royalty checks now tied  directly to the state's                                                                    
     mineral (oil) revenue. The value  of the dividend would                                                                    
     fluctuate along  with the price and  production of oil.                                                                    
     This uncertainty  is better  sustained in  the dividend                                                                    
     check,   as  certainty   and   predictability  are   of                                                                    
     paramount importance  for planning  government spending                                                                    
     into the future.                                                                                                           
                                                                                                                                
          If  the   price  or   volume  of   oil  production                                                                    
          increased, so too would our checks.                                                                                   
                                                                                                                                
          If oil taxes  increased, so would the dividend.                                                                       
                                                                                                                                
          If   new  natural   gas  resources   came  online,                                                                    
          dividends would rise.                                                                                                 
                                                                                                                                
           Increased dividends would also offset the                                                                            
          negative  effects  (higher  fuel,  utilities,  and                                                                    
          shipping prices) caused when oil prices are high.                                                                     
                                                                                                                                
MR. GRABMAN added that there  is not a strong correlation between                                                               
oil revenue each year and the  historic PFD; in fact, they appear                                                               
to  be inversely  correlated.   The general  trend has  been that                                                               
when  the price  of oil  increases, the  PFD decreases,  and vice                                                               
versa.                                                                                                                          
                                                                                                                                
MR. GRABMAN  stated that with  passage of Senate Bill  26 [during                                                               
the Thirtieth  Alaska State  Legislature, 2017-2018,  signed into                                                               
law 6/27/18],  a percentage of  POMV draw  is the state  law; the                                                               
proportion of the POMV that will  be devoted to the PFD this year                                                               
has already been the source of  much discussion in both bodies of                                                               
the legislature,  and such discussions appear  likely to continue                                                               
on an annual basis moving forward.                                                                                              
                                                                                                                                
MR. GRABMAN relayed that although  the principal of the permanent                                                               
fund is  primarily derived  from oil  wealth, the  performance of                                                               
the Permanent Fund Earnings Reserve  ("earnings reserve"), and by                                                               
extension,  the value  of  the PFD,  have  arguably tracked  more                                                               
closely with  stock market  fluctuations than  with the  price or                                                               
production of oil.   He added that in the  same way the taxpayers                                                               
are  more likely  to pay  attention to  government spending  than                                                               
non-taxpayers.   Tying the PFD  directly to Alaska's  oil revenue                                                               
will  ensure  that residents  remain  informed  and engaged  with                                                               
respect to the state's oil prices, production, and policies.                                                                    
                                                                                                                                
3:36:20 PM                                                                                                                    
                                                                                                                                
MR. GRABMAN  referred to a PowerPoint  presentation, entitled "HB                                                               
132:   A  New Approach  to  the PFD."   Beginning  with slide  2,                                                               
entitled  "What does  HB 132  accomplish?", Mr.  Grabman reviewed                                                               
the following points:                                                                                                           
                                                                                                                                
      Stabilize government funding by dedicating the POMV                                                                       
     draw for state services.                                                                                                   
                                                                                                                                
     Link the Dividend directly to oil revenues.                                                                                
                                                                                                                                
     Reduce need for recurrent legislative battle over PFD                                                                      
     amount.                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  explained that the state  has been "breaking                                                               
the law" in its method of paying  out the PFD in the last several                                                               
years;  the  statutory formula  prescribes  one  method, and  the                                                               
state has  been following  another method.   He offered  that the                                                               
proposed  legislation would  eliminate the  old statute  to avoid                                                               
the state breaking the law, and  a new statute would be enacted -                                                               
one  that would  be  more easily  followed.   He  added that  the                                                               
"battle"  that  Mr. Grabman  mentioned  is  the battle  over  the                                                               
amount of the dividend; that  battle never used to happen because                                                               
the  state  followed the  statute.    He  said that  the  extreme                                                               
decline in  revenue has caused  fiscal realignment; HB  132 would                                                               
attempt to eliminate that annual conflict.                                                                                      
                                                                                                                                
REPRESENTATIVE SHAW asked if the  proposed legislation would give                                                               
the  state  the  flexibility  to  utilize  the  POMV  as  needed,                                                               
separating the government services and the dividend.                                                                            
                                                                                                                                
REPRESENTATIVE WOOL  replied that  HB 132  would retain  the POMV                                                               
draw from  the permanent  fund at the  current 5.25  percent, and                                                               
that draw would be transferred, in full, to GF.                                                                                 
                                                                                                                                
REPRESENTATIVE  LEDOUX  questioned,  "Since the  legislature  has                                                               
seen  fit to  not  follow the  law with  respect  to the  current                                                               
statute, what  makes you think  that ...  we would be  any better                                                               
when it comes to following the formula that you've set out?"                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL answered  that  the  current situation  came                                                               
about when [Governor  Bill Walker] vetoed half of  the PFD amount                                                               
in the budget [during the  Twenty-Ninth Alaska State Legislature,                                                               
2015-2016],  and it  continued  during following  two years  [the                                                               
Thirtieth   Alaska  State   Legislature,   2017-2018]  when   the                                                               
legislature  appropriated less  than the  statutory formula.   He                                                               
offered that  this occurred  because the  state could  not afford                                                               
the larger  payment.  He  further stated that a  $3,000 statutory                                                               
PFD would total about $1.9 billion.   If the revenue from oil and                                                               
POMV comes to  $5 billion, and almost $2 billion  is spent on PFD                                                               
checks, Alaskans  question, "Is  that the best  way to  spend the                                                               
limited revenue that we have?"                                                                                                  
                                                                                                                                
REPRESENTATIVE WOOL  continued by saying  that HB 132  would link                                                               
the PFD  amount to the  revenue:  when  oil revenue is  down, the                                                               
amount of  the PFD would  be lower; when  oil revenue is  up, the                                                               
amount of the PFD would be  higher.  He offered that by statutory                                                               
formula,  the PFD  amount is  high, but  the oil  revenue to  the                                                               
state is  not high,  and this  has caused  the problems  that the                                                               
state is currently experiencing.                                                                                                
                                                                                                                                
