02/24/2004 08:03 AM House STA
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 24, 2004
8:03 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Jim Holm, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Ethan Berkowitz
Representative Max Gruenberg
MEMBERS ABSENT
Representative Paul Seaton
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 3
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund.
- FAILED TO MOVE OUT OF COMMITTEE
HOUSE BILL NO. 447
"An Act making corrective amendments to the Alaska Statutes as
recommended by the revisor of statutes; and providing for an
effective date."
- MOVED CSHB 447(STA) OUT OF COMMITTEE
DISCUSSION WITH DEPARTMENT OF CORRECTIONS
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HJR 3
SHORT TITLE: CONST. AM: PERMANENT FUND
SPONSOR(S): REPRESENTATIVE(S) CRAWFORD, CROFT
01/21/03 (H) PREFILE RELEASED (1/10/03)
01/21/03 (H) READ THE FIRST TIME - REFERRALS
01/21/03 (H) STA, JUD, FIN
02/07/03 (H) SPONSOR SUBSTITUTE INTRODUCED
02/07/03 (H) READ THE FIRST TIME - REFERRALS
02/07/03 (H) STA, JUD, FIN
01/13/04 (H) STA AT 8:00 AM CAPITOL 102
01/13/04 (H) Heard & Held
01/13/04 (H) MINUTE(STA)
01/22/04 (H) STA AT 8:00 AM CAPITOL 102
01/22/04 (H) Heard & Held
01/22/04 (H) MINUTE(STA)
02/19/04 (H) STA AT 8:00 AM CAPITOL 102
02/19/04 (H) Scheduled But Not Heard
02/24/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 447
SHORT TITLE: 2004 REVISORS BILL
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE COUNCIL
02/09/04 (H) READ THE FIRST TIME - REFERRALS
02/09/04 (H) STA, JUD
02/24/04 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE ERIC CROFT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as co-sponsor of HJR 3.
REPRESENTATIVE HARRY CRAWFORD
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as co-sponsor of HJR 3.
BOB BARTHOLOMEW, Chief Operating Officer
Alaska Permanent Fund Corporation (APFC)
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 3.
ROBERT D. STORER, Executive Director
Alaska Permanent Fund Corporation (APFC)
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 3.
PAM FINLEY, Revisor of Statutes
Legislative Legal Counsel
Legislative Legal and Research Services
Juneau, Alaska
POSITION STATEMENT: Offered a brief description and answered
questions during the hearing on HB 447.
ACTION NARRATIVE
TAPE 04-21, SIDE A
Number 0001
CHAIR BRUCE WEYHRAUCH called the House State Affairs Standing
Committee meeting to order at 8:03 a.m. Representatives Holm,
Coghill, Berkowitz, and Weyhrauch were present at the call to
order. Representatives Lynn and Gruenberg arrived as the
meeting was in progress.
HJR 3-CONST. AM: PERMANENT FUND
[Contains brief mention of HB 11]
Number 0086
CHAIR WEYHRAUCH announced that the first order of business was
HOUSE JOINT RESOLUTION NO. 3, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund.
Number 0121
REPRESENTATIVE ERIC CROFT, Alaska State Legislature, as co-
sponsor of HJR 3, stated his belief that it's an important part
of any fiscal plan to ensure some substantial dividend. He said
he thinks the simplest and most direct approach would be to
protect the current system. He indicated that that current
system has protected against inflation over the prior fiscal
year. He offered to answer questions from the committee.
Number 0219
REPRESENTATIVE HARRY CRAWFORD, Alaska State Legislature, as co-
sponsor of HJR 3, stated that the crux of the matter is whether
or not a person believes that the Alaska Permanent Fund was set
up as a rainy day account for government or as a permanent fund
for the people. He stated his belief that it is the latter, and
he said the fund will help to sustain Alaska's economy for
generations. He noted that [the fund] has become approximately
one-eighth of the state's economy and, outside the urban areas,
it's as much as half of the economy. He stated that the best
way to protect the fund is by continuing the dividend program as
is.
Number 0346
CHAIR WEYHRAUCH observed that although [HJR 3] would amend the
constitution, there has been little testimony brought forth. He
noted that HJR 3 would amend Article 9, Section 15, of the
[Alaska State Constitution]. That part of the constitution was
adopted by the people and amended in 1976 to establish the
permanent fund. Article 9, Section 15 read as follows:
SECTION 15. Alaska Permanent Fund.At least twenty-
five per cent of all mineral lease rentals, royalties,
royalty sale proceeds, federal mineral revenue sharing
payments and bonuses received by the State shall be
placed in a permanent fund, the principal of which
shall be used only for those income-producing
investments specifically designated by law as eligible
for permanent fund investments. All income from the
permanent fund shall be deposited in the general fund
unless otherwise provided by law.
CHAIR WEYHRAUCH noted that HJR 3 would change [the last
sentence] of that language. [Page 1, lines 9-13, of HJR 3] read
as follows:
All income from the permanent fund shall be deposited
in the earnings reserve account and distributed as
provided for under AS 37.13.140, 37.13.145, and AS
43.23.025, as those statutes read on July 1, 2002
[GENERAL FUND UNLESS OTHERWISE PROVIDED BY LAW].
