04/09/2003 07:05 AM House W&M
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 9, 2003
7:05 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Jim Whitaker, Co-Chair
Representative Cheryll Heinze
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
Representative Vic Kohring
Representative Norman Rokeberg
Representative Bruce Weyhrauch
OTHER LEGISLATORS PRESENT
Representative Paul Seaton
Representative Dan Ogg
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 9
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit and a spending limit.
- HEARD AND HELD
PREVIOUS ACTION
BILL: HJR 9
SHORT TITLE:CONST AM: APPROPRIATION/SPENDING LIMIT
SPONSOR(S): REPRESENTATIVE(S)STOLTZE
Jrn-Date Jrn-Page Action
01/31/03 0102 (H) READ THE FIRST TIME -
REFERRALS
01/31/03 0102 (H) STA, JUD, FIN
02/11/03 (H) STA AT 8:00 AM CAPITOL 102
02/11/03 (H) Heard & Held
MINUTE(STA)
03/28/03 0687 (H) COSPONSOR(S): ROKEBERG
04/04/03 0797 (H) W&M REFERRAL ADDED BEFORE STA
04/09/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska,
POSITION STATEMENT: As sponsor, presented HJR 9.
VIRGINIA BLAISDELL, Staff
to Representative Stoltze
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions about HJR 9.
JAY HOGAN, Deputy Director
Office of Management & Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: During consideration of HJR 9, answered
questions about previous attempts to limit state spending in the
constitution.
ACTION NARRATIVE
TAPE 03-2, SIDE A
Number 0001
CO-CHAIR JIM WHITAKER called the House Special Committee on Ways
and Means meeting to order at 7:05 a.m. Representatives
Whitaker, Heinze, Wilson, Gruenberg, and Moses were present at
the call to order. Representative Hawker arrived as the meeting
was in progress. Representatives Seaton and Ogg were also
present.
HJR 9-CONST AM: APPROPRIATION/SPENDING LIMIT
Number 0014
CO-CHAIR WHITAKER announced that the only order of business
would be HOUSE JOINT RESOLUTION NO. 9, Proposing amendments to
the Constitution of the State of Alaska relating to an
appropriation limit and a spending limit.
CO-CHAIR WHITAKER commented that since this committee is charged
with finding the ways and the means to pay for the state's
operations, it is appropriate to consider a spending cap
approved by the voters as a component to that task. The
resolution will be heard three times, giving an opportunity for
the sponsor to make a presentation, for the committee to raise
questions and concerns, and for members to hear from the
administration and the public. He said the co-chairs intend
that a constitutional spending limit be a part of a sustainable
fiscal policy.
Number 0229
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, sponsor
of HJR 9, described this proposed constitutional amendment as an
absolute first step to have in place before considering other
revenue measures. The voters passed a constitutional spending
limit in 1982, which the state is observing at just under $6
billion; the voters also attempted to limit state spending by
creating the Constitutional Budget Reserve (CBR) fund [in 1991].
Representative Stoltze said HJR 9 proposes a conservative
spending limit with flat spending and fiscal discipline. It
allows the state to receive federal revenues and exempts other
foreseeable general fund revenues; there's a laundry list of
exemptions. The bill has a sunset clause; if the constitutional
amendment is not working, voters can vote it out in six years.
Number 0609
REPRESENTATIVE GRUENBERG said it is important to have a
"repealer" in this resolution, because the current
[constitutional spending limit] doesn't work. He said Alaska is
unique in having an item in the state constitution [on whether
to convene a constitutional convention] that comes before the
voters every 10 years. He asked Representative Stoltze if he
was aware of any other state that has a spending limit with an
automatic referendum. He clarified that he was referring to
[the sunset provision in the resolution].
REPRESENTATIVE STOLTZE explained that he'd tightened up the
resolution and specifically avoided any automatic escalators
because of the resulting loss on control over spending.
Legislators should do a year-by-year analysis of their spending,
he said. He pointed to the federal examples of Medicaid and
social security that spiral upward. He wants to keep a tighter
control, he said, and recognizes that contradiction [in limiting
the legislature's power to increase spending].
Number 0944
REPRESENTATIVE WILSON expressed concern about the ability of
different departments to function competently. State [programs]
are not currently keeping up with inflation, she said; agencies
and schools have no control over fuel, insurance, and other
expenses. She warned that if the state freezes spending at a
point where it's not taking care of [citizens'] needs, it's
going backwards. She cautioned against putting the lid on too
tight but said she realizes a spending cap is needed if there
are no new revenues coming in.