3:41:10 PM                                                                                                                    
                                                                                                                                
MR. GRABMAN  continued with  slide 3,  entitled "Current  flow of                                                               
oil money and related funds."   He explained that there two types                                                               
of  oil -  leases that  pre-date 1980  and leases  that start  in                                                               
1980.    He  referred  the  committee  to  Alaska  Statutes  (AS)                                                               
37.13.010(a) for  greater detail.   He stated that 25  percent of                                                               
leases,  royalties, royalty  sales, bonuses,  net profit  shares,                                                               
and federal  mineral revenue from the  "old" oil is put  into the                                                               
corpus; 50  percent of those  revenue sources from the  "new" oil                                                               
is put  into the corpus.   He pointed  out that the  Alaska State                                                               
Constitution, Article  IX, Section  15, states  that at  least 25                                                               
percent of  this revenue must be  transferred to the corpus.   He                                                               
said  that  the  remainder  of the  revenue,  including  all  the                                                               
production tax,  currently flows into GF.   Once the money  is in                                                               
the corpus,  it is  invested; the  investment earnings  flow into                                                               
the earnings reserve, which by  statute is inflation-proofed; and                                                               
due to Senate Bill 26, there is  a POMV draw, which goes into GF.                                                               
He  stated,  "And  we  then  have  a  long,  bruising,  drawn-out                                                               
argument discussion to figure out what the PFD is going to be."                                                                 
                                                                                                                                
MR. GRABMAN referred to slide 4,  entitled "flow of oil money and                                                               
related funds  under HB  132," and said  that under  the proposed                                                               
legislation, there would  no longer be a  distinction between old                                                               
oil and new oil; 25  percent of leases, royalties, royalty sales,                                                               
bonuses,  net profit  shares, federal  mineral  revenue would  go                                                               
into the corpus; the money  flows within the permanent fund would                                                               
be  the same  as  described  under the  current  system; and  the                                                               
question would be,  What about the other 75 percent  of those six                                                               
categories from all the oil?   He explained that under HB 132, 33                                                               
percent  of the  six revenue  sources and  production tax  or the                                                               
amount needed  to distribute  an $1,800 dividend  would go  to GF                                                               
where it  would be appropriated to  the PFD fund and  paid out as                                                               
dividends.   He  said  that if  there is  not  enough revenue  to                                                               
afford an $1,800  dividend, then the remaining 42  percent of the                                                               
six revenue  sources would go  into GF  along with 67  percent of                                                               
the production tax.                                                                                                             
                                                                                                                                
MR.  GRABMAN moved  on to  slide 5,  entitled "HB  132 vs  Actual                                                               
PFD," and  stated that the  chart on  the slide shows  the actual                                                               
PFDs since inception  compared with what they would  have been if                                                               
HB 132 had been enacted throughout  that time.  He pointed out in                                                               
the  chart  that  the  trends  of the  two  lines  are  often  in                                                               
opposition; the  amount of  oil revenue  has not  correlated with                                                               
the historical amounts of the PFD.                                                                                              
                                                                                                                                
MR. GRABMAN  referred to  slide 6, entitled  "HB 132  (capped and                                                               
uncapped PFD) vs.  Actual PFD", which adds the trend  line for an                                                               
uncapped PFD  under the scenario  of HB 132 having  been enacted.                                                               
He  pointed out  that  uncapped  PFDs would  have  been like  the                                                               
actual PFDs  most years; however,  there would have  been massive                                                               
disparities between  the two for a  few years.  There  would have                                                               
been $5,000  PFDs in the years  that oil revenue spiked.   Having                                                               
the cap allows  the state to "put more money  away" in funds such                                                               
as the  Constitutional Budget  Reserve (CBR)  and other  funds to                                                               
save for the future.                                                                                                            
                                                                                                                                
3:45:24 PM                                                                                                                    
                                                                                                                                
MR. GRABMAN  moved on to  slide 7,  entitled "PFD Values,  HB 132                                                               
vs. Proposed  POMV Splits,"  and explained  that the  POMV splits                                                               
came from  the Legislative Finance  Agency and the  statutory PFD                                                               
came from  the Office of Management  & Budget (OMB).   He pointed                                                               
out the wide disparity between the trend lines in the graph.                                                                    
                                                                                                                                
MR. GRABMAN turned to slide 8,  entitled "FY202: HB 132 PFD check                                                               
values,  determined  by  per  barrel   oil  cost  and  production                                                               
levels."   He  explained  that the  chart  demonstrates what  the                                                               
dividend amounts  would be under  HB 132 at  different per-barrel                                                               
oil  costs.     The  chart   compares  the   official  production                                                               
projections with  the values determined for  different production                                                               
levels  by linear  extrapolation  - at  90  percent of  projected                                                               
production,  95  percent,  105  percent, and  110  percent.    He                                                               
pointed out that  the values at the  top half of the  chart - per                                                               
barrel oil  cost of $90 and  above - are mostly  above the $1,800                                                               
threshold.                                                                                                                      
                                                                                                                                
3:46:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE stated  her belief  that linking  the [PFD]                                                               
directly to  oil is counter to  the intent of the  permanent fund                                                               
since the time  of inception.  She stated that  the intent of the                                                               
permanent fund was  to take a non-renewable resource  and turn it                                                               
into a  renewable resource  to offset  when Alaska's  economy was                                                               
down due  to oil  prices; a  high [PFD] would  balance out  a low                                                               
Alaska economy.  She offered that  under HB 132, both the state's                                                               
economy  and the  PFD  would be  low at  the  same time,  hurting                                                               
Alaska's economy even more.                                                                                                     
                                                                                                                                
REPRESENTATIVE WOOL  agreed that  the permanent fund  was created                                                               
for the intent  that when oil prices were low,  Alaska would have                                                               
a vast  fund from  which to  draw for  operating.   He maintained                                                               
that under  HB 132,  that would not  change; the  structured POMV                                                               
draw of 5.25 percent would  fund government services; the revenue                                                               
would be steady and not be  "chipped away at year after year" for                                                               
PFD checks.   He maintained that under HB 132  the permanent fund                                                               
would stay intact and, in some ways, be more robust.                                                                            
                                                                                                                                