CHAIR WEYHRAUCH asked the co-sponsors to address the meaning of
the statutes aforementioned in the proposed language.
Number 0500
REPRESENTATIVE CROFT responded that those are the permanent fund
and inflation-proofing statutes and the intent of the resolution
is to protect those. In response to a question from Chair
Weyhrauch, he explained that the date was chosen to "lock in"
the statutes as they read on that date, so any change made to
them later would not effect this language.
Number 0578
CHAIR WEYHRAUCH directed attention to [Section 2, paragraph
(1)], which read as follows:
(1) AS 37.13.140, 37.13.145, AS 43.23.025,
and any provisions of law referred to in those
sections, remain in effect as they read on July 1,
2002, unless they are amended or repealed and the
amendment or repeal is ratified by affirmative vote of
at least sixty percent of the voters of the State
voting on the question; and
CHAIR WEYHRAUCH asked if the 60 percent would change any other
voting requirement in the constitution or law.
REPRESENTATIVE CROFT answered as follows:
If this constitutional amendment passed, then to get
at and change any of the dividend structure, you would
both have to: under Section 1, change the
constitution and under Section 2, meet this 60-percent
hurdle to change the underlying statute.
CHAIR WEYHRAUCH asked in what respect the 60 percent would be
different than any other constitutional amendment.
REPRESENTATIVE CROFT answered, "Generally, there's a high burden
to put it before the people, Mr. Chairman - that is, a two-
thirds vote in each body - but it's a 50-percent vote of the
people.
CHAIR WEYHRAUCH asked for clarification that [HJR 3] would
increase the requirement [for a vote of the people] from 50.1
percent to 60 percent, in order to approve any change to the
aforementioned statutes.
REPRESENTATIVE CROFT said yes. He explained that the structure
for amending the constitution is a relatively high burden "to
get it on" and a pure majority "to get it passed." Section 2,
he said, would create a system for amending "these statutes."
Number 0757
CHAIR WEYHRAUCH turned to [Section 2, paragraph (2)] which read
as follows:
(2) money may be appropriated from the
earnings reserve account only as authorized under AS
37.13.145(b) and (c) as those subsections read on July
1, 2002, unless the appropriation is ratified by
affirmative vote of at least sixty percent of the
voters of the State voting on the question.
CHAIR WEYHRAUCH offered his understanding that the intent is
that the legislature may appropriate money from the earnings
reserve account, but that appropriation then has to go to the
vote of the people and can only be approved if 60 percent of the
people approve it.
REPRESENTATIVE CROFT said that any excess earnings left after
"protecting inflation-proofing and the dividend structure as it
is" could only "be done by a 60 percent vote [of the people]."
Number 0851
REPRESENTATIVE COGHILL asked if there is any other place in the
constitution where statutory language has been adopted as part
of the constitution.
REPRESENTATIVE CROFT answered no.
REPRESENTATIVE COGHILL said he remembers some discussion a few
months ago that there is a possibility under "this formulation"
that there could in fact not be a dividend paid, "based on the
way the average is figured and the amount available for
appropriation." He asked for clarification.
REPRESENTATIVE CROFT responded that the ability to pay dividends
and inflation-proof depends on having a healthy balance in the
earnings reserve fund. He said, "That, if we are prudent
managers of the money, should be fine." He continued as
follows:
What has happened in the last two or three years that
created that potential that you're talking about is
both record declines in the stock market and what I
feel were imprudent actions by the legislature in
depositing some of the earning reserve funds .... But
if you allow the earnings reserve balance to keep the
earnings reserve as it should, and you protect the
excess earnings so that they are there as a cushion,
the projections I've seen show that it, under the
market projection, will have enough and will grow.
It's only when you take a substantial amount out - and
that's why Section 2 is there - that you start to
threaten that structure.
Number 1032
REPRESENTATIVE COGHILL said the word "imprudent" spurs him a
little bit. He stated it's also true that there have been some
significant prudent investments into the fund that under "this
specific scenario" wouldn't have been allowed.
REPRESENTATIVE CROFT stated that "we" have, at various times,
taken balances in excess of $3 or $4 billion and deposited some
into the principal. He added, "I think you're right, and I even
voted for some of those." He classified those as being on "the
prudent side of the line." Bleeding the earnings reserve down
to just $100 million during unstable stock market times, he
opined, is not prudent.
Number 1100
REPRESENTATIVE COGHILL said he might even agree with
Representative Croft; however, at this point, [HJR 3] would take
the earnings reserve "completely off the table," so that the
legislature could never again appropriate from the earnings
reserve account.
REPRESENTATIVE CROFT corrected, "Only with the approval of the
people - 60 percent."
REPRESENTATIVE COGHILL stated that although he understands why
it's being [proposed], he does not agree with it. He said he
thinks that was not the original intent of "putting it in." He
revealed that he is struggling with "putting this complex of a
system in the constitution."
