Legislature(2019 - 2020)GRUENBERG 120
04/30/2019 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HJR18 | |
| HJR5|| HJR6|| HJR7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HJR 18 | TELECONFERENCED | |
| *+ | HJR 5 | TELECONFERENCED | |
| += | HJR 6 | TELECONFERENCED | |
| *+ | HJR 7 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 30, 2019
3:05 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 Josh Revak
COMMITTEE CALENDAR
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. 5
Proposing amendments to the Constitution of the State of Alaska
prohibiting the establishment of, or increase to, a state tax
without the approval of the voters of the state; and relating to
the initiative process.
- 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
HOUSE JOINT RESOLUTION NO. 7
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit; relating to the budget
reserve fund and establishing the savings reserve fund; and
relating to the permanent fund.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
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
04/25/19 (H) Heard & Held
04/25/19 (H) MINUTE(STA)
04/30/19 (H) STA AT 3:00 PM GRUENBERG 120
BILL: HJR 5
SHORT TITLE: CONST. AM: STATE TAX; INTIATIVE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/20/19 (H) READ THE FIRST TIME - REFERRALS
02/20/19 (H) STA, JUD, FIN
04/30/19 (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
04/25/19 (H) Heard & Held
04/25/19 (H) MINUTE(STA)
04/30/19 (H) STA AT 3:00 PM GRUENBERG 120
BILL: HJR 7
SHORT TITLE: CONST AM:APPROP. LIMIT; RESERVE FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/20/19 (H) READ THE FIRST TIME - REFERRALS
02/20/19 (H) STA, JUD, FIN
04/30/19 (H) STA AT 3:00 PM GRUENBERG 120
WITNESS REGISTER
EMILY NAUMAN, Deputy Director
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 18.
KEVIN MCGOWAN, Staff
Representative Jonathan Kreiss-Tomkins
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 18 on behalf of Representative Kreiss-Tomkins, prime
sponsor.
PAULYN SWANSON, Communications Manager
Alaska Permanent Fund Corporation (APFC)
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 18.
JUSTIN PARISH
Juneau, Alaska
POSITION STATEMENT: Testified in support of HJR 18.
LYNN WILLIS
Eagle River, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
LAURA BONNER
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing of HJR 18.
JAMES SQUYRES
Delta Junction, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
BERT HOUGHTALING
Big Lake, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
INGRID PETERSON
Fox Creek Canyon Landowners Association
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
PAM GOODE
Delta Junction, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
TRISHA PEARSON
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HJR 18.
VIKKI JO KENNEDY
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
ADAM HYKES
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HJR 18.
LARRY SLONE
Homer, Alaska
POSITION STATEMENT: Testified in support of HJR 18.
GARY MCDONALD
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HJR 18
MIKE BARNHILL, Director of Policy
Office of Management & Budget (OMB)
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Presented HJR 5, HJR 6, and HJR 7 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 5 on
behalf of the House Rules Standing Committee, sponsor, by
request of the governor.
ED KING, Chief Economist
Office of Management & Budget (OMB)
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Presented HJR 7 on behalf of the House
Rules Standing Committee, sponsor, by request of the governor,
with the use of a PowerPoint presentation.
CORI MILLS, Senior Assistant Attorney General
Labor and State Affairs Section
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis for HJR 7 on
behalf of the House Rules Standing Committee, sponsor, by
request of the governor, with the use of a PowerPoint
presentation.
JUSTIN PARISH
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5 and HJR 7.
JOE GELDHOF, Board Member
Permanent Fund Defenders
Juneau, Alaska
POSITION STATEMENT: Testified in support of HJR 6.
LAURA BONNER
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5, HJR 6,
and HJR 7.
PAT KEHOE PENDELL
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5, HJR 6,
and HJR 7.
ROBERT HALL
Houston, Alaska
POSITION STATEMENT: Testified during the hearing on HJR 5, HJR
6, and HJR 7.
BRIAN LYNCH
Petersburg, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5, HJR 6,
and HJR 7.
ADAM HYKES
Homer, Alaska
POSITION STATEMENT: Testified during the hearing on HJR 5 and
in support of HJR 6 and HJR 7.
LARRY SLONE
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5 and HJR 6
and in support of HJR 7.
GENE WHITE
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HJR 5, HJR 6,
and HJR 7.
CRIS EICHENLAUB
Eagle River, Alaska
POSITION STATEMENT: Testified in support of HJR 5, HJR 6, and
HJR 7.
DEBORAH HOLLAND
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HJR 5, HJR 6, and
HJR 7.
ACTION NARRATIVE
3:05:00 PM
CO-CHAIR ZACK FIELDS called the House State Affairs Standing
Committee meeting to order at 3:05 p.m. Representatives LeDoux,
Story, Wool, Vance, Shaw, Kreiss-Tomkins, and Fields were
present at the call to order. Also present was Representative
Revak.
HJR 18-CONST AM: PERMANENT FUND; POMV;EARNINGS
3:05:29 PM
CO-CHAIR FIELDS announced that the first 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.
3:05:57 PM
CO-CHAIR KREISS-TOMKINS, as prime sponsor of HJR 18, stated that
he was available for questions.
REPRESENTATIVE WOOL asked whether the Alaska State Constitution
could be amended under the proposed resolution or whether a
constitutional convention would be required to revise the
constitution.
CO-CHAIR KREISS-TOMKINS responded that there is limited case law
on the question of amendment versus revision. He cited the
Alaska Supreme Court decision Bess v. Ulmer [1999]. He stated
that there are differing perspectives for "constitutionalizing"
the permanent fund dividend (PFD) itself and whether doing so
would constitute a revision as opposed to an amendment. He
expressed his belief that the amendment proposed under HJR 18 is
clearly just an amendment, because it would change the structure
of the permanent fund, combine the earnings reserve fund (ERA)
into the principle, and add a constitutional cap [on
appropriations from the permanent fund]; it would not
effectively add new content into the constitution that might be
considered a revision. He suggested asking for an opinion from
Legislative Legal Services.
3:08:11 PM
EMILY NAUMAN, Deputy Director, Legislative Legal Services,
Legislative Affairs Agency, responded that it was a difficult
question to answer because there is only one case to depend on
to parse out the difference between an amendment and a revision.
She said that of the four resolutions to be considered by the
committee, HJR 18 is the most innocuous; it proposes to make a
small number of changes and would not have a sweeping effect on
the balance of power between the three branches of government.
