04/02/2009 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HJR8 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 8 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 2, 2009
8:05 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Paul Seaton, Vice Chair
Representative Carl Gatto
Representative Craig Johnson
Representative Peggy Wilson
Representative Max Gruenberg
MEMBERS ABSENT
Representative Pete Petersen
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 8
Proposing amendments to the Constitution of the State of Alaska
limiting appropriations from certain mineral revenue, relating
to the balanced budget account, and relating to an appropriation
limit.
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 8
SHORT TITLE: CONST. AM: APPROP. LIMIT/MINERAL REVENUE
SPONSOR(s): REPRESENTATIVE(s) KELLY
01/26/09 (H) READ THE FIRST TIME - REFERRALS
01/26/09 (H) STA, JUD, FIN
04/02/09 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE MIKE KELLY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, introduced HJR 8.
DEREK MILLER, Staff
Representative Mike Kelly
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HJR 8 on behalf of Representative
Kelly, prime sponsor.
ACTION NARRATIVE
8:05:06 AM
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:05 a.m. Representatives Lynn, Gatto,
Johnson, and Wilson were present at the call to order.
Representatives Seaton and Gruenberg arrived as the meeting was
in progress.
HJR 8-CONST. AM: APPROP. LIMIT/MINERAL REVENUE
8:05:55 AM
CHAIR LYNN announced that the only order of business was HOUSE
JOINT RESOLUTION NO. 8, Proposing amendments to the Constitution
of the State of Alaska limiting appropriations from certain
mineral revenue, relating to the balanced budget account, and
relating to an appropriation limit.
8:06:08 AM
REPRESENTATIVE MIKE KELLY, Alaska State Legislature, as prime
sponsor of HJR 8, talked about the fluctuation of oil from $9 a
barrel ten years ago to $145 a barrel in 2008. He said Alaska
needs a fiscal policy, and HJR 8 is one step in that direction.
The legislation proposes that in any given year, the legislature
would be allowed to spend a five-year rolling average of the
mineral revenues to the state. Mineral revenues make up 80-90
percent of the state's total revenues. The proposed resolution
would prevent over-spending when oil revenues are high, which
would leave money in the state's balance when oil revenues are
low. He noted Representatives Stoltze and Hawker had expressed
interest in assisting with this legislation. He said similar
legislation was proposed during the last legislative session,
and HJR 8 is virtually the same.
8:09:14 AM
DEREK MILLER, Staff, Representative Mike Kelly, Alaska State
Legislature, presented HJR 8 on behalf of Representative Kelly.
He said mineral revenue is defined [on page 1, lines 8-10] of
HJR 8 as "mineral lease rentals, royalties, royalty sale
proceeds, federal mineral revenue sharing payments and bonuses,
and every State tax on minerals, mineral production, or mineral
transportation." If the proposed legislation is passed in 2010,
it would apply to all appropriations made in fiscal year 2012
(FY 12) and thereafter.
MR. MILLER offered a slide presentation [hard copy for which is
included in the committee packet]. As shown on slides 2-4, he
related that in 1982, voters approved an amendment to the
Constitution of the State of Alaska to control state spending.
The amendment established an annual appropriations limit of $2.5
billion, plus adjustments for changes in population and
inflation. The State of Alaska Comprehensive Financial Report
for FY 08 shows that the constitutional appropriation limit
would be approximately $7.9 billion. The FY 08 budget, after
passage by the legislature and subsequent vetoes, was $5.5
billion, which was $2.4 billion less than the 1982
constitutional spending limit. Mr. Miller said that means
either the 1982 spending limit was ineffective or "we're doing a
heck of a job controlling government growth." Mr. Miller added
that he thinks most people would agree that the former is
accurate.
MR. MILLER, highlighting slides 5 and 6, noted that in 1990, in
another attempt to impose budget stability, voters approved a
constitutional amendment creating the Constitutional Budget
Reserve Fund (CBRF). He stated that the CBRF was "created to
receive and protect excess revenues generated in high revenue
years rather than leaving excess funds in the General Fund."
Taking money out of the CBRF requires a three-quarters vote,
making the money more difficult to tap.
8:11:39 AM
MR. MILLER directed attention to slides 7-9, on which are graphs
showing State of Alaska General Fund spending for FY 90 - FY 09.