Number 1264
BOB BARTHOLOMEW, Chief Operating Officer, Alaska Permanent Fund
Corporation (APFC), Department of Revenue, informed the
committee that since the policy decisions regarding how the use
of earnings are "done" are outside the purview of the board of
trustees, that board has taken "the position of no position,"
regarding the proposed legislation. He continued as follows:
The only statement they've made is that they would
recommend, if we're going to do something like that,
to try to use a method that's compatible with how the
permanent fund is invested. And they have felt that
there are some weaknesses with the existing system
....
The statutes that are being referred to in the
resolution are basically the existing statutes that
have been in place since about 1982 that determine how
to calculate how much is available, from a statutory
approach, annually from the permanent fund. And it
looks at the realized earnings on a five-year average
.... Add that up and roughly take 21 percent of that.
... A second step ... is: You take the lesser of a
five-year average calculation or the balance of the
earnings reserve and, whichever is less, you split
that in half. One half goes to a transfer to the
dividend fund, so we would annually transfer that
money out of the permanent fund over to the Department
of Revenue to pay dividends.
The next step would be inflation-proofing whatever
amount is necessary to inflation-proof the principal,
which is just a portion of the fund. Historically,
it's ranged from 80-95 percent of the fund .... And
then, as Representative Croft said, there's a residual
or an excess from that formula, as well as any amount
that's left in the permanent fund, [which] currently
is available for appropriation by the legislature.
And historically, all they've done with that money is
either left it in the earnings reserve or reinvested
it back into the principal. And that's how the
existing statutes have been working.
Number 1474
CHAIR WEYHRAUCH referred to AS 37.13.140, 37.13.145, and
43.23.025. He asked if the legislature makes an appropriation
to inflation-proof the fund under the authority of those
statutes.
MR. BARTHOLOMEW answered that's correct.
CHAIR WEYHRAUCH concluded that part of the inflation-proofing is
subject to appropriation under the authority of that statute.
He asked if, as a result of passing [HJR 3], 60 percent of
people would have to approve of inflation-proofing the permanent
fund.
MR. BARTHOLOMEW offered his understanding that Section 2,
[paragraph (2)] says money can be appropriated under the normal
process for dividends and inflation proofing, but any earnings
outside of those two calculations would trigger the 60-percent
vote of the public.
Number 1550
REPRESENTATIVE GRUENBERG suggested that these would be the same
questions average voters would have when they vote on the
measure, because unless they have these complex statutes in
front of them and were intimately familiar with them, it would
be tough for them to know what [the effects of] this proposed
constitutional amendment would be when they stepped into the
ballot box. He said he thinks that's a problem with the
[proposed resolution to amend the constitution].
Number 1611
CHAIR WEYHRAUCH expressed that there is an ongoing concern that
there must be a mechanism to ensure inflation proofing of the
fund and payment of the dividend. He said he thinks "that's
what's really lurking underneath the introduction of this
resolution." He stated that he would like to know, for the
record, what sort of appropriation into the fund, beyond the
constitutionally mandated appropriation, the legislature has
made over time, and the value of those appropriations.
Number 1665
MR. BARTHOLOMEW noted that beginning in 1981, during the peak of
the oil revenues coming into the state, the legislature
appropriated approximately $2.5 billion of general fund revenues
from the general fund directly into the principal of the
permanent fund and, from the mid-1980s until the year 2000,
another $4 billion from the earnings reserve account. The
transfers from the general fund and the earnings reserve account
totaled $6.8 billion.
Number 1665
REPRESENTATIVE BERKOWITZ observed that that amount was direct
deposit. He asked what the approximate total would be when
factoring in the amount of interest that has been gained from
those [transfers].
MR. BARTHOLOMEW explained that some of the earnings from the
money that was deposited early on is "part of what got swept
later." He said it would take some time to figure out how much
was principal and how much was earnings; however, the concept
[is] that the money that was "put in there" has generated
additional earnings that have either been paid out as dividends,
used as inflation-proofing, or reinvested.
Number 1799
CHAIR WEYHRAUCH responded, "Well, it's a gross matter and you
want to follow your POMV [percent of market value] approach. If
you assumed an 8-percent growth with a 3-percent inflation rate,
you're [indisc.] getting a 5-percent return on that. Is that
correct?"
Number 1812
ROBERT D. STORER, Executive Director, Alaska Permanent Fund
Corporation (APFC), Department of Revenue, offered the following
explanation:
Over the last 15-20 years, we've actually been in an
extraordinary bull market, so our real rate of return
was not a "5 percent" as we suggest, but it was 6.3
percent. One way of looking to the answer to
Representative Berkowitz's question is simply one
third of the permanent fund's principal is special
contributions. So, that, in essence, answers your
question; that's all extra income that was retained in
the fund.
MR. STORER, in response to a question from Chair Weyhrauch,
confirmed that one third of the permanent fund's principal is
[from] special contributions made by the legislature since 1981.