She relayed that the best test for determining the difference is
two-pronged: 1) looking at the number of changes, and 2)
looking at the type of changes. She offered that Representative
Kreiss-Tomkins's representation of the changes proposed in HJR
18 is accurate: the changes are minor quantitatively and do not
tip the scale qualitatively as far as balance of power or other
constitutional authority of the government.
REPRESENTATIVE LEDOUX asked for a quick synopsis of HJR 18.
CO-CHAIR KREISS-TOMKINS answered that HJR 18 would roll the ERA
into the principle of the permanent fund, effectively creating
an endowment governed with a hard cap - a draw of 5 percent of
the average of its market value - for the first five of the
preceding six fiscal years.
REPRESENTATIVE LEDOUX asked whether that amount is less than
what the state is currently drawing from the fund.
CO-CHAIR KREISS-TOMKINS responded that under Senate Bill 26
[passed during the Thirtieth Alaska State Legislature, 2017-
2018, and signed into law 6/27/18], 5.25 percent of market value
(POMV) will be drawn from the permanent fund for the current
fiscal year [fiscal year 2018 (FY 18)] and the next two fiscal
years [FY 19 and FY 20] to be available for appropriation, if
the legislature follows statute; thereafter, the POMV would be
reduced to 5 percent. He pointed out that after the next two
fiscal years, HJR 18 would mirror what is already in law.
REPRESENTATIVE LEDOUX asked if the motive for HJR 18 is to
prevent the legislature from "getting its hands on money."
CO-CHAIR KREISS-TOMKINS stated that the primary goal of HJR 18
is to protect the permanent fund forever; ensure that it cannot
be spent down but will remain permanent. He described a
secondary benefit: As the permanent fund is presently
structured, even if the legislature is restrained in its
spending, the ERA could bottom out in an extreme [stock] market
downturn. This almost occurred in 2009. He expressed that the
ERA could drop to $0, and money would not be available for
dividends or public services. He maintained that HJR 18 would
effectively prevent that from happening.
3:13:20 PM
REPRESENTATIVE VANCE asked for confirmation that HJR would
enshrine the POMV and supersede the statutory PFD formula.
CO-CHAIR KREISS-TOMKINS answered, "That's incorrect." He stated
that there would be no mathematical conflict between having a
statutory POMV and a statutory PFD. He relayed that under HJR
18, there would be enough money for the legislature to draw a 5
percent POMV and pay out $3,000 dividends.
REPRESENTATIVE VANCE expressed her understanding that
historically the PFD was calculated from the 5-year average.
Under HJR 18, a 5 percent POMV would be transferred to the
general fund (GF), and from that draw the legislature would
dispense PFD checks based on historical calculations. She
referred to page 1, line 15, 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..." and added that the POMV would then be
transferred from the corpus to GF. Subsequently, the
legislature could distribute a dividend based upon the statutory
formula.
3:16:00 PM
KEVIN MCGOWAN, Staff, Representative Jonathan Kreiss-Tomkins, on
behalf of Representative Kreiss-Tomkins, prime sponsor of HJR
18, responded that HJR 18 would not affect how the legislature
decides to allocate the 5 percent draw.
CO-CHAIR KREISS-TOMKINS added that the answer to the question
is, Yes, that money can be distributed for dividends.
REPRESENTATIVE VANCE expressed that the bigger issue for the
public is "where funding starts." She said, "We all agree that
... the 50-50 statutory formula, but where do you implement it
into the math equation and come out with a different amount?
And this puts it in after the POMV draw, whereas historically it
was directly from the average of the earnings, and this, I
think, would shift a lot of the conversation of what the public
is trying to have in light of the governor's constitutional
amendments as well." She continued by stating, "I'm not there
yet. I know that the winds are ... blowing that way with SB 26,
but I don't ... think I'm there yet because the public wants to
have a fuller conversation on the possibility of PFD paybacks
with the ERA, of how the dividend should be formulated in the
future; and I agree that we need to look on the overall effects
of the future, but I'm just not there with your amendment at
this time."
REPRESENTATIVE STORY expressed her understanding that [HJR 18]
follows best practices for big endowments in setting their
investment earnings for the year.
CO-CHAIR KREISS-TOMKINS agreed that most endowments and most
sovereign wealth funds are managed in the manner contemplated by
HJR 18, with a POMV taken out every year and one combined fund
for which the principle is protected.
REPRESENTATIVE LEDOUX expressed her concern that under HJR 18,
the PFD will take "second place"; it will be taken from the
amount that is remaining. She referred to Senator Peter
Micciche's comment in the Senate Finance Standing Committee
meeting that a $3,000 PFD would probably exceed the limits of
Senate Bill 26. She said that he pointed out that legislators
would need to decide which of the statutes to violate. She
concluded that in the scenario under HJR 18, the PFD would "be
the stepchild."
CO-CHAIR FIELDS offered that $3 billion is enough to pay out a
statutory dividend. It is the decision of the legislature
whether to do that, raise revenue to pay the dividend and
maintain government services, or pay out a massive dividend and
annihilate government services within the POMV framework. All
of these are options.
3:20:56 PM
CO-CHAIR FIELDS asked for confirmation that since the current
statutory formula was put in place, the permanent fund has grown
steadily over time considering bull and bear markets.
3:21:20 PM
PAULYN SWANSON, Communications Manager, Alaska Permanent Fund
Corporation (APFC), Department of Revenue (DOR), responded that
the permanent fund has certainly grown a great deal over time
since inception - from the initial deposit of $734,000 to the
$64.5 billion as of March 31 [2019].
CO-CHAIR FIELDS asked whether nominal and real value PFDs have
generally grown over time.
MS. SWANSON offered that DOR could better answer the question
regarding the PFD. She stated that up until the past few years,
the PFD was based on the statutory net income from the fund
averaged over years. She relayed that HJR 18 speaks to the
amount of money that could be spent off the fund on an annual
basis; it does not speak to the dividend.
CO-CHAIR FIELDS asked for confirmation that nothing in the
constitutional amendment under HJR 18 would limit the dividend
or nullify the current statute with respect to disbursement of
the dividend.
MS. SWANSON confirmed that nothing within the proposed
resolution speaks to the dividend.
REPRESENTATIVE WOOL maintained that the proposed resolution
specifies the amount of revenue that may be taken from the fund
and does not address the statutory formula for the PFD at all.
MS. SWANSON answered, "That's absolutely correct."
REPRESENTATIVE WOOL expressed his understanding that the ERA is
the account used to pay the PFD via GF; in other words, it is
the source of expendable cash in the permanent fund.