The graph on slide 7 shows spending in 1990 at $2.3 million,
which Mr. Miller point out is less than the 1982 annual
appropriation limit amount of $2.5 billion. He said the
disparity shows "ineffectiveness." He said the spending shown
in the chart on page 7 has been inflation adjusted. The amount
for FY 09 is about $4 million. He indicated that the inflation
adjustment is 3 percent.
MR. MILLER said [slide 8] represents "spending from operating,
capital budget, and statewide operations." Statewide
operations, he related, include debt service, fund caps, revenue
sharing, and direct appropriations to the retirement system. He
stated, "This does not include, for example, ... the substantial
amount of savings that we put away in FY 08 and FY 09, on a
scale of $5-6 billion; this includes all of the other spending."
8:12:59 AM
MR. MILLER, in response to Representative Seaton, confirmed that
includes deposits to the Public Employees' Retirement System
(PERS) and the Teachers' Retirement System (TRS).
REPRESENTATIVE SEATON asked if Mr. Miller is saying that the
state would have to use other money, for example, money allotted
to education, in order to make up for the unfunded liability.
MR. MILLER responded that if the proposed legislation passes,
the legislature would have to make [further] appropriation
decisions.
REPRESENTATIVE SEATON asked Mr. Miller to confirm that any money
- even that which is generated from mineral resources - is "free
and clear" once it is deposited into the CBRF.
MR. MILLER answered that that is his understanding.
8:14:40 AM
REPRESENTATIVE KELLY noted that any excess revenues above the
five-year average would be deposited in a "day tank."
8:15:15 AM
REPRESENTATIVE GATTO noted that teachers have automatic step
raises, without there being any salary increase in the budget;
therefore, even if the legislature froze increases to education,
there would still be increases to the education budget. That
money would have to come from someplace else in the budget. He
said, "I just want to be clear that that's part of the plan."
REPRESENTATIVE KELLY responded that HJR 8 does not allocate; it
just proposes that the stream of oil and mineral revenue would
be available to the legislature "on a five-year average." What
the legislature does with that money is not constrained by HJR
8, except that the amount above the five-year average would
automatically go in to the [Balanced Budget Account (BBA)]. He
said the remaining presentation would show how that money could
be used to balance budgets in lean years, and that if the amount
ever exceeds twice the five-year average, any additional cash
from [the BBA] would then be ejected into the CBRF. He opined
that it is a pretty sound mechanism for preserving the CBRF,
giving the state a fund buffer, and disciplining the state in
its spending.
8:17:08 AM
MR. MILLER continued to a graph on slide 9, which shows
inflation adjusted spending as a blue line, actual General Fund
(GF) spending as a red line, and total GF revenue, including
non-mineral, as a yellow line. The graph illustrates there was
a spike in total GF revenue between FY 08 and FY 09, which Mr.
Miller explained was a result of oil rising to $145 a barrel.
MR. MILLER directed attention to slide 10, which shows the State
of Alaska General Fund spending from FY 00 - FY 10. The chart
shows inflation adjusted in blue, actual GF spending in red,
total GF revenue, including non-mineral, in yellow, and the
effects of HJR 8, including non-mineral, in black. It shows
that in FY 02 the spending limit was a little bit greater than
the total GF fund available. [If HJR 8 had been in place that
year], the legislature would have had the option to take money
from the BBA. The chart also shows that "this year we would be
able to draw from the Balanced Budget Account to fill that gap
... between the yellow line and the black line here in FY 10."
REPRESENTATIVE KELLY explained the reason he decided to add non-
mineral revenue to the black line figure of HJR 8 was to provide
an "apples to apples" comparison.
REPRESENTATIVE SEATON said, "So, this is dealing with just
mineral revenue." He asked if HJR 9 would put the legislature
in a position such that it would have to increase non-mineral
revenue either by instituting a sales tax or an income tax, even
though it had money in the bank and could balance the budget
without "having to live under the constraints of this bill."
REPRESENTATIVE KELLY responded that the short answer is yes, the
state could do anything "on the non-mineral side" as far as
changing sources of revenue. He said the beauty of HJR 8 is
that it would put money away for the state to use when it has a
need. He clarified, "So, I would submit that although the
answer is yes, you can adjust revenue in any way you can, you
may not need to if we could impose this discipline on
ourselves."