CHAIR WEYHRAUCH asked what the payout has been of permanent fund
dividends since the inception of that program.
Number 1979
MR. BARTHOLOMEW answered that from Fiscal Year '78 to Fiscal
Year '03, approximately $12.5 billion have been paid out in
dividends. In response to a follow-up question from Chair
Weyhrauch, he explained that the permanent fund was established
in 1978 and the first dividend was paid out in 1982; [that first
payout] included some of the earnings from the earlier years.
He added that some general fund money was used to pay out the
original dividend. Since then all the dividends have been paid
from earnings of the permanent fund.
CHAIR WEYHRAUCH asked how much has been deposited into the
permanent fund, since it's inception, separate from
appropriations.
MR. BARTHOLOMEW replied that the primary original source of
money into the fund was from oil deposits. He noted that the
constitution requires that 25 percent of the royalty lease
revenues that come into the state for nonrenewable resources
goes into the permanent fund. He added, "For a period of time,
for about 15 percent of the leases, that percentage was
increased to 50 percent, and now that's back to 25 percent."
CHAIR WEYHRAUCH offered his understanding that HB 11 was the
mechanism by which the change was made back to 25 percent last
year. He asked how long the 50-percent increase was in effect.
MR. BARTHOLOMEW said he thinks it was from 1983 through 2003.
CHAIR WEYHRAUCH asked Mr. Bartholomew if he knows what the value
of that additional 25 percent was, in terms of income to the
permanent fund.
MR. BARTHOLOMEW answered he doesn't know, but he estimated that
it would have been $400 to $500 million. In response to a
question from Chair Weyhrauch, he confirmed that the $400 to
$500 million is separate from the previously mentioned
legislative appropriations; it's a portion of the total
dedicated mineral wealth that has come into the fund, which as
of June 30 was $7.7 billion.
Number 2115
REPRESENTATIVE BERKOWITZ asked, "What if it had been 100 percent
[of all mineral revenues]?"
MR. BARTHOLOMEW answered, "Well, you would probably take three
times what we've put in there, because we got 25 percent. So,
... if you took it up to 100 percent, and we've received
(indisc. - coughing) billion, you would have said another $21
billion would be in the permanent fund." He clarified, "If $7.7
billion is 25 percent, roughly, of the mineral revenues we've
received, if you'd have put it all in there, there must have
been another 75 percent of just royalty-type revenues and
leases, so I'm saying ... $21 billion - $22 billion."
Number 2156
MR. STORER added, "Plus the income that would have been earned
on that contribution."
REPRESENTATIVE BERKOWITZ stated, "That's somewhat akin to what
Roger Cremo would have proposed [in a plan regarding the Alaska
Permanent Fund]."
MR. BARTHOLOMEW responded that he is vaguely familiar with [Mr.
Cremo's] plan, which he said he thinks had to do with depositing
all revenues into a single source and trying to fund government
from that.
MR. STORER suggested that a crude rule would be to "multiply the
entire fund by that multiple of three, and you'd get currently
the fund is $29 billion." In response to a question from
Representative Berkowitz, he concurred that three times that
amount would be $90 [billion].
Number 2214
CHAIR WEYHRAUCH noted that there are "other monies that are
spent." He asked how much other money has been appropriated -
over the course of the permanent fund - that has not been
identified in previous testimony.
MR. BARTHOLOMEW responded that when people talk about money that
has been spent for other than dividends, [they are referring to]
the following: "the hold-harmless," dividends for certain
prisoners that go to the Department of Corrections, and the
operations of the Permanent Fund Dividend Division. He stated
that all of those monies basically come out of the calculation
of what goes to the dividend. He concluded, "So, we calculate
what's available for the dividend, we transfer that amount to
the Department of Revenue, and those other items actually come
out of the dividend pool." He said there's roughly a couple
million dollars per year that are split up between the
Department of Revenue, the Department of Natural Resources, and
the Department of Law, to cover some of their operating costs
related to the collection of the oil royalties. He said there
is also the cost of "the investment management of the permanent
fund that funds the corporation."
CHAIR WEYHRAUCH said, "So, the permanent fund dividend payment
is off the top, essentially."
MR. BARTHOLOMEW replied:
You do a calculation by statute of that five-year
average of earnings. Half goes to the dividend fund,
it's called. Out of the dividend fund is where those
other expenditures have been funded.
Number 2300
REPRESENTATIVE COGHILL asked, "Would we assume that formulation
in the constitution, and do we have to get a specific
appropriation authority to continue that? Are we barred from
that if we put this in the constitution?"
Number 2322
REPRESENTATIVE CROFT responded as follows:
Are [we] barred from doing the hold-harmless? I don't
believe so. That question was asked before, and we
refer to the statutes for that reason, so that they
incorporate those ideas.