REPRESENTATIVE STOLTZE said it's even more important [to have a
spending cap] if more revenues are coming in. He said the
public has to support any new revenue measures and have
assurances that the revenues are not just going to fuel more and
excessive government. This constitutional spending limit really
forces the legislature to identify its highest priorities and
find reductions in areas that aren't appropriate for government,
he said. The legislature has to make the choices. He said he
is uncomfortable with this measure, which says he as a
legislator cannot be trusted to [hold down spending]; however,
he is more resolved to offer this resolution after sitting in a
caucus of 28 and a body of 40 [House members]. Legislators'
interests and views on essential funding are too diverse to
collectively come up with the needed reductions, he suggested.
He said he was reluctant to offer HJR 9 because the
legislature's authority to appropriate is perhaps its most
powerful tool.
Number 1358
REPRESENTATIVE HEINZE noted that the state is trying to put out
a welcome mat to businesses, to offer more fiscal security and
certainty. She asked if he perceived this resolution as a
positive lure to new corporations.
REPRESENTATIVE STOLTZE surmised that corporations would see
HJR 9 as a mixed bag; major incentives [to relocate in Alaska]
would have to fall under the cap. Some companies want
stability, while others are drawn to Alaska because they want to
tap into its largesse. He opined that most businesses want more
stability.
Number 1614
REPRESENTATIVE SEATON noted that in HJR 9, an appropriation for
a year can't exceed the average of the previous two years and an
appropriation of federal money is exempt. He asked how the
state matching money used to attract federal money would be
treated under this resolution.
REPRESENTATIVE STOLTZE said the legislature would apply the same
discipline as on the capital budget, using general funds as
effectively as possible to maximize the amount of federal
matching funds. The resolution would force the legislature to
prioritize the most effective use of the state's limited dollars
to match federal funds.
REPRESENTATIVE SEATON confirmed that the legislature would still
be working under the general fund cap; if legislators wanted to
leverage federal funds, they would need to find other reductions
in the budget.
REPRESENTATIVE STOLTZE agreed, adding that [a constitutional
spending limit] forces legislators to make smarter and more
thoughtful decisions about other people's money.
Number 1847
REPRESENTATIVE GRUENBERG remarked that HJR 9 is interesting
because it addresses the threshold question of who decides [the
level of state spending]. The resolution says that the ultimate
question of state spending should be decided by the voters and
redecided every few years. The issue of holding a
constitutional convention comes around every 10 years. The
current spending limit in the constitution is not redecided on a
regular basis. The legislature will need to decide whether
there should be something in the constitution, in statute, or
both.
REPRESENTATIVE STOLTZE said then-Governor Sheffield pushed
through a statutory spending limit, but the funds were never
exhausted. He said Alaska has had a 20-year teacher of the
flaws in the attempts to limit spending; it's obvious where the
gaping holes are. He suggested Alaska has a better chance of
having a meaningful spending limit than 20 years ago because the
political circumstances are different.
Number 2255
REPRESENTATIVE WILSON asked why the two-year base doesn't
include the current fiscal year.
REPRESENTATIVE STOLTZE answered that the current year is
excluded from the calculation because it's important for the
legislature to work with completed fiscal years in which the
numbers are known.
REPRESENTATIVE WILSON asked what the final budget total was two
years ago.
Number 2407
VIRGINIA BLAISDELL, Staff to Representative Stoltze, Alaska
State Legislature, said she didn't know the specific number.
REPRESENTATIVE STOLTZE estimated it was $2.3 billion.
MS. BLAISDELL said HJR 9 includes all state funds, so it's
larger than the general fund column, which is typically in the
fiscal summary.
REPRESENTATIVE WILSON remarked that she'd appreciate that
information so she would know whether legislators have to cut
deeper. It's been very hard on legislators to make these
decisions, she observed.
MS. BLAISDELL stated that the estimate for fiscal year 2004
(FY 04) is $3.328 billion, and the estimate for FY 05 is $3.394
billion.
REPRESENTATIVE WILSON surmised that this number included the
capital budget.
Number 2705
REPRESENTATIVE GRUENBERG noted that the legislature "piecemeals"
the general fund, mental health, and then the capital budget
every year. He pointed out that Congress had established a
budget committee to set an overall spending limit for the year
that gets to the bottom line, which is the most illusive issue
in the Alaska legislature each year. He noted that the role of
this committee is limited to the House and finishes at the end
of the year. When Congress established the budget committee,
the mission was to set an overall spending limit. The number
needs to be set by the legislature annually, in a comprehensive
manner, early on, he said.
REPRESENTATIVE STOLTZE remarked that he thinks the voters will
approve a constitutional amendment, and he said he doesn't want
it to cause harm to Alaskans or the economy. He said he wants
to avoid unintended consequences.