MS. SWANSON stated that with the implementation of Senate Bill
26, FY 19 was the first year that funds were distributed
directly to GF as a revenue source. Up until then, the ERA had
been used historically to pay dividends, pay for APFC operations
and management, and to support the Department of Law (DOL) and
Department of Natural Resources (DNR) regarding the work they do
to bring in royalties.
REPRESENTATIVE WOOL relayed that the ERA was used to pay the PFD
checks. He asked what the changes would be under Senate Bill
26.
MS. SWANSON answered that with Senate Bill 26 in place, there is
a statutory rule limiting the draw to 5.25 percent for FY 19, FY
20, and FY 21; in FY 22, the draw goes to 5 percent. She stated
that it is the responsibility of the legislature to appropriate
the money from the ERA to GF following the statutory rule;
further distribution of that money is the policy call of the
legislature.
REPRESENTATIVE WOOL stated that prior to Senate Bill 26, funds
needed for the PFD checks were taken directly from the ERA.
MS. SWANSON said, "Historically ... that is correct."
REPRESENTATIVE WOOL offered that now the 5.25 percent draw goes
to GF, funds for the PFD checks come from GF.
MS. SWANSON answered yes, the current construct of the FY 20
budget is that the 5.25 percent goes directly to GF and is
further distributed to the PFD fund from GF.
CO-CHAIR FIELDS recalled that $1.9 billion would be needed to
pay a $3,000 PFD in the current year.
MS. SWANSON concurred.
3:26:33 PM
CO-CHAIR FIELDS relayed that under HJR 18, a [5.25] percent draw
would be $3 billion - vastly more than enough to pay a $3,000
PFD; HJR 18 would not limit the size of the PFD; the size of the
PFD is a legislative decision.
REPRESENTATIVE WOOL asked whether APFC has a position on the
concept behind what HJR 18 attempts to accomplish.
MS. SWANSON responded that the APFC board of trustees has no
position on this resolution specifically. Historically the
board has supported the POMV and classic endowment concepts.
Resolution 1804, passed by the board, speaks to the importance
of having a rules-based structure regarding withdrawals from the
fund, and HJR 18 reflects a rules-based structure regarding
withdrawals from the fund for ongoing sustainability.
REPRESENTATIVE VANCE referred to testimony that ERA funds were
used by DNR to collect royalties. She asked what mechanism is
in place under Senate Bill 26 to support DNR.
MS. SWANSON answered that the funds for DNR is an appropriation
in the operating budget. Within the operating budget, the ERA
currently funds the APFC operating budget for the investment and
management of the permanent fund. There is a specific
appropriation to DNR regarding royalty work. She stated that
combined, DOL and DNR receive about $8 million to support their
activities in generating royalties.
3:29:10 PM
REPRESENTATIVE SHAW expressed that HJR 18 appears to put all the
ERA into the principle of the fund. He cited page 1, line 10,
of HJR 18, which read in part, "Except as provided in (b) and
(c) of this section, all income...." He said that the rationale
given for HB 31 was that there needed to be a "cushion" in the
ERA. He asked if HJR 18 would provide a cushion or is a cushion
not needed.
CO-CHAIR KREISS-TOMKINS answered that HB 31 works within the
current structure of the permanent fund in the constitution,
whereas HJR 18 would change that very structure. He said that
in the current structure, as long as there is an ERA - which is
subject to volatility with markets or the spending of the
legislature - it is advisable to have a "shock-absorber" - some
liquidity - in the ERA; if the ERA goes to zero, there is no
means to pay dividends or for public services. Under HJR 18,
combining the ERA into the principle and operating under the
POMV structure eliminates the need for liquidity in the ERA. He
added that HJR 18 would solve the problem at its root.
REPRESENTATIVE SHAW commented that part of the hardship in the
committee and in the public view is that the issues have become
so confusing, and there are so many bills, resolutions, and
amendments dealing with the permanent fund, the PFD, and the
earnings that it is difficult to "get a bite on anything in
particular." He maintained that Representative Kreiss-Tomkins's
explanation confused him more. He said that he sees a conflict
between HB 31 and HJR 18, yet he doesn't know if there is one.
He mentioned the difficulty of messaging these concepts to his
constituents.
CO-CHAIR FIELDS gave an example as an explanation: HJR 18
passes. Alaska loses $5-10 billion from the fund due to a bad
market year. Because the ERA and the principle are combined and
Alaska is using a POMV draw, there would still be adequate money
to pay out PFDs from that one integrated fund, just as there
would be if the ERA money was adequate. He maintained that
under HJR 18, the funds for payouts are "safer," because the
money would be taken from a larger fund, which constitutes less
risk in a terrible market; in a terrible market the likelihood
of the ERA being drawn down is greater.
CO-CHAIR KREISS-TOMKINS added that currently the permanent fund
has two accounts: the principle and the ERA. Since the ERA was
created, it was necessary to have liquidity in the ERA. Under
HJR 18, the two would be combined.
REPRESENTATIVE SHAW offered that HJR 18 provides no cushion,
since the resolution states that all income [from the permanent
fund shall be retained in the GF].
CO-CHAIR FIELDS responded that HJR 18 provides the largest
cushion possible for paying out dividends and for services
within the context of the POMV.
3:33:46 PM
REPRESENTATIVE WOOL referred to testimony that the legislature
has a mixed history on following its own rules. He opined that
these statements bother him. There are some examples of that
being true: the legislature not following the 90-day session
and the PFD formula being ignored during the past three years.
He asked, "Do you really think that we're going to just start
... digging through the crates and pulling cash out because we
need it above and beyond the 5.25 percent? Is that your fear?"
CO-CHAIR KREISS-TOMKINS replied that it is impossible to know;
however, there is enough probability or risk that it could
happen and, therefore, warrants fully protecting the permanent
fund. He stated that in this first year of the rules-based
framework for the permanent fund, one legislative body is
potentially on the verge of passing a budget that exceeds the
5.25 percent draw.
REPRESENTATIVE WOOL asked what the state would do in the
following scenario: the oil revenue goes to almost nothing for
any number of reasons; the stock market and economy are booming;
the permanent fund is growing; the expense of operating the
state is substantial; however, Alaska is locked into the 5
percent draw in the constitution.
CO-CHAIR KREISS-TOMKINS replied that the State of Alaska would
have to do what the other 49 states in the country do, which is
cut the budget, raise revenues, or execute some balance of both.
3:37:22 PM
REPRESENTATIVE LEDOUX offered that the corpus of the permanent
fund is already protected without the proposed amendment to the
constitution; the legislature cannot access the corpus without a
vote of the people. She suggested that HJR 18 relates to
protecting the ERA - a subaccount of the permanent fund.