REPRESENTATIVE WOOL continued  by saying that the  PFD itself was                                                               
not in  the original  conversation concerning  the intent  of the                                                               
permanent fund.  He stated his  belief that the intent of the PFD                                                               
has morphed from its original intent.   He opined that the intent                                                               
of the  PFD was to give  Alaskans a dividend from  the oil wealth                                                               
so that  they would monitor  the investments and spending  of the                                                               
state.    He   mentioned  that  the  permanent   fund  has  grown                                                               
tremendously.   The  PFD  checks  began at  about  $300  - not  a                                                               
significant contribution to  a person's budget -  and varied from                                                               
year to year.  He mentioned  that the PFD has become a guaranteed                                                               
income.   With  the  new  structured draw  and  the  size of  the                                                               
permanent fund,  the checks could go  to $4,000.  He  offered his                                                               
belief  that such  a check  defies  the intent  of the  PFD.   He                                                               
concluded  that  under HB  132,  the  permanent fund  would  stay                                                               
intact and would be used to fund government and services.                                                                       
                                                                                                                                
3:51:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE  referred to  the chart on  slides 3  and 4.                                                               
She asked  whether reducing  the percentage  of new  oil revenues                                                               
going into the corpus from 50  percent to 25 percent under HB 132                                                               
would be detrimental to the corpus.                                                                                             
                                                                                                                                
REPRESENTATIVE  WOOL responded  that the  combined percentage  of                                                               
old  and new  oil revenues  is about  31 percent;  therefore, the                                                               
reduction  is from  31 percent  to 25  percent.   He agreed  that                                                               
under the proposed legislation, less would  go to the corpus.  He                                                               
added that  HB 132 was introduced  to adjust the PFD  in response                                                               
to the new POMV program.                                                                                                        
                                                                                                                                
REPRESENTATIVE  VANCE asked  for  the motivation  behind HB  132,                                                               
considering that less money would  go into the corpus, less money                                                               
would be introduced  into Alaska's economy, the  PFD checks would                                                               
be fluctuating as much as it  has historically, and only the POMV                                                               
portion for government operations would be protected.                                                                           
                                                                                                                                
REPRESENTATIVE  WOOL answered  that the  model proposed  under HB                                                               
132 would  cause greater fluctuations  in the  PFD check.   A $64                                                               
billion permanent  fund, invested and  producing an average  of 8                                                               
percent annual  return since inception, constitutes  steady money                                                               
regardless  of  the formula  for  the  PFD.    He said  that  his                                                               
proposal  would cause  the check  to fluctuate  depending on  the                                                               
price and production of oil.   He maintained his belief that some                                                               
variability in the  PFD check is acceptable.  He  stated that his                                                               
preference is that  the money for state government  be steady and                                                               
the  payments  to  Alaskans  be variable  according  to  the  oil                                                               
industry  market.   He suggested  that under  his proposal  there                                                               
would be  more incentive to  produce more oil or  produce natural                                                               
gas.  He  declared that in the  event that there is  no more oil,                                                               
or the oil market  abates, relying on a POMV draw  to pay the PFD                                                               
check  without  oil  revenue  would create  a  huge  problem  for                                                               
Alaska.   Under HB 132, if  there is no more  oil revenue, Alaska                                                               
is not committed to giving a large check in perpetuity.                                                                         
                                                                                                                                
3:56:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked for  confirmation that  the proposed                                                               
legislation puts a cap on the PFD but no floor on the PFD.                                                                      
                                                                                                                                
REPRESENTATIVE WOOL  replied, "You  are correct."   He  said that                                                               
the cap  could be raised or  lowered, or a floor  could be added.                                                               
He  reiterated that  if the  price of  oil goes  down to  $15 per                                                               
barrel  and production  goes  down to  250,000  barrels per  day,                                                               
Alaska  would have  a difficult  time operating.   He  maintained                                                               
that the  dividend under his  proposed legislation would  be like                                                               
the dividend one  gets with stock in Ford Motor  Company:  if the                                                               
company  has a  good  year,  the investor  gets  a good  dividend                                                               
check; if  the company loses money,  the investor does not  get a                                                               
good check.  He concluded that the  PFD under HB 132 is tied more                                                               
to performance of Alaska's number one resource.                                                                                 
                                                                                                                                
REPRESENTATIVE VANCE asked, "Who do  you represent - the state or                                                               
the people?"                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  responded that  he represents the  people in                                                               
the  state of  Alaska, and  he believes  that the  state and  the                                                               
people of  Alaska are  inextricably entwined.   He opined  that a                                                               
good state system  that supports the people is  desirable and, in                                                               
turn, the  people will support the  state.  He conceded  that his                                                               
proposed  legislation  is  a different  approach  than  has  been                                                               
considered.    The  previous   administration  introduced  a  PFD                                                               
proposal that was complicated; however,  there was a component of                                                               
that formula  that was dependent  on oil.   He mentioned  that in                                                               
2008, Governor Sarah  Palin proposed a bonus check  of $1,200 due                                                               
to abundant oil  revenues to the state; it was  an "energy" check                                                               
due to the  high cost of heating  oil.  When the price  of oil is                                                               
high, it is good  for the state but bad for  the residents; it is                                                               
of no  benefit to the average  citizen.  He maintained  that when                                                               
the price of oil  is high, a larger PFD check  can offset some of                                                               
the other expenses incurred due to the high cost of oil.                                                                        
                                                                                                                                
[HB 132 was held over.]                                                                                                         
                                                                                                                                
4:01:24 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:01 p.m. to 4:03 p.m.                                                                       
                                                                                                                                
        HJR 18-CONST AM: PERMANENT FUND; POMV; EARNINGS                                                                     
                                                                                                                              
4:03:12 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced  that the next order  of business would                                                               
be HOUSE  JOINT RESOLUTION  NO. 18,  Proposing amendments  to the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund  and to appropriations  from the  Alaska permanent                                                               
fund.                                                                                                                           
                                                                                                                                
4:03:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS, as prime sponsor HJR 18, paraphrased                                                                   
the sponsor statement, which read as follows [original                                                                          
punctuation provided]:                                                                                                          
                                                                                                                                
     House  Joint Resolution  18  (HJR 18)  constitutionally                                                                    
     protects the real value of  the Alaska Permanent Fund                                                                      
     permanently,  for future  generations    by "hardening"                                                                    
     the  POMV  structure  of  SB   26,  as  passed  by  the                                                                    
     legislature in 2018.                                                                                                       
                                                                                                                                
     HJR 18 constitutionally  limits appropriations from the                                                                    
     Permanent  Fund to  5%  of the  average  of its  market                                                                    
     value for  the first five  of the preceding  six fiscal                                                                    
     years. Because  POMV-based management of  the Permanent                                                                    
     Fund  renders  the  function of  the  earnings  reserve                                                                    
     account  obsolete,  HJR  18 also  merges  the  earnings                                                                    
     reserve  account with  the  principal; effectively  all                                                                    
     the Permanent Fund becomes the principal.                                                                                  
                                                                                                                                