REPRESENTATIVE CROFT said the rule of thumb is that about one
third of the principal of the fund is either direct
constitutional or statutory appropriation, one third is
discretionary, and one third is inflation-proofing that has been
done. He said, "So, to the extent you were making that point,
I'd conceded that at least a third of the value of the fund
itself is by our actions of the legislature adding
discretionary, nonrequired deposits." He said he would also
concede that "we" have almost totally only used the fund, to
date, for dividends, inflation-proofing, and special
appropriations. That amount that has been used for other
things, he said, is almost negligible, and is always related to
things related to the dividend itself, to the operation of the
fund, or to generating the revenue for the fund. He opined, "We
have, to date, been pretty good managers of the fund, either out
of fear or out of good government."
REPRESENTATIVE CROFT addressed Representative Coghill's previous
question regarding whether discretionary deposits to the
principal could be made "under this amendment." He said, "I
don't think so, and I don't think you'd have to anymore." He
explained that the only permanent fund-related reason for
putting money from the earnings reserve into the principal is to
take it away from the legislature so that it can never be spent.
He said, "Well, you've already got that protection now." He
stated that the purpose of discretionary deposit is to make sure
that that money is not spent at some later time. He said, "If
you didn't have that fear, you wouldn't put it in the principal
to begin with. By protecting it [with] another mechanism - this
'don't spend at 60 percent' - you wouldn't need to salt it away,
it is salted."
Number 2449
REPRESENTATIVE COGHILL questioned if the legislature would
surrender authority if it was barred from changing the statute
because "it's assumed in the constitution." He said that the
way [HJR 3] is written, it seems to him that the legislature
would even be barred from making the appropriation. He
clarified that he needs to know how the mechanics work.
REPRESENTATIVE CROFT responded that it sounds like an issue for
the House Judiciary Standing Committee to consider.
Number 2517
REPRESENTATIVE BERKOWITZ moved to report HJR 3 out of committee
with individual recommendations and the accompanying fiscal
notes.
Number 2529
REPRESENTATIVE COGHILL objected.
Number 2533
REPRESENTATIVE GRUENBERG said that, while he is undecided on the
issue, he thinks it's appropriate to move the proposed
resolution to the House Judiciary Standing Committee.
Number 2575
REPRESENTATIVE HOLM said he has been quiet, but would not be so
quiet in the House Judiciary Standing Committee. He mentioned
that he has another idea [regarding the permanent fund]. He
noted that one of the aspects of [HJR 3] is that it makes no
"definitive for population growth." He revealed that, since
1982, the population has grown by 200,000 people. He questioned
how the proposed resolution would impact the size of the
[permanent fund] dividend in the future when there is more
population growth. He said he isn't going to "not support"
moving [HJR 3 out of committee], but he said he wonders what
would happen if oil were to be $9 a barrel again. He said he
thinks it was overwhelmingly proven today that the legislature
has, in the past, been somewhat responsible about how the money
is spent. Representative Holm questioned whether or not "we
want to tie our hands." He opined that Representative Coghill
made a good point; putting statutes in the constitution that
[the legislature] can't touch impinges its right to be good
legislators and be responsive to the needs of the people. He
continued:
Today, when we're spending $400 or $500 million more
than we've taken in revenue, how in the dickens do you
propose that we're going to make up those shortfalls?
And, more so than that, how in the dickens do you
propose that we're going to have more money in for
education? Where's it come from? You can't tax
enough for that.
Number 2673
REPRESENTATIVE LYNN stated his belief that HJR 3 should be moved
to the next committee of referral. He said he thinks it
deserves study and is an important concept. He noted that the
question is what to do with the permanent fund. Everybody is
asking that question, he said. He stated that the fund needs to
be preserved, but the fiscal deficit also needs to be addressed.
Number 2701
REPRESENTATIVE COGHILL responded that he couldn't disagree more.
He said he thinks [HJR 3] is bad public policy and that assuming
statutes in the constitution is so complex that for the
legislature to revise statutes now that have been assumed in the
constitution is problematic. He indicated that he could
consider enshrining a constitutional amendment that would
protect the dividend, but HJR 3 is cumbersome and complex. He
said, "We're going to put in the constitution language, such as
unrealized gains, and then we're going to have to decide what
that is at a constitutional level." Net income, he observed,
can be debated in court now at a whole different level, so the
balance of the earnings reserve becomes an interesting
discussion, since "we" have assumed that it is a protected and
growing entity. He stated that if HJR 3 goes to the House
Judiciary Standing Committee, he will make certain that his
questions get asked in that committee. Representative Coghill
reiterated that he thinks HJR 3 is bad public policy and he
stated that he would not vote for it.
Number 2776
REPRESENTATIVE BERKOWITZ noted that the title for HJR 3 would
allow for some change, because it's a wide-open title. He said
he hopes there is opportunity to discuss central changes. He
said Representative Holm had pointed out that this is a spending
limit, which Representative Berkowitz opined is the fiscally
responsible course for the legislature to take. He continued as
follows:
If you constrain the amount of money government can
have, it won't waste money. And if you want to use
money, you have to work hard to go get it. So, to the
extent that this is a spending limit, I think there's
a lot more consideration than we've seen here.