8:21:18 AM
MR. KELLY added that the proposed legislation aims to stabilize
the most volatile component of the state's revenue stream, which
is also 85-90 percent of the state's revenue stream. In that
regard, he said, the legislation "looks to something else
besides mineral resources for the legislature to go out and
promote." He stated that he sees HJR 8 as a benefit to the
revenue stream for the State of Alaska.
8:21:43 AM
REPRESENTATIVE JOHNSON pointed out that bringing a decision
before the citizens of the state may serve to make the
legislature more prudent in its request.
8:22:24 AM
REPRESENTATIVE GATTO asked if he is correct that the resolution
only includes mineral resources - that it does not include
timber and fish.
MR. MILLER offered his understanding that that is correct.
REPRESENTATIVE JOHNSON asked why those other resources were not
included.
REPRESENTATIVE KELLY responded that timber and fish provide a
lesser contribution to the state than oil does, and have fewer
"wild swings."
REPRESENTATIVE JOHNSON pointed out that fewer wild swings may
act as a stabilizing force, and he encouraged the sponsor to
consider using a resource base rather than just a mineral base.
REPRESENTATIVE KELLY said it would be fairly easy to conduct a
sensitivity report on that.
8:24:12 AM
CHAIR LYNN asked what percentage of the state's total income is
derived from fish.
REPRESENTATIVE KELLY deferred to Representative Seaton.
REPRESENTATIVE SEATON said he does not know.
8:24:39 AM
REPRESENTATIVE GATTO suggested also adding tourism dollars into
the mix, because tourism dollars have become difficult to
manage. He suggested that HJR 8 may add some direction to those
dollars if they are "inside of a formula."
8:25:10 AM
REPRESENTATIVE KELLY said he would be happy to run a report
based on those suggestions.
8:25:24 AM
REPRESENTATIVE WILSON said she thinks it would be interesting to
see that report.
REPRESENTATIVE KELLY echoed Representative Johnson's comment
that adding these other resources could act as a stabilizing
force.
8:25:53 AM
MR. MILLER directed attention to slide 11, which shows two
columns. The column on the left depicts the revenue from oil
after the permanent fund dividend is paid, while the one on the
right shows the BBA. The chart is an explanation of how the
money would come from the right-hand column to the left-hand
column when revenue is low in order to meet the five-year
average. It also shows how money would be taken from the left-
hand column and put back into the right-hand column when revenue
is high.
8:27:45 AM
REPRESENTATIVE SEATON noted that the legislature has used
several mechanisms for savings, the biggest being "forward
funding of education." He offered his understanding that under
HJR 8, until the BBA was full the state would not be forward
funding education.
REPRESENTATIVE KELLY said education was forward funded once
"with a big chunk"; however, HJR 8 would not prevent the
legislature from "choosing that mechanism." Furthermore, he
surmised that the proposed legislation would provide a mechanism
that would probably hold back enough money "to do those sorts of
things in the future."
8:29:01 AM
REPRESENTATIVE WILSON commented that any time there is a "bump"
in pay for employees under PERS, the state absorbs it, but the
state expects schools to absorb the cost for employees under
TRS.
REPRESENTATIVE SEATON pointed out that school districts
negotiate individually. He explained, "If we automatically paid
it, there would be no constraints at all on negotiations."
8:30:40 AM
MR. MILLER turned to slide 12, entitled, "Sacred Cows." He
explained that HJR 8 does not "touch" the following: the
permanent fund dividend, the permanent fund corpus, the
permanent fund earnings, or Amerada Hess. Moving on to slide
13, Mr. Miller said the BBA would not be subject to the
"Constitutional Budget Reserve sweep," which he explained is a
term used to describe the annual transfer of available balances
in the GF to the CBRF.
8:31:38 AM
MR. MILLER, in response to a request by Representative
Gruenberg, reviewed for the public the background of the CBRF.
In response to a follow-up question from Representative
Gruenberg, he offered his understanding that currently nothing
is owed from the GF to the CBRF.
8:32:52 AM
REPRESENTATIVE KELLY offered his belief that the state made
total repayment to the CBRF; however, with the budget deficit
estimated to be at least $2 billion for FY 09 and FY 10, "that
victory may be fairly short-lived."
REPRESENTATIVE GRUENBERG said he was under the impression that
in past years [the state] has never "repaid a substantial
amount."