CO-CHAIR KREISS-TOMKINS answered that her question gets to the
"heart of the matter," which is, "Do we as the legislature - do
Alaskans - consider the ERA part of the permanent fund ... as in
something that should be protected forever, managed for the
benefit of future generations, or is this ... a pot of cash akin
to the statutory budget reserve, the constitutional budget
reserve, that's available to be spent down because we want to
pay down unfunded liability, we want to build a bridge, we want
to have an amazing foster care system, whatever?" He maintained
that the premise of HJR 18 is that the ERA is part of the
permanent fund - which is supported by history and by law - and
should be likewise protected and managed.
CO-CHAIR FIELDS opened public testimony on HJR 18.
3:39:15 PM
JUSTIN PARISH testified that he supports the resolution and
believes that it will provide protection for the real value of
the [permanent] fund. Currently, protection for only the corpus
does not protect the real value of the corpus; if the earnings
are spent down, because of inflation or market losses, the
corpus would be steadily depleted year after year. He
maintained that only a constitutional amendment such as under
HJR 18, which follows best practices of fund management, would
be enough to protect the fund into the future.
3:40:36 PM
LYNN WILLIS testified that he is opposed to amending the
constitution, because it will constrain the legislature in doing
its job regarding stewardship of fiscal resources. He
maintained that the legislature needs every option available to
solve the budget crisis and expressed that he doesn't want the
public blamed if the state cannot pay out a massive PFD or levy
taxes. He stated that he opposes the constitutional amendment
approach and supports addressing changes during the
constitutional convention.
3:41:58 PM
LAURA BONNER testified that the resolution is confusing. She
said that she supports protecting the permanent fund. She
stated that she supports eliminating the ERA and putting the
POMV draw into the GF.
3:43:32 PM
JAMES SQUYRES testified that he supports the original
calculation of the PFD, and HJR 18 would remove that
calculation. He opined that eliminating the ERA and the
statutory income would ultimately reduce the PFD on which
Alaskans depend and eliminate the PFD payback. He said Alaskans
have ceased to trust the legislature's actions regarding the
PFD. He maintained that HJR 18 would obstruct [Governor Michael
J. Dunleavy's] agenda and hearten Senate Bill 26.
3:44:51 PM
BERT HOUGHTALING testified that under HJR 18, the legislature
would continue to use the permanent fund and ERA to fund
government expenses and continue its theft [of the PFD money].
He maintained that no resolution is worth passing if it doesn't
seek to amend the constitution to protect the PFD in its
original formula.
3:46:25 PM
INGRID PETERSON, Fox Creek Canyon Landowners Association,
testified that the association objects to the lack of
information and short timeline for testimony on HJR 18. She
opined that more explanation and public input is needed when
suggesting changes to the Alaska State Constitution.
3:49:16 PM
PAM GOODE testified that she and many others did not support
Senate Bill 26; she does not support the POMV philosophy; and
she does not support putting the ERA into the permanent fund.
She stated that since the voters would have to approve the
constitutional amendment under HJR 18, they would need to
understand not only the original practices but the proposed
practices, which would be a challenge. She maintained that the
problem is not the permanent fund and the ERA but overspending
by legislators. She offered that only the inflation-proofing of
the fund needs attention.
3:52:09 PM
TRISHA PEARSON testified that she has many questions about the
proposed resolution and expressed her belief that more education
of the public is needed before passing a resolution calling for
a constitutional amendment.
3:53:33 PM
VIKKI JO KENNEDY testified that she opposes the passage of any
confusing resolutions for constitutional amendments.
3:54:59 PM
ADAM HYKES testified that it would be an accounting blunder to
think that Alaska can spend down the permanent fund to fix a
spending problem. He expressed that "Alaska voted loud and
clear on the PFD issue," and members lost their seats in the
legislature because of it. He stated, "We want our PFD back,
and it was taken from us, and there is no trust between us and
government until that is paid back and trust is restored."
3:56:08 PM
LARRY SLONE testified that he supports locking up the ERA into
the permanent fund and, thereby, making it inaccessible to the
legislature. It would prevent the legislature from depleting
the permanent fund; a 5 percent POMV draw would still provide a
reasonable dividend. If the government needs more money, it
would just have to go through the process of taxing individual
citizens, and consequently it would be more difficult for the
legislature to waste money.
3:57:25 PM
GARY MCDONALD expressed that the legislators should leave the
permanent fund alone and "give us what we deserve."
3:58:07 PM
CO-CHAIR FIELDS closed public testimony on HJR 18. He explained
that HJR 18 would not change the statute with respect to
disbursement of PFDs; it does not limit or change the
legislature's ability to raise revenue; it does protect the
value of the permanent fund and, therefore, the ability to pay
out PFDs indefinitely into the future by preventing the
liquidation of a significant part of the permanent fund.
REPRESENTATIVE STORY commented that each year every $1 billion
invested yields Alaska about $100 million; therefore, being able
to build and preserve the ERA along with the corpus would keep a
long-term permanent fund and ultimately the statutory formula
PFD.
CO-CHAIR FIELDS added that draining the permanent fund locks
Alaska into a death spiral in which the state could only pay out
smaller and smaller PFDs over time.
[HJR 18 was held over.]
HJR 5-CONST. AM: STATE TAX; INTIATIVE
HJR 6-CONST. AM.:PERMANENT FUND & DIVIDEND
HJR 7-CONST AM:APPROP. LIMIT; RESERVE FUND
3:59:52 PM
CO-CHAIR FIELDS announced that the next order of business would
be HOUSE JOINT RESOLUTION NO. 5, Proposing amendments to the
Constitution of the State of Alaska prohibiting the
establishment of, or increase to, a state tax without the
approval of the voters of the state; and relating to the
initiative process and 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 and
HOUSE JOINT RESOLUTION NO. 7, Proposing amendments to the
Constitution of the State of Alaska relating to an appropriation
limit; relating to the budget reserve fund and establishing the
savings reserve fund; and relating to the permanent fund.
4:00:03 PM
MIKE BARNHILL, Director of Policy, Office of Management & Budget
(OMB), Office of the Governor, on behalf of the House Rules
Standing Committee, sponsor of HJR 5, HJR 6, and HJR 7, by
request of the governor, relayed that the three resolutions
comprise Governor Michael J. Dunleavy's proposal to the
legislature to amend the Alaska State Constitution in three
separate vehicles to provide for long-term fiscal stability and
sustainability. He stated that HJR 5 and HJR 6 are both
examples of direct democracy. The proposal under HJR 5
stipulates that whenever the legislature enacts a tax or an
increase to the rate of a tax, a vote of the people would be
required.