[It's a] question of intergenerational equity. I
mean, we have been in a generation that has benefited
from the dividend. And I don't' think we ought to
preclude our children and grandchildren and great
grandchildren from also enjoying the benefits of a
permanent fund dividend [emphasis on the word
"permanent"].
REPRESENTATIVE BERKOWITZ remarked that there's been a great deal
of focus in the legislature on the money that comes out of the
permanent fund, but to some extent the legislature has ignored
the money that goes into the permanent fund. He referred to the
testimony of [Mr. Bartholomew and Mr. Storer] regarding what
would have happened if "we" had adopted 100 percent of the
resource royalty money and "gone into the permanent fund." He
said the situation would have been far different today. He
stated that that seems to be a way of preserving the state's
options in the future. He said he will personally promote
giving that aspect of the permanent fund a much closer look.
Number 2888
CHAIR WEYHRAUCH stated that he plans to vote no on moving HJR 3
from committee and to vote no at "every other opportunity."
Notwithstanding that, he stated that he doesn't want "the
people" to think that he didn't want this debate to occur. He
said he thinks the permanent fund belongs to the people and they
deserve to debate on it. He revealed that he did no lobbying on
the resolution whatsoever, nor did he impose his opinions on any
member of the committee, but he thinks HJR 3 is "one of the
worst kinds of public policy decisions this legislature could
ever make ...."
CHAIR WEYHRAUCH said there has been a tremendous amount of
interest in the resolution, not just at the recent conference in
Fairbanks where enshrinement of the dividend was discussed, but
also through thousands of e-mails that he said he has tried to
respond to. He indicated that some of the e-mails he's received
are offensive and "have no deference or concern at all
[regarding] what happens to anyone else in this state, or any
other program in this state." He continued as follows:
Some of the e-mails and comments I've received are
more principled and selfless, and reflect a basic
distrust of the legislature's desire or ability to
continue to pay permanent fund dividends or to
inflation-proof the fund, or to protect the fund for
future generations. And people who have sent those e-
mails believe that, unless the [... payout of the
permanent fund is enshrined in the constitution that
the people will never get a permanent fund dividend
and the legislature is suspect and would not do that
in the future, given the competing tensions of the
political process.]
[Not on tape, but taken from the Gavel to Gavel recording on the
Internet, was a major portion of the above bracketed testimony.]
TAPE 04-21, SIDE B
Number 2988
CHAIR WEYHRAUCH continued as follows:
I disagree with that. If people have campaigned on
the basis of protecting the permanent fund and they
don't do that, their constituents have a
constitutional right to vote them out of office and
that's what they should do.
We've heard testimony that far outweighs the defeat of
this ... measure than would urge passage of it. For
on thing, the vagueness of these statutes and what
they mean and the implications of what they mean to
enshrine them in the constitution is completely
unknown and unanswered. That is such an important
role for this committee to play in terms of state
policy decision that there's no way in good conscience
I can vote this out of committee.
The second thing that we've heard is compelling
testimony that instead of raiding the permanent fund,
... the legislature, in fact, has bolstered the
permanent fund to the extent of billions of dollars.
And instead of threatening a permanent fund dividend,
this legislature has done everything possible to pay a
permanent fund dividend. Instead of threatening
future generations with failure to inflation-proof the
permanent fund, this committee has heard testimony
that the legislature has done everything possible to
ensure the fund is protected against the ravages of
inflation.
CHAIR WEYHRAUCH stated that to allow 40 percent of the people to
decide what the legislature should do is tyranny by the
minority. He opined that, "We, as public policy makers, as
stewards of the government's trust, as stewards of this money,
have an absolute obligation to protect this fund for future
generations and to use it for basic state services."
CHAIR WEYHRAUCH continued as follows:
And I'm really glad that Lieutenant Governor Leman has
passed out a constitution to every member of this
legislature this session, and this copy that I have is
signed by John B. "Jack" Coghill. And it's also got
copies of every signer of the constitution of the
State of Alaska. And just for the public's benefit:
we look at the declaration of rights - civil rights,
freedom of religion, freedom of speech, petition, due
process - all those protect our rights as citizens in
this country and in this state. It establishes a
legislature; it establishes an executive branch, a
judiciary, elections, a legislative apportionment,
health, education, and welfare, natural resources,
finance and taxation, local government, the initiative
referendum and recall process. All of those
provisions focus down to one article, and that is
under Section 15 of Article 9, where we have this
Alaska Permanent Fund. And 25 percent of all mineral
lease rental royalties, royalty sale proceeds are to
be placed in the permanent fund. Instead of violating
that, what the legislature has shown in historic
actions is to increase from 25 percent of the
constitutional mandate to 50 percent, over a
substantial period of time. That is not squandering
the people's money; that is not dispersing it to state
government; that is not squandering it on pork; that
is protecting this fund for future generations.
... I'm seriously worried about Article 7 of this
state's constitution: health, education, and welfare.