Number 3121
REPRESENTATIVE OGG asked about the difference between this
resolution and the current constitutional spending limit.
REPRESENTATIVE STOLTZE replied that a constitutional spending
limit was passed 20 years ago. The current state budget is
several billion dollars under the limit, and the capital budget
component has been largely ignored by the legislature. Ignoring
constitutional provisions creates a dangerous precedent, he
cautioned. His version of HJR 9 creates flat funding, setting
the two previous years as the limit, so there's a number the
legislature can get hold of. If the legislature wants to
increase spending 2 percent, it requires a supermajority vote.
He added that there are numerous exemptions for receiving
federal funds; it exempts state corporations. The resolution is
a conservative revision of the current constitutional spending
limit, he concluded.
Number 3405
REPRESENTATIVE OGG pointed out that with the current
constitutional cap, a majority of legislators could have voted
to exceed the spending limit if the governor signed it; if the
governor had vetoed it, three-quarters of the body could have
overridden the veto. Under HJR 9, the initial passage of
increased spending requires a three-quarters vote before it goes
to the governor. He asked Representative Stoltze why he chose
that change.
REPRESENTATIVE STOLTZE replied that he recognized many
legitimate reasons to exceed the budget, for example, population
growth. With a supermajority, the legislature can exceed the
budget cap. He'd picked three-quarters because that's what it
takes to override a governor's veto. He said he wanted the vote
to be greater than a simple majority, partly to protect the
rights of the minority.
REPRESENTATIVE OGG responded that in the past, the legislature
never reached that limit. He asked if the 50-plus-1 vote has
caused problems in the past.
REPRESENTATIVE STOLTZE said the majority vote hasn't caused a
problem; it probably has increased the budget in the past few
years. The three-quarters vote has probably raised the spending
as much as anything, he surmised.
Number 3744
REPRESENTATIVE SEATON asked about tying the budget to the
previously completed single year, which may be subject to large
variations. He asked if it would make more sense to tie the
budget cap to the two previously completed years in order to
level out the average.
REPRESENTATIVE STOLTZE replied that it's certainly an option.
He expressed willingness to look at any potential improvements
in HJR 9. However, he doesn't want a resolution with lots of
holes in it; he said he doesn't want to replace one broken
constitutional spending cap with another broken one.
REPRESENTATIVE SEATON asked about the two exemptions, starting
on page 1, line 16, "(5) an appropriation of State general
obligation and revenue bond proceeds; (6) an appropriation
required to pay obligations under general obligation bonds,
revenue bonds, and certificates of participation issued by the
State". He asked if the resolution is setting up an alternative
financing system that would be used by a simple majority of the
legislature.
Number 3925
REPRESENTATIVE STOLTZE said it's a possibility, but he said it
must be approved by the voters, who can recognize a scam; if
it's a worthy, overdue project, they'll endorse it. He said he
has confidence in the voters to help determine the best policy.
Number 3952
REPRESENTATIVE WILSON asked Representative Stoltze to explain
his earlier statements about the existing constitutional caps on
the operating and capital budgets.
REPRESENTATIVE STOLTZE said the capital budget is limited to
one-third of the total budget. It is a constitutional provision
that hasn't been followed, which fosters disrespect for the
constitution, he said. It's not a maximum; it's a required
amount.
CO-CHAIR WHITAKER remarked that one-third of state budget
expenditures must be capital; however, he said that was trumped
by an attorney general's opinion.
Number 4110
REPRESENTATIVE WILSON noted that the state has one billion
dollars in deferred maintenance. She said she can see a
spending limit on operating expenses, but it would be nice to
catch up on deferred maintenance.
REPRESENTATIVE STOLTZE said he understands the major maintenance
needs of the state. He also said he thinks both he and the
public are concerned that if there is a windfall, the
legislature will revert to spending patterns that aren't
sustainable. He added that if the legislature has a lot of
extra money, it is more popular to build new things than to do
deferred maintenance.
Number 4408
JAY HOGAN, Deputy Director, Office of Management & Budget,
Office of the Governor, testified that the governor has no
position on HJR 9. He said the governor's approach has been to
work within the existing system by attempting to lower expenses
and finding new revenue sources. He commented on the two prior
attempts at spending limits. There is a statutory spending
limit, he said, but no one has paid attention to it in recent
years. He explained how important the legislative circumstances
are [when a constitutional spending cap is created]. Setting a
provision like this in the constitution is [a means of] dealing
with a particular situation in time. But circumstances change,
he cautioned. The spending limit of 1982 came on the heels of
near-billion-dollar increases in recurring revenue every year in
1979, 1980, and 1981 - a billion dollars of new money in the
treasury every year.