REPRESENTATIVE KELLY reiterated his belief that the past due
amount had been recently repaid, and he said he would furnish
that information to the committee.
8:34:06 AM
MR. MILLER returned to his presentation and highlighted the
information on slide 14, which shows the oil revenue for FY 05 -
FY 08 and the estimated oil revenue for FY 09. He read, "HJR 8
transfers funds into the BBA when oil prices are high and, with
a simple majority vote, transfers funds out of the BBA to fill
the gap when oil prices are low. When the BBA exceeds two years
of appropriations, any excess ... will be transferred into the
CBRF."
REPRESENTATIVE KELLY said to some extent the legislature puts
savings away, as it did last year. The proposed legislation
would formalize the process of saving money, without allowing
for arguments as to how much should be put aside.
8:36:26 AM
MR. MILLER turned to slide 15, which shows the 5-year average
calculation for the FY 10 budget. The calculation is done by
taking the mineral resource revenue from FY 05 - FY 08, plus the
estimated revenue for FY 09, and dividing by 5, which comes to
$5.2 billion.
8:38:02 AM
REPRESENTATIVE JOHNSON remarked that the spike in oil revenues
in FY 08 makes the figure on slide 15 look good. However, he
questioned what the figure would look like in the future without
such a spike.
8:39:06 AM
REPRESENTATIVE KELLY said he could provide the committee with a
chart in which the spiked revenue amount is replaced with a more
average amount.
REPRESENTATIVE JOHNSON said he just figured that out to be $3.95
billion instead of $5.2 billion. He questioned what that change
does to the concept of the legislation.
REPRESENTATIVE KELLY submitted that HJR 8 would operate
"elegantly" under either scenario. He said he thinks the public
wants a fiscal plan it can understand - one that will not become
dated two years after formulation, because it constantly updates
itself.
CHAIR LYNN asked what other pieces of legislation are related.
REPRESENTATIVE KELLY indicated that last year HB 125 was passed,
which requires departments to provide a 10-year forecast. He
said it is difficult to project wages 10 years ahead. He said
if HJR 8 is approved by voters, it would send the message that
voters want consistency in state savings.
8:42:04 AM
REPRESENTATIVE GRUENBERG said the proposed legislation brings up
a philosophical question as to how much discretion on an annual
basis the legislature should be given. The Alaska State
Legislature has more discretion than many other states because
of its constitutional prohibition against dedicated funds. He
said he supports that. He noted that a number of amendments
over the years have attempted to "nibble away at that very basic
prohibition," and he said he sees HJR 8 as another attempt to do
so. He said he would like to have committee discussion
regarding whether or not it is wise to allow or limit
legislative discretion on an annual basis.
8:43:55 AM
REPRESENTATIVE KELLY said he does not disagree with anything
that Representative Gruenberg said. He stated his belief that
HJR 8 would allow guidance from the people "to replace the chaos
that they don't like." He said he knows of no one in his
district who says the state should not have a fiscal plan, and
he emphasized the state does not have one now. He pointed out
that the public could certainly choose not to approve the
amendment. He stated his intent is not to remove any
prerogatives of the legislature "in anything but a fashion that
involves reasonableness and maybe a pattern for the future."
8:46:08 AM
REPRESENTATIVE GRUENBERG suggested that the committee: name the
issues and decide which of those issues need to be addressed;
find answers to those important issues; and examine "this
particular solution."
8:47:32 AM
REPRESENTATIVE WILSON stated that she thinks the concept of the
resolution is wonderful, but it needs work. She talked about
the state's failure to address deferred maintenance. She said
she does not have an answer for this but wants the issue
addressed.
8:49:03 AM
REPRESENTATIVE KELLY concurred with Representative Wilson. He
said it costs the state more not to fix things. He stated that
HJR 8 does not "harm" or advance that issue, except in one
regard: "One who tends to average and plan and budget is on his
or her way to thinking about fixing their stuff."
8:51:01 AM
REPRESENTATIVE SEATON said three years ago the legislature had
extra money with which it funded the entire list of deferred
maintenance for rural schools. He said the problem with the
proposed resolution is that it would not allow the legislature
to similarly use extra revenue money made in a particular year,
because the state would be required to have a five-year average.
REPRESENTATIVE KELLY disagreed. He said HJR 8 "averages what we
can spend based on a 5-year look back." He said he would rather
manage an averaged flow of income than the highs and lows the
state has been experiencing.