     Most  important,  HJR  18   addresses  the  urgent  and                                                                    
     bipartisan  goal of  protecting the  real value  of the                                                                    
     Permanent  Fund for  future  generations. In  addition,                                                                    
     HJR 18  provides the Alaska Permanent  Fund Corporation                                                                    
     certainty in  managing assets, allowing APFC  to earn a                                                                    
     best  possible  return  on  its  investments,  for  the                                                                    
     benefit of Alaskans.                                                                                                       
                                                                                                                                
CO-CHAIR  FIELDS  asked  the reason  for  Representative  Kreiss-                                                               
Tomkins  concern  regarding  the  legislature  drawing  down  the                                                               
state's savings account.                                                                                                        
                                                                                                                                
CO-CHAIR KREISS-TOMKINS explained that  since he was elected, the                                                               
legislature has spent  $14 billion out of  savings, because doing                                                               
so was  easier than cutting  the operating budget  and/or passing                                                               
taxes.  He maintained that one  or the other of those two actions                                                               
should  have been  taken,  but neither  occurred  because it  was                                                               
easier  to spend  down  savings.   He  stated  that  he has  been                                                               
frustrated by  that scenario and  believes that putting  in place                                                               
hard  protections  is  an  important and  prudent  measure.    He                                                               
offered that the  permanent fund is one of  the largest sovereign                                                               
wealth funds in  the world and certainly the largest  in the U.S.                                                               
He mentioned that the permanent  fund is a huge intergenerational                                                               
asset and expressed his desire that it be there permanently.                                                                    
                                                                                                                                
CO-CHAIR FIELDS  mentioned that his staff  has prepared long-term                                                               
projections for the permanent fund  under different scenarios and                                                               
offered them to the committee members to review.                                                                                
                                                                                                                                
4:06:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SHAW  referred to  Representative Kreiss-Tomkins's                                                               
testimony  that  $14 billion  has  been  spent from  the  savings                                                               
accounts   -  the   Statutory  Budget   Reserve  (SBR)   and  the                                                               
Constitutional  Budget Reserve  Fund (CBRF).   He  mentioned that                                                               
Representative  Kreiss-Tomkins was  involved  in the  legislative                                                               
process that resulted in the spending  and asked, "We now have to                                                               
be prudent  because there is a  potential that we could  go broke                                                               
in that savings account?"                                                                                                       
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS explained  that  the $14  billion is  an                                                               
approximate  number; the  spending  began in  2013;  the SBR  has                                                               
about $1.7 billion remaining; and  therefore, the legislature has                                                               
effectively spent  the savings  down.  He  concluded that  it was                                                               
that  situation which  prompted  the passage  of  Senate Bill  26                                                               
[during  the  Thirtieth   Alaska  State  Legislature,  2017-2018,                                                               
signed into law 6/27/18].                                                                                                       
                                                                                                                                
REPRESENTATIVE  VANCE  concurred with  the  need  to protect  the                                                               
corpus of the  permanent fund and the importance  of it remaining                                                               
in perpetuity.  She asked whether there is a need for inflation-                                                                
proofing in the proposed legislation.                                                                                           
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  responded  that  inflation-proofing  is                                                               
effectively accounted for  in the percent of  market value (POMV)                                                               
structure  provided the  draw is  sufficiently conservative.   He                                                               
said  that  the 5  percent  draw  proposed  in  HJR 18  and  also                                                               
incorporated in Senate Bill 26  beginning in fiscal year 2021 (FY                                                               
21),  effectively  accounts  for  inflation  in  looking  at  the                                                               
average market value  of the permanent fund in the  first five of                                                               
the preceding six fiscal years.   With a greater percentage draw,                                                               
the  real  value  of  the  fund would  be  eroded  over  time  by                                                               
inflation.                                                                                                                      
                                                                                                                                
REPRESENTATIVE VANCE  asked whether the inflation-proofing  is in                                                               
statute.                                                                                                                        
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  explained that  under the  POMV approach                                                               
the permanent fund is basically  a classical endowment:  there is                                                               
a big  pot of  money, and the  draw down each  year is  a certain                                                               
percentage of the pot.  Currently,  Alaska has two pots of money:                                                               
one  pot is  static; the  other  constantly grows;  and money  is                                                               
transferred from  the growing pot to  the static pot.   He stated                                                               
that it is  important to account for inflation  by shifting money                                                               
from  the earnings  reserve account  (ERA)  to the  corpus on  an                                                               
annual basis to  ensure that the corpus will not  lose value over                                                               
time.     Under  his  proposed  legislation,   the  structure  is                                                               
simplified to  have one large  corpus -  all principle -  and the                                                               
draw already  accounts for inflation; in  other words, inflation-                                                               
proofing is built in.                                                                                                           
                                                                                                                                
CO-CHAIR  FIELDS added  that with  an  8 percent  or more  annual                                                               
return and  a 5  percent draw,  the remaining  3 percent  is more                                                               
than enough to prevent against inflation.                                                                                       
                                                                                                                                
4:11:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE  asked, "While  this protects the  corpus in                                                               
the constitution, where is the dividend?"                                                                                       
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS   responded   that  there   have   been                                                               
discussions among  legislators about whether the  [amount of the]                                                               
permanent  fund  dividend  (PFD)   should  be  addressed  in  the                                                               
constitution.   He  added  that he  personally  believes that  it                                                               
should be and has sponsored  a constitutional amendment to do so.                                                               
He  noted the  lack of  legislative support  for that  idea.   He                                                               
stated that as  a baseline, all legislators,  regardless of their                                                               
views on the PFD, agree on  the importance of protecting the fund                                                               
itself.   Under  HJR 18  and the  POMV approach  to managing  the                                                               
permanent fund, the  amount of the PFD becomes a  decision of the                                                               
legislature,  as  it is  currently.    He  mentioned that  the  5                                                               
percent draw  from the fund  would be more  than enough to  pay a                                                               
PFD  that  follows  the statutory  formula,  if  the  legislators                                                               
supported  it.   Currently,  the  political  is to  distribute  a                                                               
lesser amount.                                                                                                                  
                                                                                                                                