REPRESENTATIVE LEDOUX referred to Mr. Barnhill's statement that
the proposed resolutions are examples of direct democracy. She
opined that HJR 5, Section 1(b) is an example of direct
democracy; however, Section 1(c) is the converse of direct
democracy in that any law enacted by the voters through
initiative must be approved by the legislature. She added that
she supports Section 1(b) but does not believe Section 1(c) to
represent direct democracy.
MR. BARNHILL responded that there are two elements to HJR 5:
When the legislature enacts a tax or an increase in the rate of
an existing tax, it would require a vote of the people. Section
1(c) is the converse of 1(b). When people initiate a tax or an
increase in the rate of an existing tax, which is an example of
direct democracy, the tax question comes back to the legislature
for approval. He maintained that both are uses of direct
democracy and already exist in the constitution. He stated that
when the legislature enacts any law, under the constitution the
people have the right through the referendum process to consider
it and reject it. Conversely, under the constitution, if the
people were to initiate and enact any law, the legislature can
amend it immediately but can't repeal it for two years. The
change proposed under HJR 5 involves allowing the legislature to
reject a voter-initiated law during the next legislative
session, rather than waiting two years.
REPRESENTATIVE LEDOUX maintained that what Mr. Barnhill
described is not exactly direct democracy. She asked for
confirmation that the legislature's amendment to a voter-
initiated law cannot constitute a substantial change to the
initiative.
MR. BARNHILL responded that there are court cases that attempt
to define the line between an amendment and a repeal of a voter-
initiated law. He added that the court looks at whether
substantively the amendment amounts to a repeal. He maintained
that Section 1(c) is absolutely an example of direct democracy
but would tighten the timelines for the legislature to reject a
voter-initiated law.
CO-CHAIR FIELDS asked whether a legislature that did not want to
approve a voter-initiated tax would need to vote on it or
whether the tax would die through legislative inaction.
MR. BARNHILL stated that under HJR 5, the legislature would need
to act on the law before it is approved; no action would
constitute a "pocket veto" of the law. He added that the
companion resolution, SJR 4, was changed by the Senate Judiciary
Standing Committee to a "pocket passage" approach to address
concerns that the other approach could potentially reduce the
power of the people to initiate a tax law.
4:05:44 PM
MR. BARNHILL reminded the committee that HJR 6 was discussed in
the 4/25/19 House State Affairs Standing Committee meeting. He
maintained that HJR 6 is also an example of direct democracy; it
proposes that any change in the calculation of the permanent
fund dividend (PFD) in statute would also be considered by the
people. He continued by saying that HJR 7 is an appropriation
limit proposal. He offered that together the three resolutions
form Governor Dunleavy's core legislative agenda for the current
session; the governor feels very strongly about allowing the
people the opportunity to consider each of these [proposed]
amendments to the constitution separately in order to achieve
fiscal stability and fiscal sustainability in the state.
MR. BARNHILL stated that HJR 5 is referred to in other states as
the taxpayer bill of rights; it is inspired by Colorado's
example, in which the people initiated a change to the Colorado
State Constitution in 1992 requiring a vote of the people any
time there is a change to a tax. He mentioned other states with
similar provisions: The State of Missouri enacted an amendment
to the Missouri State Constitution requiring a vote of the
people any time there was a tax or fee that increased revenues
by more than $50 million or the inflation-adjusted value. The
State of Washington has a constitutional provision requiring a
vote of the people for property taxes at the local level that
are in excess of 1 percent of property values. California's
constitution also requires a vote of the people at the local
level.
REPRESENTATIVE LEDOUX suggested that western states, rather than
eastern states, have the initiative process. She asked whether
any of the states that Mr. Barnhill mentioned allowing taxation
through the initiative process have provisions requiring the
legislature to approve the taxes - ether implicitly or
explicitly.
MR. BARNHILL responded that he did not know but could research
that.
4:09:06 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 5, by request of the governor, paraphrased from the
sectional analysis, which read as follows [original punctuation
provided]:
Section 1: This section would add two new subsections
to the tax clause of the Alaska Constitution. Taken
together, the two subsections would require that any
new state tax or increase to the rate of an existing
state tax be approved by both the legislature and the
voters.
Subsection (b) would require that any law enacted
through the legislative process that would establish a
new state tax or increase the rate of an existing
state tax shall not take effect unless the voters
approve the proposed law in the next statewide
election. If the voters approve the proposed law, it
would take effect 90 days after the election was
certified.
Subsection (c) would require that any law proposed for
enactment through the initiative process and approved
by the voters that would establish a new state tax or
increase the rate of an existing state tax shall not
take effect unless the legislature, by resolution,
approved the initiated measure by the end of the next
regular session. The legislature would have to approve
it by majority vote in a joint session. If the
legislature approved of the initiated measure, it
would take effect 90 days after the legislature's
approval.
Section 2: This section would make a conforming change
to the initiative process in Section 6 of Article XI,
providing an exception to the effective date
requirements for initiatives.
Section 3: This section would require that this
amendment be placed on the ballot in the 2020 general
election.
CO-CHAIR FIELDS referred to a memorandum from Legislative Legal
Services [dated 4/19/19], included in the committee packet,
which suggested that HJR 5 is sufficiently sweeping to require a
constitutional convention, because it constitutes a revision to
the constitution and not an amendment.
MR. MILKS explained that the Department of Law (DOL) considers
the proposed constitutional amendment to be an appropriate
amendment, because the Alaska State Constitution already allows
for the people or the legislature to enact laws, and processes
exist for veto or override. He reiterated that since the state
already has an initiative or referendum process, the amendment
would not constitute a sweeping change. He mentioned that in
the Alaska Supreme Court Case, Bess v. Ulmer [1991], cited in
the memo, two of the three amendments considered were found to
be appropriate amendments, and only one was found not to be
appropriate; that amendment was a sweeping change to a large
number of criminal defense rights.
CO-CHAIR FIELDS relayed the opinion from the Legislative Legal
Services memorandum, dated 4/19/19, which read in part as
follows:
Under art. XIII, sec. 1, Constitution of the State of
Alaska, an amendment to the constitution may be made
with a two-thirds vote of each house of the
legislature and a majority vote of the electorate.
Under art. XIII, sec. 4, a revision to the
constitution may only be made at a constitutional
convention....