We are required to establish a public education system
in this state, a state university system, a board of
regents, and, specifically Section 4 of Article 7,
"the legislature shall provide for the promotion and
protection of public health," and Section 5, "the
legislature shall provide for public welfare." Now
maybe it's those portions that said we shall establish
a permanent fund for people to use for their own
benefit. And I benefit from that as others have.
We've benefited from the payment of permanent fund
dividends to the tune of billions of dollars. My
children have benefited from that and I use it to pay
for their education. But to constitutionalize the
payment of a check for individuals and subject the
appropriation of any other money to 40-percent right
to veto that by the legislature is an abrogation of
our constitutional responsibility. It's an abrogation
of our right to address public education. Nowhere in
this constitution do we constitutionalize
appropriation. Nowhere in this constitution do we say
that people have a right to a check. Nowhere in any
constitution in any state or any nation have I ever
seen that people have a right to payment of a check.
And to say that people have a right to a permanent
fund dividend check and that ... 40 percent of the
people have a right to veto legislative appropriation
over the public's right to an education, to teachers,
to reasonable-sized classrooms or the promotion and
protection of public health or public welfare, to me
is terrible public policy.
Number 2697
REPRESENTATIVE BERKOWITZ said he appreciates Chair Weyhrauch's
heartfelt concern regarding the schools, and health and public
safety. He said that concern is well taken, which is why,
during the times when he has served on the legislature, attempts
were made to put funds into those areas. In spite of the need,
he said, the request for those funds has been rejected. He
stated that he looks forward to Chair Weyhrauch's support this
year for "our amendments" to bolster schools, health, and public
safety. He said it's one thing for the legislature to gather
and say, "Cut the budget," but people who are cutting the budget
need to remember that they're hurting people. He added, "And,
at some point, you've got to do what you think is right for the
public, not just follow a bumper sticker."
CHAIR WEYHRAUCH responded, "If you think that
constitutionalizing the payment of a permanent fund is going to
help the legislature address the serious needs of its education,
then I think that we better spend a lot more time in a lot more
committees, on a lot more issues like this one, because we're
not getting it. The legislature doesn't understand it."
Number 2643
REPRESENTATIVE LYNN stated that he thinks this is such an
important issue and the stakes are so high that people need to
"ventilate on this situation" in more than one committee. He
noted that other people feel the same way that Chair Weyhrauch
does. He stated that he shares his concerns, but he thinks that
the people in the next committee of referral need to have the
opportunity to say the same thing if they choose to do so.
CHAIR WEYHRAUCH clarified that he had no intention to "kill this
bill or bottle it up," which is why he brought it up for a vote
of the committee.
REPRESENTATIVE LYNN clarified that he will not be voting in
favor of the resolution, but in favor of moving it to the next
committee for that committee's consideration.
Number 2670
A roll call vote was taken. Representatives Berkowitz,
Gruenberg, and Lynn voted in favor of HJR 3. Representatives
Holm, Coghill, and Weyhrauch voted against it. Therefore, HJR 3
failed to move out of the House State Affairs Standing Committee
by a vote of 3-3.
Number 2540
CHAIR WEYHRAUCH asked Representative Gruenberg to move for
reconsideration.
Number 2550
REPRESENTATIVE GRUENBERG said, "Yes."
CHAIR WEYHRAUCH announced that [HJR 3] would be brought before
the committee again at the next committee meeting when there was
a full committee. [HJR 3 was not heard again.]
HB 447-2004 REVISORS BILL
Number 2512
CHAIR WEYHRAUCH announced that the next order of business was
HOUSE BILL NO. 447, "An Act making corrective amendments to the
Alaska Statutes as recommended by the revisor of statutes; and
providing for an effective date."
The committee took an at-ease from 9:00 a.m. to 9:03 a.m.
Number 2494
PAM FINLEY, Revisor of Statutes, Legislative Legal Counsel,
Legislative Legal and Research Services, told the committee that
the purpose of [HB 447] is to "clean up the statutes on matters
where the policy has already been decided." She indicated that
there should be no policy changes in the proposed legislation.
She explained that most of the changes in the bill have to do
with two executive orders from last year, which "didn't make
certain technical changes that needed to be made." Those
changes, she explained, have been discussed with the executive
branch. Ms. Finley noted that there is a sectional included
with the bill. She offered to answer questions.
Number 2443
MS. FINLEY began discussion of what became Amendment 1. She
said the Department of Law has asked for a change as follows:
On page 7, line 6
Delete "and restoration"
MS. FINLEY explained that the Department of Natural Resources
(DNR) says it is not doing restoration.
Number 2387
REPRESENTATIVE GRUENBERG suggested, "When we're talking about
whether DNR ... chooses to do restoration, that may be a policy
issue."
MS. FINLEY responded that it would be [a policy issue] if that
section of the bill "told people to do things." She clarified,
"What this section of the law is, is a list of state activities
that can be considered in determining the differential in fees
between residents and nonresidents for fishing." She continued
as follows:
So, what it basically says is that you may consider
the cost incurred by the state for direct operating
expenditures in regulation of the commercial ...
fishing industry, including -- and then there's this
long laundry list.