REPRESENTATIVE SEATON explained that he is trying to figure out
if HJR 8 would really discipline spending at all, because money
would automatically go either into [the BBA] or the CBRF
depending on where the state's revenue balance was in relation
to the five-year average. He asked, "The intention here is to
limit spending in high years, right?"
REPRESENTATIVE KELLY answered that the intention is to create a
more stable balance, and he directed attention back to slide 10
to illustrate his point. When revenue is highest, it would
still be possible "to take a heavy cut at deferred maintenance
or anything else that you feel you need to, just as now, only
it's just not so wildly off of the 'x' axis."
REPRESENTATIVE SEATON interpreted slide 10 to illustrate that
for each year from FY 03 through FY 09, the state "would have
spent half a billion dollars less than we actually spent."
REPRESENTATIVE KELLY clarified that any time the [red] line,
depicting actual GF spending, drops, [the solid black HJR 8]
line is "going to tend to pump cash back in." As oil prices are
climbing, [the black line] will "smooth that out and tend to
hold spending down."
8:58:55 AM
MR. MILLER added, "This year would be an example of a year where
we, with a simple majority vote, could draw money from the
revenue built up in the Balanced Budget Account in the prior
years." He returned to slide 15 and stated:
I can go ahead and take ... FY 08, and instead of
having $10 [billion] there in mineral revenue, I can
[assign an amount of] $3.7. But that defeats the
whole purpose of what we're trying to do here, because
I can go to the revenue resources book - and that's
exactly what the Department of Revenue does projecting
out - and it's a flat line: the price per barrel of
oil and the revenue coming in. If you check out your
revenue resources book and you go from FY 11 on, it is
a flat line. If that were the case, then we wouldn't
need to be here right now with this. So, I can go
ahead and I can take out revenue in FY 08 and play
with the numbers all you want, but this is the most
volatile component that we have, and that's the whole
purpose of trying to taper this off.
9:00:24 AM
REPRESENTATIVE GATTO said typically an average is found by
cancelling out the high and low numbers. He said he ran the
numbers using that formula and got $4.33 billion. However, each
year this manner of finding an average is done, the state will
be closer to "the real smoothing."
9:01:21 AM
REPRESENTATIVE KELLY responded that he does not disagree with
what Representative Gatto, because he said that is the essence
of the plan to smooth out the state's BBA.
9:02:28 AM
REPRESENTATIVE GRUENBERG said HJR 8 deals with mineral revenue,
which is, perhaps for the foreseeable future, the major source
of instate revenue. The resolution does not deal at all with
revenue received from the federal government. He mentioned
stimulus money, which he said cannot be predicted and comes with
strings attached. He said there is no requirement in Article 9,
which deals with funding, that the state adopt and follow a
fiscal plan. He said he thinks his constituents, like
Representative Kelly's want the state to have such a plan. He
recommended that the committee consider adding a requirement in
the Constitution of the State of Alaska that the state have a
fiscal plan and follow it.
9:05:44 AM
REPRESENTATIVE KELLY said he thinks attempts were made by the
people of Alaska in 1982 and 1990 to make the state more
fiscally responsible. The proposed legislation, he reiterated,
would give the state a more predictable stream of income with
which to make plans for the state. He indicated that without
such a plan, the state makes business difficult to run for its
agencies.
CHAIR LYNN remarked that those entities with the best planning
tend to stay in business longest.
9:08:06 AM
REPRESENTATIVE WILSON noted that the legislature passed a bill
last year mandating that "the governor was supposed to do a
five-year and a ten-year plan in every single department." She
said that bill is on the books, but "it didn't happen." She
said she believes in having a fiscal plan, but questioned how to
enforce it.
CHAIR LYNN indicated that legislation which has become part of
statute does not hold the same weight as language which has
amended the Constitution of the State of Alaska.
9:09:24 AM
REPRESENTATIVE KELLY told Representative Wilson he thinks this
year there is a recognition that departments have been
converting to a ten-year plan and they are being given some
leeway to make that transition. He remarked that one of the
easiest things to plan is deferred maintenance, because it is
tangible. He said it would be a huge benefit to the state to
address the issue of deferred maintenance.
9:12:06 AM
REPRESENTATIVE WILSON indicated that two of the committees on
which she serves never broached the subject of [deferred
maintenance]. She said she hopes to see more attention to the
issue next year.