The amendment prevents the legislature from imposing
new tax or increasing a tax without voter approval.
The result will be a fundamental shift in the
constitutional authority of the legislature to tax.
As identified in Bess [v. Ulmer] the changes seem to
'substantially alter the substance and integrity of
the state constitution as a document of independent
force and effect....'
4:13:39 PM
REPRESENTATIVE WOOL mentioned that HJR 5 calls for any change to
an existing tax to go to a vote of the people automatically. He
stated that the referendum/ballot initiative process is
difficult work as is the process of passing a bill. He
expressed his belief that the only tax increase during his
tenure in the legislature was the Spill Prevention and Response
(SPAR) [surcharge of .0095 cent-per-gallon on refined fuel
sold]. He asked whether under the proposed constitutional
amendment, such a tax increase would need to go to a vote of the
people.
MR. BARNHILL answered that he doesn't know whether the SPAR
[surcharge] is a tax or a fee. He said that if it was a fee
then it would not go to a vote of the people; if it was a tax
then it would. He maintained that unlike Missouri, which puts
taxes and fees to a vote of the people, the administration
recognizes that putting every fee increase to the vote of the
people could be burdensome; it would overload the ballot,
requiring presentations on many issues. He offered that the
proposed amendment is intended to divide taxes and fees.
MR. MILKS offered that the proposed amendment refers to changes
in a tax or a fee. He relayed the definition of tax: a charge
laid by government upon persons or property for public purposes.
He said that in contrast, a user fee is a charge to someone for
permission to do something or to be licensed for an occupation.
REPRESENTATIVE WOOL asked whether motor fuel tax is a fee or a
tax.
MR. BARNHILL responded, "That is a tax." He said that if the
legislature enacted into law a 5 percent increase, it would go
to a vote of the people.
REPRESENTATIVE WOOL expressed his reluctance with the proposed
amendment as follows: "If I ask my kid's class if they want ice
cream every day for lunch, they're probably going to say 'Yes.'
Do they really need ice cream every day for lunch? Probably
not." He stated that he is not trying to be disrespectful to
the public. He offered that if you ask a room full of people if
they want to pay more for gas at the pump, they would say 'No';
however, he contended that the second half of the question - do
you want your roads fixed? - is important. Going back to his
earlier example, he said, "If I ask my kids, 'Hey, do you all
want to have diabetes?' ... they're going to say 'No,' but the
ice cream might dominate their mind." He said that it would be
the same with the tax. He maintained that some of the taxes are
complicated. When raising a tax, it is important to look at the
totality of the state economy to understand the implication of
the tax increase.
MR. BARNHILL responded that he acknowledges Representative
Wool's concerns; however, he maintained that direct democracy is
a part of Alaska's constitutional framework. He relayed that it
is the administration's position that the issue of new taxes,
increases in the rate of a tax, and the calculation of the PFD
are sufficiently important issues that the people should be
consulted. He mentioned that if the legislature enacts a tax,
the people - with the tools currently available in the
constitution - can put a referendum on the ballot. The proposed
constitutional amendment "pre-packages" that process. He
maintained that a new tax is important enough to warrant getting
the public's view on it.
REPRESENTATIVE WOOL asked, "How easy do you want to make it?"
He suggested that rejecting a law - that has been enacted
through ballot initiative - by legislative inaction may be too
easy. He mentioned the legalization of marijuana as an example
and offered that perhaps the legislature should have to wait two
years to repeal a law; if the law has been in effect for two
years it may be impossible to repeal.
4:20:23 PM
CO-CHAIR KREISS-TOMKINS said that the terms "taxes," "fees," and
"surcharges" are semantics used by politicians to frame an
issue. He maintained that if the constitution is amended based
on one of these terms at the exclusion of the others, the
substantive difference between them is very important. He said
that all money raised from taxes, fees, or surcharges end up in
the general fund (GF). He requested in writing an
interpretation of how the three will be distinguished from one
another.
REPRESENTATIVE LEDOUX stated that last year the legislature
eliminated some oil tax credits. She asked whether eliminating
oil tax credits would be considered a change in taxes requiring
a vote of the people.
MR. MILKS responded that the intent of HJR 6 is that the
constitutional amendment would be drafted such that a new tax or
change in the rate of a tax would go to a vote of the people; a
change in deduction would not go to a vote of the people, In
response to Representative Kreiss-Tompkins he stated that in
interpreting constitutional amendments, the Alaska Supreme Court
will look at the records of the committees and the understanding
of the legislators and the people. He reiterated that the
constitutional amendment proposal refers to taxes as understood
by the Alaska Constitutional Convention - a charge laid by
government upon persons or property for public purposes - which
refers to property, sales, and income taxes levied by the state.
He asserted that this understanding of taxes contrasts with fees
- the permission to do something - or licenses - such as an
occupational license.
REPRESENTATIVE LEDOUX conjectured that among the states that
have constitutional caps on taxes, fees, or both, people would
not vote to raise their taxes very often. She mentioned that
most states don't have a permanent fund like Alaska and asked
how the states pay for their core services.
MR. BARNHILL answered that the states that he referred to do not
have constitutional caps; and they have constitutionally
required referendums. He stated that in Colorado since 1992
there have been just over a dozen taxes proposed by the
legislature; of those, there was an increase in the cigarette
tax rate, an enactment of a marijuana tax, and an increase in
the rate of the marijuana tax. All three were approved by a
vote of the people. He added that it is not impossible for new
taxes to become law in Colorado, but it is clearly more
difficult.
REPRESENTATIVE LEDOUX expressed her understanding that
Colorado's constitutional provision does not apply to fees, and
there has been a hefty increase in fees since the constitutional
provision went into effect.
MR. BARNHILL replied that he did not have information on the
increase in fees in Colorado; however, he confirmed that fees
are excluded from the Colorado constitutional amendment. He
added that there has been litigation and [Colorado] Supreme
Court decisions to distinguish fees from taxes.
4:26:01 PM
CO-CHAIR FIELDS stated that he does not support the proposed
amendments and believes that they represent a backdoor attempt
to defund core services; defunding of services is wildly
unpopular in the state of Alaska. He maintained that evidence
from around the country demonstrates that when such provisions
are adopted in other states, it leads to dramatic declines in
funding for education, higher education, and other core
services. He asserted that if those are the decisions that
Alaska wishes to make, it should make them in a straightforward
manner and not through a backdoor effort.
4:27:01 PM
The committee took an at-ease from 4:27 p.m. to 4:29 p.m.