REPRESENTATIVE VANCE referred  to page 1, line 15-16,  of HJR 18,                                                               
which  read in  part:   "Each  fiscal year,  the legislature  may                                                               
appropriate  from  the permanent  fund  to  the general  fund  an                                                               
amount  that  is not  more  than  five  percent...."   She  asked                                                               
whether this could be interpreted  as "may appropriate the POMV."                                                               
She  added that  historically  the words  "may appropriate"  have                                                               
been "fighting words."   She asked the  reasoning behind choosing                                                               
this wording for the constitutional amendment.                                                                                  
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  restated  the question,  Why  does  the                                                               
amendment use  "may" instead of "shall"?   He stated that  if oil                                                               
exceeds $140 barrel  and a large amount  of traditional petroleum                                                               
revenue is flowing  into the state treasury,  the legislature may                                                               
choose  to draw  down  only  4.25 percent  of  the market  value,                                                               
because it doesn't  need the full 5 percent;  the remaining money                                                               
could be  left to grow  in the fund  for future generations.   He                                                               
suggested that  there may be  scenarios in which  the legislature                                                               
decides that spending the full 5 percent is unnecessary.                                                                        
                                                                                                                                
4:15:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether under  HJR 18,  taking a  5                                                               
percent draw rather  than a 5.25 percent draw,  would subject the                                                               
state  to greater  reductions in  services or  a lower  PFD check                                                               
than currently experienced.                                                                                                     
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS agreed  that there  would be  less money                                                               
available with  a POMV  draw of  5 percent  compared with  a POMV                                                               
draw of 5.25 percent; however,  there are many other variables at                                                               
play.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  VANCE  asked   Representative  Kreiss-Tomkins  to                                                               
explain how the ERA is currently used.                                                                                          
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  said that currently the  ERA consists of                                                               
realized and  unrealized earnings  from the permanent  fund; this                                                               
is the account  use by the legislature to pay  dividends and some                                                               
public services.   He added that the permanent  fund is generally                                                               
understood to consist of the corpus and the ERA combined.                                                                       
                                                                                                                                
REPRESENTATIVE  VANCE   asked  for  confirmation  that   the  two                                                               
accounts  are clearly  different regarding  accessing the  funds.                                                               
She asked  for clarification of  the motivation  behind combining                                                               
the accounts.                                                                                                                   
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS agreed  that there  is a  very important                                                               
and  profound  difference  between  the funds:    the  corpus  is                                                               
protected  in  the  constitution   and  cannot  be  accessed  for                                                               
appropriation, whereas the ERA - which  is close to $19 billion -                                                               
is available for  appropriation by a simple majority  vote of the                                                               
legislature.   He  noted that  the two-account  structure of  the                                                               
permanent  fund is  highly unusual  relative  to other  sovereign                                                               
wealth funds.                                                                                                                   
                                                                                                                                
[HJR 18 was held over.]                                                                                                         
                                                                                                                                
4:19:44 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:20 p.m. to 4:21 p.m.                                                                       
                                                                                                                                
           HJR 6-CONST. AM.:PERMANENT FUND & DIVIDEND                                                                       
 [Contains discussion of HJR 5, HJR 7, SJR 4, SJR 5, and SJR 6]                                                                 
                                                                                                                              
4:21:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced that the  final order of business would                                                               
be  HOUSE JOINT  RESOLUTION NO.  6, Proposing  amendments to  the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund and the permanent fund dividend.                                                                                 
                                                                                                                                
4:21:24 PM                                                                                                                    
                                                                                                                                
BRUCE  TANGEMAN, Commissioner,  Department of  Revenue (DOR),  on                                                               
behalf of the  House Rules Standing Committee, sponsor  of HJR 6,                                                               
by  request   of  the  governor,   lauded  the  actions   of  the                                                               
legislature  in  creating  the percent  of  market  value  (POMV)                                                               
structure of drawing money from  the permanent fund and noted the                                                               
current  discussions  in  the committee  meeting  addressing  the                                                               
split.   He stated that  HJR 6  would protect Alaskans'  right to                                                               
determine the  future of the  permanent fund dividend (PFD).   He                                                               
said that  the permanent fund  and the  PFD was never  broken and                                                               
worked  exactly  as  designed  for  34 years.    Over  the  three                                                               
decades, the PFD calculation and  the amount paid to Alaskans was                                                               
never  questioned, regardless  of the  size of  the check,  until                                                               
2016,  when  the  legislature  appropriated   the  full  PFD  and                                                               
Governor Bill Walker  vetoed it by half.  In  2017 and 2018, both                                                               
branches of government agreed on a reduced dividend.                                                                            
                                                                                                                                
MR.  TANGEMAN,  in  response to  Representative  Wool's  proposed                                                               
legislation [HB 132, introduced  and discussed during the 4/25/19                                                               
House  State  Affairs  Standing  Committee  meeting],  said  that                                                               
currently DOR tracks the market  to determine a five-year rolling                                                               
average; HB 132 would track the  price and production of oil.  He                                                               
stated that in 2012, the PFD was  $878; in 2013 the PFD was $900;                                                               
however, in  2015, the dividend  was the largest ever  at $2,072.                                                               
He stated that  the dip reflected the market  correction of 2008,                                                               
which  affected the  following five  years; in  2013, the  amount                                                               
again  increased and  was  at  its highest  level  in  2015.   He                                                               
conceded that  there has been  volatility in the PFD  amount, but                                                               
Alaskans never questioned the amount,  because they understood it                                                               
to  be the  result  of  the calculation  and  not  politics.   He                                                               
maintained that  political decisions regarding the  amount of the                                                               
PFD are  what "got  people's attention"  and created  the current                                                               
situation.                                                                                                                      
                                                                                                                                
MR. TANGEMAN said  that the constitutional amendment  under HJR 6                                                               
would  guarantee   the  PFD;  PFDs   would  not  be   subject  to                                                               
appropriation; the funds would be  transferred to the PFD payment                                                               
fund and  distributed.   He maintained  that the  amendment under                                                               
the proposed  resolution would protect  the PFD; it could  not be                                                               
reduced by the legislature or  the governor's veto.  Further, the                                                               
amendment would  require that  any changes  to the  statutory PFD                                                               
formula  would require  a vote  of  the people.   He  emphasized,                                                               
"It's Alaska's PFD  and they should be entrusted  with the future                                                               
of any changes to the calculation."   He stated that the proposed                                                               
resolution  is  part of  Governor  Michael  J. Dunleavy's  larger                                                               
fiscal  plan,  which is  to  ensure  Alaskans are  included  when                                                               
deciding the size and scope of their government.                                                                                
                                                                                                                                