9:12:42 AM
REPRESENTATIVE WILSON referred to slide 10, and said she would
like a "green line" depicting where [GF spending] would be when
the "high year" and "low year" are taken off.
REPRESENTATIVE KELLY said he would provide that information.
9:13:15 AM
REPRESENTATIVE SEATON commented, "I appreciate that, but the
whole intent is taking the low year off and the high year off by
averaging five years." He said he is not hearing from his
constituents that they want the state to constrain spending.
Conversely, he hears requests from constituents for funding. He
clarified he is not saying that his constituents want the state
to spend money wildly. Referring to slide 10, he said even
though the yellow line shows a spike in GF revenue, the red line
shows "an even flow" - no wild swings in spending. He observed
that when comparing the red line with the HJR 8 black line, the
only benefit of HJR 8 appears to be that the state would
constrain actual GF spending in every [fiscal] year except FY 10
by a half billion to a billion dollars and lower state spending
on issues such as education and transportation, for which
constituents have been requesting funding.
9:16:36 AM
REPRESENTATIVE KELLY responded that since he has been in the
legislature, the budget has doubled and the number of
entitlements has increased. He contended that by spending less
during high mineral revenue years, the state will be more
equipped to deliver the services that it has promised.
REPRESENTATIVE SEATON further clarified his interpretation of
the graph [on slide 10] as follows:
It says that in every year since 2000, we would have
constrained the spending, because we would have less
revenue than we actually spent in every one of those
years except for the 2010 fiscal budget, in which case
we would have more revenue than the actual spending is
anticipated to be.
REPRESENTATIVE KELLY said Representative Seaton is interpreting
the graph correctly.
9:19:19 AM
MR. MILLER noted that in FY 98 and FY 99, the revenue was $l.3
billion and less than $1 billion, respectively. Those years,
which are not shown on the graph, are obviously affecting the
five-year average, which is why the revenue for FY 00 shows as
so low, he explained.
9:19:51 AM
REPRESENTATIVE JOHNSON said he interprets the graph the same
way. He suggested that the question to ask is whether it is
good or bad that "over the last period we spent a half a billion
dollars less." He said he thinks it is good that "we would have
spent less money in government under this," and he reiterated
that that is what his constituents want.
9:20:46 AM
REPRESENTATIVE KELLY said:
If you look at that, that difference isn't just a half
a billion. If you take [FY] 08 [and] 07, it's closer
to a billion and better. ... So, it's real money.
9:21:07 AM
MR. MILLER added:
In [FY] 08 it matches inflation since 2000, so it's
right there.
9:21:23 AM
MR. MILLER continued his slide presentation, moving on to slide
16, which he said recognizes the relationship between the BBA
and the CBRF. He reviewed the process by which funds would be
transferred from one to the other. Unlike the BBA, the CBRF has
no cap on it, and the legislature would still be able to tap its
funds with a three-quarter super majority vote.
REPRESENTATIVE KELLY said historically the Senate and House
Finance Committees must always decide where to store money, and
HJR 8 would make that decision clear.
9:22:44 AM
REPRESENTATIVE WILSON said Alaska's oil production is dropping
by 6-10 percent a year, and it is not likely that the state will
have any other significant resource up and running within the
next ten years. She asked what the ramifications will be if the
price of oil does not go back up.
REPRESENTATIVE KELLY answered that money will come out of the
BBA in those times when the revenue has "dropped below the
smoothing line." He explained, "As the curve is dropping down,
this allows you to spend above what you would have had, had you
not put some aside."
REPRESENTATIVE WILSON restated her concern regarding revenue
that will consistently be dropping, and she said there will be a
point where the state will still have to make cutbacks. She
said, "Until we can get something going that's going to
counteract that, we're going to be in trouble."
CHAIR LYNN questioned, "But would we not be in trouble with or
without this plan?"
REPRESENTATIVE KELLY characterized [HJR 8] as "a shock
absorber." He said there is only so much that can be set aside,
but the state would be able to see the depletion of the BBA as
it happens.
9:26:52 AM
REPRESENTATIVE WILSON asked for a projection of the graph on
slide 10 into a hypothetical future without any upward
fluctuations in revenue.
REPRESENTATIVE KELLY answered yes. He said, "It will flatten
out, because what we have to use is the predicted oil price that
the state has." Those predictions have historically been
inconsistent, he pointed out.