4:28:41 PM
ED KING, Chief Economist, Office of Management & Budget (OMB),
Office of the Governor, on behalf of the House Rules Standing
Committee, sponsor of HJR 7, by request of the governor,
presented HJR 7 with the use of a PowerPoint presentation,
entitled "House Joint Resolution 7 Appropriation Limit." He
referred to a description of the current constitutional spending
limits on slide 2, entitled "Current Constitutional Spending
Limit (Article 9, Section 16)," and relayed that the limit was
set at $2.5 billion in 1982, allowing for adjustments for
inflation.
MR. KING pointed out that slide 3, entitled "UGF Spending and
Limit History (Inflation Adjusted)," shows a graphic
representation of how the current spending and spending limit
interact. He stated that in the early 1980s, there was a
massive increase in revenue from oil with a corresponding
increase in spending; in 1982 a limit was set due to excess
spending. He maintained that the limit was not effective when
oil revenues spiked again, as shown on the right side of the
graph; it did not prevent the growth of government.
MR. KING moved on to slide 4, entitled "What if the Proposed
Spending Cap Passed before Oil Prices Spiked?" which
demonstrates the current spending limit versus the proposed
spending limit; it reveals that if the proposed limit had been
in place, $29 billion would not have been spent; and that amount
invested would have generated an additional $5-6 billion in the
POMV rather than the current $3 billion.
MR. KING turned to slide 5, entitled "Sources of UGF Spending
Growth," to point out the sectors in which the growth [of
government] occurred in the years surrounding 2010.
4:30:31 PM
CORI MILLS, Senior Assistant Attorney General, Labor and State
Affairs Section, Department of Law (DOL), on behalf of the House
Rules Standing Committee, sponsor of HJR 7, by request of the
governor, continued with slide 6, entitled "Appropriation Limit
(SJR 6/HJR 7)," to point out that the current constitutional
appropriation limit has not worked to create an actual limit for
spending. She stated that the Constitutional Budget Reserve
Fund (CBRF) was created to be used during Alaska's "down time";
however, over the past four years, the legislature has not been
able to access the CBRF by a majority vote to fill a fiscal gap,
because the Alaska Supreme Court determined that the legislature
must first take into account the earnings reserve account (ERA),
and the ERA has always had enough to cover the budget.
MS. MILLS referred to slide 7, entitled "Appropriation Limit:
Section 1(a)," and relayed that the current appropriation limit
is $2.5 billion plus inflation; the goal under HJR 7 is to make
the limit more meaningful and impactful by tying it to spending.
She reviewed slide 7, which read as follows:
• Appropriation Limit -- "Appropriations made for a
fiscal year shall not exceed the average of the
appropriations made in the previous three fiscal years
by more than fifty percent of the cumulative change in
population and inflation since January 1 of the
previous calendar year, derived from federal indices
as prescribed by law, or two percent, whichever is
less
o Provides a list of exceptions for spending that
falls outside the appropriation limit cap
o Examples: permanent fund dividends and money placed
in the fund; money for disasters; obligations and
proceeds from G.O. bonds and revenue bonds
o Most substantial change from existing exceptions--
capital spending is not an exception and falls
within the appropriation limit cap
MS. MILLS turned to slide 8 for a graphic illustrating
expenditures that would fall within the limit and are capped by
the limit and the expenditures that would fall outside the limit
- the PFD, federal receipts, and other trust monies that must be
spent for specific purposes. She explained that the proposed
exclusions are currently exceptions within the constitutional
appropriation limit except for capital spending, which is
currently an exception but would not be under HJR 7.
MS. MILLS moved on to slide 9, entitled "Appropriation Limit:
Section 1(b) and (c)," to describe the new "savings waterfall"
under HJR 7. Slide 9 read as follows:
• Excess revenues would automatically be deposited into
savings accounts in priority order
Total amount in general fund that is "unexpended,
unobligated, and unappropriated" (i.e., excess
revenues)
Priority #1: Pay back the permanent fund
principal 50% of the income that was deposited
into the ERA that fiscal year
Priority #2: [if money remains after
priority #1] Get savings reserve fund
balance up to appropriation limit (formerly
the CBR)
Priority #3: [if money remains after
priority #2] Put money into permanent
fund principal to continue growing the
fund
MS. MILLS referred to slide 10, entitled "Appropriation Limit:
Sections 2,3, and 5," to relay that under HJR 7 the CBRF would
get a new name, [savings reserve fund]; the Senate [Judiciary
Standing Committee] removed that provision [from the companion
resolution, SJR 6, during the 4/1/19 meeting]. She reviewed the
left side of slide 10 as follows: The existing CBRF is funded
by tax and royalty settlements, which can be spent by a three-
quarters vote [of the legislature]. All the money available in
GF is to be returned to CBRF - pursuant to Article IX, Section
17(d), of the Alaska State Constitution - which is known as "the
sweep." The repayment via the sweep has not occurred, because
the legislature has used the three-quarters vote to return the
money to GF, a process known as the "reverse sweep."
MS. MILLS turned to the right side of slide 10 to relay the
proposal under HJR 7 as follows: Tax and royalty settlements
would still go into the savings reserve fund (formerly the
CBRF). A portion of excess revenues, mentioned on slide 9,
would also go into the savings reserve fund. The sweep and the
[need for a] three-quarters vote would be eliminated; however,
the legislature, by majority vote, would be able to access the
savings reserve fund to fill the gap between what is available
in the GF for appropriation up to the appropriation limit. She
maintained that between the changes to the CBRF and the
appropriation limit, the two would work more in harmony
together, create a more effective cap on government spending,
and create a more sustainable savings model.
4:36:03 PM
CO-CHAIR FIELDS opened public testimony on HJR 5, HJR 6, and HJR
7.
4:36:18 PM
JUSTIN PARISH testified that although HJR 5 is being "sold" as
direct democracy, it is an unprecedented attack on the power of
the initiative process, which is direct democracy. He mentioned
that Colorado's taxpayer bill of rights does not restrict
initiatives at all. He stated that if most of Alaska voters
want one thing and have put tremendous sacrifice and work into
achieving it through the initiative process, the legislature
should listen and not prevent it by way of a pocket veto. He
offered that to not include tax decreases in the proposed
amendment suggests that the administration does not want to take
the risk of the public asking to decrease taxes, for example, on
the oil industry. He maintained that the goal of HJR 5 is to
prevent the public weighing in on oil taxes. He stated that
last year ConocoPhillips Alaska, Inc. paid an effective tax rate
of -7.7 percent to Alaska as a production tax, and he asked how
the public is supposed to respond to that. He reiterated that
the proposed amendment under HJR 5 would "tie the public's
hands" and prevent it from trying to get a fair deal. He added
that also it would prevent the public from saying, "No, I want
to pay for my schools."