4:26:09 PM                                                                                                                    
                                                                                                                                
WILLIAM MILKS,  Senior Assistant Attorney General,  Legislation &                                                               
Regulations Section,  Civil Division (Juneau), Department  of Law                                                               
(DOL), on behalf  of the House Rules  Standing Committee, sponsor                                                               
of HJR 6,  by request of the governor, relayed  that the proposed                                                               
resolution  consists of  a constitutional  amendment which  would                                                               
provide  for a  dividend in  the Alaska  State Constitution.   He                                                               
reiterated that  the statutory dividend program  was followed for                                                               
three  decades;  it not  being  followed  prompted a  court  case                                                               
challenge; the Alaska Supreme Court  stated clearly that absent a                                                               
constitutional amendment  providing for a dividend,  the PFD will                                                               
compete  annually for  legislative  appropriations.   He  relayed                                                               
that the proposed amendment follows up on that decision.                                                                        
                                                                                                                                
MR. MILKS paraphrased from the sectional analysis, which read as                                                                
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Section 1:  This would  provide a  conforming amendment                                                                  
     to  the  existing  language in  order  to  authorize  a                                                                    
     portion  of  permanent  fund  income  to  be  used  for                                                                    
     dividends as set forth in Section 2.                                                                                       
                                                                                                                                
     Section   2:  This   section  would   create  two   new                                                                  
     subsections in the permanent fund amendment.                                                                               
                                                                                                                                
     Subsection  (b) would  require that  a  portion of  the                                                                    
     permanent   fund    income   be   used,    without   an                                                                    
     appropriation,  solely   for  the  purpose   of  paying                                                                    
     permanent  fund  dividends  to state  residents.  Those                                                                    
     payments would occur according  to the dividend program                                                                    
     and formula currently set  forth in statute. Subsection                                                                    
     (b)  would also  allow  the legislature  to change  the                                                                    
     dividend  program,  including amount  and  eligibility,                                                                    
     subject  to the  approval of  the voters  in subsection                                                                    
     (c).                                                                                                                       
                                                                                                                                
     Subsection  (c) would  require that  any law  passed by                                                                    
     the legislature  to amend  the permanent  fund dividend                                                                    
     program,  including  the  amount  and  the  eligibility                                                                    
     requirements, would  not take effect unless  the voters                                                                    
     approved  the  proposed  law   at  the  next  statewide                                                                    
     election.  If approved  by the  voters,  it would  take                                                                    
     effect 90 days after certification of the election.                                                                        
                                                                                                                                
     Section  3: This  transition  provision specifies  that                                                                  
     the dividend program in place  on January 1, 2019 would                                                                    
     remain in  place until the  legislature and  the voters                                                                    
     approved a change to the program.                                                                                          
                                                                                                                                
     Section  4:   This  section  would  require   that  the                                                                  
     constitutional  amendment  be  placed  on  the  general                                                                    
     election ballot in 2020.                                                                                                   
                                                                                                                                
4:29:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   KREISS-TOMKINS   asked    for   the   administration's                                                               
perspective  on  the  changes  made  to  [SJR  5]  -  the  Senate                                                               
companion resolution.                                                                                                           
                                                                                                                                
MR.  MILKS  responded  that  the  largest  change  was  that  the                                                               
proposed  constitutional amendment  would  include the  statutory                                                               
formula for  calculating the dividend  amount, and any  change in                                                               
the formula would  be subject to the approval of  the voters.  He                                                               
mentioned  that an  additional change  to the  proposed amendment                                                               
was the replacement of annual payments with quarterly payments.                                                                 
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked for the  administration's position                                                               
on the quarterly disbursements.                                                                                                 
                                                                                                                                
4:31:15 PM                                                                                                                    
                                                                                                                                
MIKE BARNHILL, Director of Policy,  Office of Management & Budget                                                               
(OMB), Office of the Governor,  responded on the administration's                                                               
position  on  changes made  to  SJR  5  by the  Senate  Judiciary                                                               
Standing   Committee  [during   the   4/15/19   meeting].     The                                                               
administration supports  the elimination of the  requirement that                                                               
any  change in  eligibility requirements  [for the  PFD] must  be                                                               
approved by  voters.  The  administration does not object  to the                                                               
amendment  calling for  quarterly  disbursements of  the PFD  but                                                               
that  the  change would  be  accomplished  more appropriately  by                                                               
statute.     The  administration  did  not   voice  an  objection                                                               
regarding  the third  change -  rolling  SJR 6  into SJR  5.   He                                                               
explained that  SJR 6  constitutes the  administration's proposal                                                               
with respect  to a constitutional  spending limit.  He  said that                                                               
the  administration's   preference  is  that  the   two  proposed                                                               
resolutions be considered  separately; they represent substantial                                                               
policy amendments to the constitution.                                                                                          
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether the  administration opposes                                                               
quarterly payments as a social engineering concept.                                                                             
                                                                                                                                
MR. BARNHILL  expressed that  there are  valid policy  reasons to                                                               
pay  the PFD  on a  more periodic  basis:   more of  the dividend                                                               
money  would stay  in state;  it would  have more  impact on  the                                                               
economy  of the  state; it  could  generate jobs;  and an  annual                                                               
dividend  tends  to   be  spent  Outside.    He   said  that  the                                                               
administration's objection  is not from a  policy standpoint, but                                                               
due  to a  concern for  the appropriate  place -  constitution or                                                               
statute.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  VANCE  suggested  that quarterly  payments  would                                                               
benefit not only  the recipients but the earnings  of the corpus,                                                               
as the money would remain in  the corpus longer.  She expressed a                                                               
desire  to  hear  the perspective  of  Angela  Rodell,  Executive                                                               
Director,  Alaska Permanent  Fund  Corporation, (APFC)  regarding                                                               
quarterly payments.                                                                                                             
                                                                                                                                
REPRESENTATIVE  VANCE  asked  if  it is  possible  to  adopt  the                                                               
proposed constitutional  amendment in HJR 6  without adopting the                                                               
proposed spending cap and vice versa.                                                                                           
                                                                                                                                