REPRESENTATIVE WILSON added that she would like the sponsor to
"build in the decrease in production."
9:28:08 AM
MR. MILLER skipped slide 17 and highlighted slide 18, entitled,
"Why a Constitutional Amendment?" He said the sponsor thinks
the best chance at having the proposed legislation adhered to is
by placing it in the Constitution of the State of Alaska. Doing
so would allow the people of the state to speak on the subject.
Mr. Miller turned to slide 19, which read [original punctuation
provided]: "If the people of Alaska choose a Percent of Market
Value approach to funding government using the Permanent Fund
Earnings, HJR 8 would accommodate that approach." Mr. Miller
concluded his presentation by showing slide 19, which includes
excerpts from Bradner's Alaska Legislative Digest No. 29/07 Dec.
19, 2007. He cited the last excerpt, which read as follows
[original punctuation provided]:
The same people who demand that they see a critical
need in their community, or in relation to their
institution or industry, will still say the
Legislature "spends too much."
9:29:54 AM
REPRESENTATIVE GRUENBERG said HJR 8 "opened up a different
dimension" in the committee's discussion. He opined that the
legislature needs to bring back its House Ways & Means
Committee. He said the House State Affairs Standing Committee
is set up to talk about policy rather than to look only at
numbers. The slide presentation today, he remarked, provided
numbers. He said the question to the public would not be on the
ballot for another year and a half, which will give the
committee a chance to consider problems and look at whether
there may be existing constitutional provisions that are no
longer of use or whether there are other constitutional
provisions needed. He stated, "The constitution is set up to
trump the ability of the legislature to pass a law, and that's
kind of what you're getting at here: What should there be that
sets ... a sideboard on the legislature's ability to legislate?"
He expressed his hope that without a House Ways & Means
Committee, the House State Affairs Standing Committee would
recognize its unique position in setting policy.
9:34:03 AM
CHAIR LYNN said he would like to address the resolution itself.
9:34:58 AM
REPRESENTATIVE KELLY said on page 1 the resolution speaks to
identifying the type of revenue, while on page 2 it sets up the
BBA. The resolution describes how the revenue would be placed
in and taken out of the BBA. He concluded that the body of HJR
8 "pretty much puts in text exactly what Derek has laid out for
us here in the slides."
REPRESENTATIVE KELLY, in response to Chair Lynn, talked about
his hopes for the resolution as it is heard in future committees
of referral.
9:37:20 AM
REPRESENTATIVE WILSON said she would like the sponsor to think
about changing the language from "certain mineral revenue" to
something like "natural resource revenue", so that it would
include a little bit more of the state's revenues.
REPRESENTATIVE KELLY said he thinks that is a good idea. He
said he supports the previously mentioned suggestions to expand
the resources that would be included in the resolution.
9:38:16 AM
REPRESENTATIVE SEATON directed attention to page 1, and asked
why "mineral transportation" is included in the resolution. He
said he thought the idea was to include that which has volatile
swings, and mineral transportation is consistent over a long
period of time.
MR. MILLER said the language is taken from another article in
the constitution, and he told Representative Seaton he would
obtain further information for him.
REPRESENTATIVE SEATON warned that putting "everything into ...
this bucket" would leave future legislatures no option to
consider imposing taxes or to decide what to fund. He indicated
that constituents will say they want the state to spend less
money, but not if that means no port facilities, ferries, or
museums, for example. He said he thinks the committee needs
further discussion on HJR 8, and, regarding the graph on slide
10, he asked the sponsor to provide some parameters on "where
those budgets were in each of those years, and what the effect
would have been."
9:44:17 AM
CHAIR LYNN suggested [the chart] indicates that the state should
have been even more conservative in its spending than it was.
REPRESENTATIVE KELLY told Representative Seaton:
That money didn't evaporate ...; every penny of that
money that was captured to smooth this line went into
the Balanced Budget Account to help us in the pickle
we're in now, and the rest of it went to the CBR. ...
Let's just say the average is $3 billion, so ... $6
billion is the [maximum] that you could stick in the
Balanced Budget Account. And that amount, then, would
be available for ... the tough times ahead as the
pipeline throughput goes down, as the price of oil
stays at [$45/barrel] this morning or whatever it was,
and I think that's responsible.