And actually, even if it weren't in this list, I think
if it's met the basic definition of a commercial
fishing activity, you could still consider it. I
think this list was passed, probably in response to a
court decision where they were trying to spend the fee
differential, and they wanted as much as they could
put in it. So, if this were a statute that says, "DNR
shall do 'x,' 'y,' or 'z,'" I would agree with you -
it would be a policy matter and I wouldn't touch it.
... This is a list of things we're doing that you
could consider in the fee differential and, actually
even if it's not in this list, you could still
consider it. So, I don't really have any objection to
making DNR happy on this point.
Number 2260
REPRESENTATIVE BERKOWITZ asked the following:
If DNR were to engage in restoration - which, since
they've assumed most of the functions of [the Alaska
Department of Fish & Game], they ought to - would
removal of this language preclude a differential?
MS. FINLEY said she doesn't think so, because the language
specifies the Department of Natural Resources, "including" the
Alaska coastal management program and habitat program. She
explained that the use of the word "including" does not mean
"these are the only things." She opined that it's nice to have
[and restoration] in the list, which she explained is why she
included it; however, if DNR decided to do restoration, she said
she thinks the department could still argue that as long as it
had something to do with commercial fishing, it could be
included.
REPRESENTATIVE BERKOWITZ asked if that language was removed at
the request of someone.
MS. FINLEY noted that she had received a call from Janet
Burleson-Baxter, [Department of Natural Resources], who asked
her to [remove the language], whereby she deferred Ms. Burleson-
Baxter to [Deborah Behr, Assistant Attorney General]. Then Ms.
Behr called her and asked her to take the language out. She
said, "We agreed that since this was just an including
provision, both in [the Alaska Department of Fish & Game] and in
DNR, ... in some ways it didn't matter at all."
Number 2181
CHAIR WEYHRAUCH asked if there was any objection to adopting the
foregoing Amendment 1. There being none, it was so ordered.
Number 2135
MS. FINLEY, in response to a query from Chair Weyhrauch, offered
the following history: She said there was a time when the
advisor's bill just went to the House Judiciary Standing
Committee and the Senate Judiciary Standing Committee. At some
point, she noted, it got a referral to "State Affairs in one
house and then in the next." Ever since then it has been heard
by both the House State Affairs Standing Committee and the
Senate State Affairs Standing Committee.
Number 2112
CHAIR WEYHRAUCH noted that there has been some grumbling by some
that [the revisor's bill] should not get a referral to [the
House State Affairs Standing Committee or the Senate State
Affairs Standing Committee]. He opined, "I think it's fine if
another pair of eyes looks at it." He noted that sometimes
"people pick things up that aren't picked up in one committee."
Number 2092
REPRESENTATIVE BERKOWITZ remarked that he thinks that's why it's
generally preferable that bills - particularly substantive bills
- get at least two committees of referral. He stated that he
knows that the speaker [of the House of Representatives] is "not
always of the same opinion."
Number 2064
REPRESENTATIVE COGHILL turned to [page 6, line 4], and asked for
an explanation of the change in language from "[PRIMARY]" to
"general".
MS. FINLEY explained that at one point nominating petitions were
done for the primary election. That was changed in 2001, so
that the nominating petitions only applied to general elections.
She added, "And we did it in all the other statutes and we
missed this one." She clarified that the language that
Representative Coghill asked about is just conforming language.
Number 2015
REPRESENTATIVE COGHILL moved to report HB 447, as amended, out
of committee with individual recommendations [and the
accompanying fiscal note].
Number 2007
REPRESENTATIVE BERKOWITZ objected to say that he has noticed
that a substantial portion of the bill came about because
executive orders were not "carefully vetted"; they didn't do
what they should have done. He said this highlights the problem
of when the administration acts without doing a thorough job
regarding executive orders. He said that it highlights the
danger of using executive orders as opposed to going through
legislation to conduct the state's business. He noted that it
is not the legislature's mistake that is being fixed, but the
governor's. That said, Representative Berkowitz withdrew his
objection.
Number 1959
There being no further objection, CSHB 447(STA) was reported out
of the House State Affairs Standing Committee.
^DISCUSSION WITH DEPARTMENT OF CORRECTIONS
Number 1931
CHAIR WEYHRAUCH announced that the committee would now pose
questions to Commissioner Marc Antrim of the Department of
Corrections, which Commissioner Antrim would digest and answer
during an upcoming overview.
[Committee members posed questions and Commissioner Antrim
offered preliminary answers to some of them. The question
period began on TAPE 04-21, SIDE B, but due to technical
difficulties continued on TAPE 04-22, SIDE A.]
NOTE: A copy of the tape(s) may be obtained by contacting the
House Records Office at State Capitol, Room 3, Juneau, Alaska
99801 (mailing address), (907) 465-2214, and after adjournment
of the second session of the Twenty-Third Alaska State
Legislature this information may be obtained by contacting the
Legislative Reference Library at (907) 465-3808.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:25
a.m.
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