MR.  BARNHILL  answered  that  the  administration  intentionally                                                               
structured  the  proposed   constitutional  amendments  in  three                                                               
separate vehicles so that the  citizens would have the ability to                                                               
vote on each  one based on its merits; by  implication, one could                                                               
be adopted  without the other.   He said that  the constitutional                                                               
amendments would  give the voters  the opportunity to vote  up or                                                               
down on the spending limit [HJR 7  and SJR 6], on a dividend that                                                               
is constitutionally  appropriated [HJR 6  and SJR 5], and  on the                                                               
taxpayer's bill of  rights [HJR 5 and SJR 4].   He concluded that                                                               
one amendment  could be adopted  without the others;  however, it                                                               
is  the   Dunleavy  administration's  perspective  is   that  the                                                               
residents should have the opportunity to vote on each.                                                                          
                                                                                                                                
REPRESENTATIVE VANCE asked  whether HJR 6 protects  the corpus of                                                               
the permanent fund.                                                                                                             
                                                                                                                                
MR.  BARNHILL responded  that  existing constitutional  construct                                                               
regarding the  permanent fund protects  the corpus;  the language                                                               
was adopted in 1976.  It  relays that the principle shall be used                                                               
only for incoming-producing investments,  implying that it cannot                                                               
be appropriated.                                                                                                                
                                                                                                                                
4:36:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS commented that the  constitution does not protect                                                               
the ERA;  therefore, the legislature  could still draw  down that                                                               
account.                                                                                                                        
                                                                                                                                
MR. BARNHILL concurred.                                                                                                         
                                                                                                                                
REPRESENTATIVE  WOOL  asked  for   confirmation  that  under  the                                                               
proposed  constitutional amendment,  the  statutory formula  [for                                                               
the  PFD] would  be  in the  constitution, and  a  change in  the                                                               
formula would require a vote of the people.                                                                                     
                                                                                                                                
MR.  BARNHILL replied  that  the  constitutional amendment  would                                                               
guarantee  the transfer  of PFD  funds pursuant  to statute.   It                                                               
would  introduce  direct  democracy   into  the  constitution  by                                                               
dictating that if the legislature  changes the statutory formula,                                                               
the people would automatically get  an opportunity to vote on the                                                               
change.   It would not  enshrine a particular  statutory approach                                                               
to the PFD  calculation.  The legislature would  retain the right                                                               
to  change the  calculation;  however, any  change would  require                                                               
approval by a vote of the people.                                                                                               
                                                                                                                                
REPRESENTATIVE LEDOUX asked whether the  people would vote on any                                                               
changes that the legislature made  before the changes can go into                                                               
effect.                                                                                                                         
                                                                                                                                
MR. BARNHILL responded, "Correct."                                                                                              
                                                                                                                                
REPRESENTATIVE  LEDOUX   asked  for  confirmation  that   if  the                                                               
legislature  wants  to  make  any  changes,  it  would  make  the                                                               
changes, put the  changes out for vote, and if  the people accept                                                               
the changes, the changes would go into effect the next year.                                                                    
                                                                                                                                
MR. BARNHILL  said, "Correct."   He  explained that  the proposed                                                               
constitutional   amendment   would   prepackage   a   referendum.                                                               
Currently under the constitution  when the legislature passes any                                                               
law, the  public can  get the  issue on  the ballot  by gathering                                                               
signatures in a referendum process.   The proposed constitutional                                                               
amendment would make the referendum process automatic.                                                                          
                                                                                                                                
4:39:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS mentioned discussion  about a 50-50 split                                                               
of the  POMV draw  as a compromise,  producing a  dividend amount                                                               
that would be larger than that  of the last two years but smaller                                                               
than  this   proposal  would  yield.     He  asked   whether  the                                                               
administration has a position on the 50-50 split compromise.                                                                    
                                                                                                                                
4:40:05 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease at 4:40 p.m.                                                                                 
                                                                                                                                
4:40:09 PM                                                                                                                    
                                                                                                                                
MR. BARNHILL  answered that  the administration  has not  taken a                                                               
position on any  new approach to the PFD, such  as a 50-50 split,                                                               
but is willing to discuss it.                                                                                                   
                                                                                                                                
REPRESENTATIVE  VANCE  asked  for  confirmation  that  if  HJR  6                                                               
passed, it would  be put to a  vote on the 2020  ballot to decide                                                               
if it should be in the constitution.                                                                                            
                                                                                                                                
MR. BARNHILL concurred.                                                                                                         
                                                                                                                                
CO-CHAIR FIELDS  asked whether the administration  has mapped out                                                               
a  timeline, since  any  change in  the  statutory formula  would                                                               
substantially alter the budget process.                                                                                         
                                                                                                                                
MR. BARNHILL  disagreed that  a change  in the  statutory formula                                                               
would  substantially change  the  budget process.   The  proposed                                                               
resolution clearly  states the  timelines; the  first opportunity                                                               
for  the legislature  to make  appropriations pursuant  to a  new                                                               
statutory  formula  would  be  the   fiscal  year  following  the                                                               
election.    For   example:    the  vote  is   in  November;  the                                                               
legislative  session  begins  the   following  January;  and  the                                                               
legislature  would  appropriate  for the  following  fiscal  year                                                               
pursuant to the constitutional amendment.                                                                                       
                                                                                                                                
REPRESENTATIVE VANCE asked  whether it would be  feasible for the                                                               
legislature  to  combine  the   three  resolutions  so  that  the                                                               
spending cap,  the income tax,  and the  PFD were all  put before                                                               
the voters in one ballot question.                                                                                              
                                                                                                                                
Mr.  BARNHILL stated  that  he  appreciated the  representative's                                                               
desire  to   simplify  constitutional  issues  for   the  voters;                                                               
however, he offered  that considerable time and  effort was spent                                                               
to determine  the best way to  present the issues.   The decision                                                               
was  made  to  use  three   separate  vehicles  addressing  three                                                               
separate subjects.  He maintained  that giving the people a voice                                                               
in how the  PFD is calculated and in any  legislative decision to                                                               
change that  calculation is a  discreet issue that stands  on its                                                               
own. The  other two  issues -  giving people a  voice in  any tax                                                               
changes  or rate  increases  and  giving the  people  a voice  in                                                               
amending the constitution  to limit spending -  are also separate                                                               
discreet issues.   He conceded  that since all three  issues fall                                                               
under Article  IX of  the constitution, it  would be  possible to                                                               
defend  combining  them; however,  it  is  the intention  of  the                                                               
administration to  give the people  the ability to vote  each one                                                               
up or down.                                                                                                                     
                                                                                                                                