REPRESENTATIVE KELLY said he does not think it would be
productive for him to try to go back and guess "what we might
have spent it on," but he said he can go back and report where
the money went - "like into the Balanced Budget Account or into
the CBR."
REPRESENTATIVE SEATON stated:
If I'm understanding right, the only time you could
get that out of the Balanced Budget Account is when
you're below the five-year average. So, ... if you're
not below the five-year average, you must maintain
that in there and you have to go to the CBR and leave
this other tank that is kind of available for a 21
vote but is not available for a 21 vote, because
constitutionally you can't use it, you have to go to
the CBR and leave that tank full and jump over to
having a CBR vote. So, it seems like ... in these
years in which we ... weren't having a CBR vote, we
would have been sticking money into this account and
requiring a CBR vote every year if we were going to
... fund our budget at the same level we did in these
past years.
9:48:14 AM
REPRESENTATIVE KELLY responded that [HJR 8] would require the
state to be disciplined and not touch some of its money so that
it is available in a more even fashion. He opined that the
elegance of the plan put forth in HJR 8 lies in its simplicity.
The resolution does not tell the legislature how to spend money,
and would allow for better management of deferred maintenance.
9:49:26 AM
REPRESENTATIVE JOHNSON said Representative Seaton is talking
about specific numbers, which is the purview of the House
Finance Committee. He encouraged the committee to advance the
discussion, and he said he thinks the people of Alaska should be
involved. He compared HJR 8 to "bowling with bumpers." He
explained, "We may never bowl a 300 with it or a perfect score,
but we're going to do a lot better." He clarified that he does
not see HJR 8 as an end-all or do-all piece of legislation, but
he thinks the concept should be advanced to the next committee
of referral to show that the legislature is committed to long-
range planning.
CHAIR LYNN said he would like to know the thoughts of the
committee members regarding whether or not a motion should be
made today to advance the resolution. He related that
Representative Gruenberg had previously left, but had asked him
to express his preference that HJR 8 not be moved out of
committee today.
9:51:34 AM
REPRESENTATIVE WILSON disagreed with Representative Johnson that
the issue in this legislation is the responsibility of the
Senate and House Finance Committees. She stated, "This is a
policy decision and we are the policy makers. The finance
people decide where they're going to spend the money." She
emphasized the importance of having the Senate and House State
Affairs Committees address policy decisions, especially since
there is no longer a House Ways & Means Committee. She noted
that most states have separate committees to deal with
appropriations and finance, but Alaska does not. In response to
Chair Lynn, she confirmed that she would like HJR 8 to remain in
the committee for further discussion.
REPRESENTATIVE GATTO indicated he was not ready to make a
decision.
9:53:38 AM
REPRESENTATIVE KELLY, in response to Chair Lynn, said he could
get the previously requested information back to the committee
by April 9.
REPRESENTATIVE SEATON said he does not yet understand the full
implications of the resolution, and waiting until the
information is brought forth may provide some answers.
9:54:04 AM
REPRESENTATIVE JOHNSON clarified that he does not want to move
the resolution, but he wants to emphasize how important it is
for the proposed legislation to get attention by the legislature
and the public. He said he knows HJR 8 needs to be fully
vetted, but he warned that many bills get stuck in the first
committee of referral. He reiterated that HJR 8 may not be the
right direction, but it is "a fine place to start."
9:55:31 AM
CHAIR LYNN concurred with Representative Johnson's remarks. He
said he personally would like to move the resolution forward,
but he respects the opinions of the committee.
9:56:08 AM
CHAIR LYNN discussed the upcoming calendar as it related to
fitting in further discussion of HJR 8. He announced his
intention to be a co-sponsor of HJR 8.
[HJR 8 was held over.]
9:57:19 AM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:57
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 HJR 8.pdf |
HSTA 4/2/2009 8:00:00 AM |
|
| 02 Sponsor Statement HJR 8.pdf |
HSTA 4/2/2009 8:00:00 AM |
|
| 03 HJR008-OOG-DOE-3-27-09.pdf |
HSTA 4/2/2009 8:00:00 AM |
|
| 04 HJR 8 Backup.pdf |
HSTA 4/2/2009 8:00:00 AM |
|
| 05 3-31-08 updated Power Point Presentation HJR 8 House State Affairs.ppt |
HSTA 4/2/2009 8:00:00 AM |