MR. PARISH continued by testifying that the proposed amendment
under HJR 7 would thwart the state's ability to pay for all of
the state functions that the public wants, including care for
Alaska elders; it would result in an approximately 19 percent
cut across the board over the next 20 years.
4:39:35 PM
JOE GELDHOF, Board Member, Permanent Fund Defenders, testified
that the mission of the Permanent Fund Defenders is to protect
and defend the permanent fund and the PFD. He maintained that
the PFD is not a welfare program; it is an equal portion of the
interest of the citizens' permanent fund paid out as a dividend;
and it has been very good at diversifying Alaska's economy and
lifting people out of poverty.
MR. GELDHOF continued by saying that the group supports
requiring a vote of the people to change the current PFD
statutory formula; however, it believes that the eligibility
requirement of the PFD program and the payment schedule should
be left in statute. He concluded by saying that the statutory
formula has worked very well to protect the permanent fund over
the past four decades.
4:43:19 PM
LAURA BONNER testified that the proposed amendment under HJR 5
would preempt the duty of legislators. She maintained that the
legislature has access to much more information for analysis
than the voters on what the state needs to maintain the roads
and fund education and services. She stated that she has
friends in Colorado who say that the roads are terrible;
Colorado has problems funding core services such as roads and
education.
MS. BONNER maintained that funding the PFD is important;
however, she opined that the proposed amendment under HJR 18
would be more effective in that regard than the one under HJR 6.
She continued by saying that she is very disturbed by HJR 7.
She maintained that the analysis of the appropriation limit
under SB 104 revealed a troubling short-term budget outcome.
She expressed that she did not support eliminating the CBRF.
She emphasized that there is not enough analysis of all three
resolutions for committee or public vote.
4:46:19 PM
PAT KEHOE PENDELL expressed her belief that HJR 5 constitutes an
unnecessary impediment to providing needed tax revenues. She
maintained that an initiative that the people have been able to
get passed would be removed from direct democracy if subject to
legislative pocket veto. She stated that she is in favor of
funding stability, however, believes that the proposal under HJR
5 would make it more difficult for the state to fund core
services. She asserted that the public would seek to increase
the amount of the PFD rather than realizing the value to
themselves and their community of the services that have
historically been provided by the State of Alaska. She added
that she believes that Alaska needs a state income tax, and HJR
5 would make it more difficult to achieve that goal.
4:47:59 PM
ROBERT HALL attested to the fact that the legislature faces a
difficult challenge: balancing the budget, paying the PFD, and
providing for long-term fiscal stability that would be approved
by Alaskan voters. He advocated for putting an advisory
resolution on the ballot to give the voters an option of
approving a package of proposals that would give the legislature
guidance. The proposal would include a two-part revision to the
PFD formula: 1) a $6,700 PFD for this year, and 2) a revised
future total payment of the PFD to a minimum of 1 percent of the
total value of the permanent fund - $1,000. He stated that the
governor proposes no revisions to the PFD without a vote of the
people; this would be the vote. He urged allowing the people to
vote on a proposal package to give the legislature direction,
guidance, and approval to pass all the constitutional amendments
and revisions to the permanent fund. He maintained that making
this year's PFD $6,700 would ensure passage and provide for
fiscal stability for the subsequent 20 years.
4:49:56 PM
BRIAN LYNCH testified that the intent of the proposed
constitutional amendments is to put Governor Dunleavy's fiscal
agenda into the constitution and once in place, would be
extremely difficult to remove should the necessity arise. He
mentioned that the referendum process is extremely difficult and
expensive for individual residents of Alaska to accomplish. He
stated that he is in favor of leaving the fiscal decisions to
the duly elected legislators, and if a person does not like the
decisions, he/she has the constitutional right to express
his/her displeasure by voting the member out of office.
4:51:35 PM
ADAM HYKES testified that he supports Section 1(b) of HJR 5 but
not Section 1(c); he stated that he is opposed to allowing the
legislature to stonewall the will of the people through action
or inaction. He expressed his belief that the PFD needs to be
constitutionally protected, as proposed under HJR 6. He stated
that he supports the three-year average spending limit under HJR
7.
4:52:50 PM
LARRY SLONE expressed his belief that the proposed
constitutional amendment under HJR 5 would defund core services
- basic infrastructure and public safety. He opined that not
allowing the state to tax its citizens amounts to "slitting our
own throat." He said that that he concurs with Governor Jay
Hammond, who said that the silliest thing he did as a governor
was to allow the income tax to be rescinded. He offered that
the public has an obligation to pay attention to money spent by
the state and the services provided; he maintained that taxing
the residents will encourage this as well as force efficiencies.
He continued by saying that paying out a full PFD under the
current formula as proposed under HJR 6 would result in the
legislature raiding the ERA to fund state services, which would
ultimately gut the future value of the permanent fund. He
opined that under HJR 7, the permanent fund would be built up
with excess revenues and would force budget efficiencies by the
legislature.
4:54:30 PM
GENE WHITE testified that in Alaska's form of representative
government, the voters elect legislators to make large and small
decisions. The decisions do represent the will of the people,
or the legislators would not have been elected; and the people
can enact changes through the initiative process. He maintained
that the three proposed resolutions express that the
administration does not trust the future will of the people
through their elected representatives, and what is known today
is good for all the future. He asserted that the legislature
must have the ability and the flexibility to deal with
situations as they arise.
4:56:06 PM
CRIS EICHENLAUB testified that he supports the governor's plan
to follow the statutory formula for the PFD and the wording in
HJR 6, page 1, lines 14-15, which read, "a portion of the income
from the permanent fund shall be transferred solely for a
program of dividend payments to state residents...." He
maintained that it is the intent of the governor to restore
integrity to the state through the three resolutions so that
entities will want to do business with the state. He maintained
that legislators found a way to circumvent the law and as a
result, people didn't get PFD money they were due. He stated
that the money is in the ERA and could be paid out today.
4:58:53 PM
DEBORAH HOLLAND testified that legislators should talk about the
fund "properly" instead of referring to the permanent fund as if
it was their personal bank account.
CO-CHAIR FIELDS closed public testimony on HJR 5, HJR 6, and HJR
7. He stated that HJR 5, HJR 6, and HJR 7 would be held over.
4:59:38 PM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 5:00
p.m.