4:45:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX referred  to  the proposed  constitutional                                                               
amendment [in HJR  5 and STR 4], also known  as the taxpayer bill                                                               
of rights,  and asked whether  the legislature would  be required                                                               
to  approve a  tax passed  by  the people  through an  initiative                                                               
process.                                                                                                                        
                                                                                                                                
Mr. BARNHILL agreed that passage  of the constitutional amendment                                                               
would  require the  people to  vote on  any new  tax or  tax rate                                                               
increase  passed  by the  legislature,  and  alternately, if  the                                                               
people initiate  a tax or  a tax increase, the  legislature would                                                               
be required to  approve it before it is enacted.   He stated that                                                               
both mechanisms  currently exist  with one  exception -  when the                                                               
people initiate a  law, the legislature cannot repeal  it for two                                                               
years.  The resolution seeks to shorten that time frame.                                                                        
                                                                                                                                
REPRESENTATIVE LEDOUX  expressed her belief that  most people who                                                               
support the taxpayer bill of rights  do not realize that it would                                                               
impact  their  ability  through  the  initiative  process.    She                                                               
offered  that the  most  likely  tax to  be  approved through  an                                                               
initiative process  would be  an oil  tax.   She stated  that she                                                               
does  not  think  most people  realize  that  the  constitutional                                                               
amendment would give the legislature "a second bite at that."                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL maintained  that the  three issues  - taxes,                                                               
PFDs, and  the spending cap  - are  all intertwined in  the final                                                               
budget  product.   He  asked whether  Mr.  Barnhill thought  that                                                               
separating issues that are intertwined might present a problem.                                                                 
                                                                                                                                
Mr. BARNHILL  responded, no.   He expressed  his belief  that the                                                               
people  can analyze  each issue  separately.   He  added that  if                                                               
there is an  emerging consensus within the committee  to roll the                                                               
resolutions  together to  move them  forward, the  administration                                                               
would most likely not object.                                                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL suggested  that the  administration, through                                                               
the  proposed constitutional  amendments, is  introducing another                                                               
branch of government.  Raising  or lowering revenue would require                                                               
approval not  only of  the House, the  Senate, and  the executive                                                               
branch, but of the people, which would  take a year or more and a                                                               
great deal of educational campaigning.                                                                                          
                                                                                                                                
Mr.  BARNHILL  responded that  this  very  point was  debated  at                                                               
length  at  the  constitutional convention,  and  the  convention                                                               
approved this  vigorous element  of direct  democracy.   He added                                                               
that Alaska has  a very strong access to  legislation through the                                                               
initiative  and  referendum  process.    He  suggested  that  the                                                               
governor is  proposing to take  that element of  direct democracy                                                               
that exists right now and  that the people regularly access right                                                               
now and  pre-package the initiative/referendum in  respect to the                                                               
PFD  and  new  and  increased  taxes.   He  opined  that  if  the                                                               
legislature were to make a change  to the PFD statute, there is a                                                               
high likelihood that a referendum would  be filed.  He added that                                                               
the passage of a personal income  tax would most likely result in                                                               
a  referendum as  well.   The administration  is seeking  to make                                                               
that referendum automatic and give  the people the opportunity to                                                               
vote on these very important issues that they care deeply about.                                                                
                                                                                                                                
4:51:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS  asked  whether  the  inclusion  of  legislative                                                               
approval  of   voter-approved  initiatives  was   intentional  or                                                               
accidental.  As an example, he  referred to a voter initiative to                                                               
spend less money on per barrel tax credits to oil companies.                                                                    
                                                                                                                                
MR. BARNHILL  responded that requiring legislative  approval over                                                               
a voter initiated  new tax or tax rate increase  was no accident;                                                               
it was the point.                                                                                                               
                                                                                                                                
MR.  MILKS   responded  that   in  the   proposed  constitutional                                                               
amendment addressing taxes, if the  voters, by initiative, pass a                                                               
new tax or  increase the rate of tax, the  legislature can reject                                                               
it.   He stated that in  the original version of  the resolution,                                                               
the default was as follows:   if the legislature did nothing, the                                                               
new tax  was rejected.   The Senate Judiciary  Standing Committee                                                               
changed the default to the following:   if the voters pass a tax,                                                               
the legislature has the opportunity to ....                                                                                     
                                                                                                                                
[Due to  technical difficulties, the  last minute of  the hearing                                                               
was not recorded.]                                                                                                              
                                                                                                                                
CO-CHAIR FIELDS stated that HJR 6 would be held over.                                                                           
                                                                                                                                
4:54:47 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
State Affairs  Standing Committee  meeting was adjourned  at 4:55                                                               
p.m.                                                                                                                            

Document Name Date/Time Subjects
HB139 ver A 4.17.19.PDF HSTA 4/25/2019 3:00:00 PM
HB 139
HB139 Sponsor Statement 4.17.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 139
HB139 Supporting Document - APFC Statement 4.17.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 139
HB139 Fiscal Note DOR-APFC 4.19.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 139
HB132 ver A 4.23.19.PDF HSTA 4/25/2019 3:00:00 PM
HB 132
HB132 Sponsor Statement 4.23.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 132
HB132 Sectional Analysis 4.23.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 132
HB132 Witness List 4.23.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 132
HB132 Presentation 4.25.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 132
HJR006 ver A 2.20.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Sectional Analysis ver A 3.21.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Transmittal Letter 1.29.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Supporting Document - Letter of Support.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Fiscal Note GOV-DOE 2.20.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR018 ver S 4.24.19.PDF HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Sponsor Statement 4.24.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Sectional Analysis 4.24.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Supporting Document - APFC Resolution 4.25.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Fiscal Note OOG-DOE 4.26.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Supporting Document - Letter of Support 4.30.19 #2.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HJR018 Supporting Document - Letter of Support 4.30.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 18
HB139 Supporting Document - Letter of Support 4.30.19.pdf HSTA 4/25/2019 3:00:00 PM
HB 139
HJR006 Opposing Document - Letter of Opposition 4.26.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Opposing Document - Letter of Opposition 4.30.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6
HJR006 Supporting Document - Letters of Support 4.2.19 - 4.30.19.pdf HSTA 4/25/2019 3:00:00 PM
HJR 6