TAPE 03-2, SIDE B
Number 4721
MR. HOGAN said the concern was to control the growth of the
operating budget; that's why the one-third for capital projects
came into play. There was great concern about rate of growth in
the state's operating budget, he recalled. Almost immediately,
revenue growth tapered off, so the limit was never effective
from the first year of implementation. The one-third
requirement was found to be ineffective by the attorney general
because the state budget did not reach the limit. This limit
has escalated mathematically into fiscal outer space and has
played no part [in actual budget decisions].
MR. HOGAN explained that the CBR was a different set of
circumstances. Policymakers were greatly concerned that this
windfall would be dissipated over the years, so the CBR was
established originally to set these funds aside for some
emergency future use. There was an attempt to sweep balances at
end of year. There is a provision requiring the reimbursement
of the CBR. Currently, the general fund is $4 billion in debt
to the CBR. The legislature has spent from the reserve but has
never [made repayments to the CBR]. The sweeps from agencies
were immediately reappropriated back. He said these are two
examples from the state's own history that indicate how
difficult it is to prescribe something in the constitution
because [its success] depends on the good faith of the governor
and the legislature to implement it.
Number 4252
REPRESENTATIVE GRUENBERG related his hope that the committee
would have the opportunity to hear more from the Office of
Management & Budget, Mr. Hogan, and others who have such
valuable historical perspective and knowledge. He said he
thinks the first step in the process is education of the
committee members.
CO-CHAIR WHITAKER stated that any committee member's request
will be dealt with in an ethical and thorough manner. He noted,
however, the urgency to act after careful consideration.
REPRESENTATIVE WILSON asked Mr. Hogan to explain who was
supposed to be policing the mandate to sweep the leftovers back
into the CBR and to repay the money withdrawn from the CBR. She
asked what the likelihood is that the legislature will pay
attention to a new set of requirements.
Number 3844
MR. HOGAN said that is the heart of the problem: the state
doesn't have an exemplary record of living within its means. He
recommended that the state should try again with the knowledge
of what went wrong with [the earlier effort]. Precision in
language is terribly important, but it's no substitute for the
desire by the governor and the legislature to make it work, he
said.
REPRESENTATIVE WILSON asked how to put teeth into a spending
limit that would have a real effect.
Number 3750
MR. HOGAN suggested this committee might look at a balanced-
budget amendment whereby the original words in the constitution
are strengthened. He said the constitution is simple and
extremely readable, but it has left a few openings in the budget
paragraph. The legislature could strengthen the constitution so
that the governor is clearly required to submit a budget for all
state expenditures and a revenue package for all proposed state
expenditures. And the legislature would be directed by the
constitution to keep those same rules in mind; then the
legislature would have the flexibility to look for additional
revenue sources to support additional proposed expenditures.
The state would then set its own limits, year by year, but
according to the revenues raised. He suggested this in addition
to a spending cap limit.
REPRESENTATIVE WILSON reiterated the suggestion to strengthen
the language in the constitution. She asked if the governor's
role would be to police it.
MR. HOGAN answered that he would defer to legislative and
executive branch attorneys to answer that, but said the
responsibility should be clearly delineated for both the
governor and the legislature.
REPRESENTATIVE GRUENBERG asked Mr. Hogan if he'd be willing to
flesh out his suggestion.
MR. HOGAN replied that he would check with the governor's office
and would be delighted to help if the committee so wished.
Number 3522
REPRESENTATIVE GRUENBERG said Mr. Hogan's suggestion [of a
balanced budget] intuitively makes sense and that he wants to
see follow-through.
CO-CHAIR WHITAKER remarked that Representative Gruenberg's
request raises the obvious questions: "Why aren't we doing it?
Why do we not have a budget that is proposed that is in balance
[with both] expenditures and revenues?"
Number 3344
MR. HOGAN replied that Governor Murkowski had approached a
balanced budget on a more gradual basis, starting with budget
reductions and suggesting revenue increases; he envisions doing
the same thing next year. There would be great social and
economic dislocation if the governor were to try to make up for
10 years of problems in one year, he suggested.
CO-CHAIR WHITAKER asked the same question over a broader
timeframe, not specific to this governor.
MR. HOGAN replied that he did not have a good answer.
REPRESENTATIVE HEINZE asked how close the governor's proposed
budget is to balancing.
Number 3152
MR. HOGAN answered that this budget is not too far from
balancing, but it's not as neat and tidy as it would have to be
under such a constitutional prohibition. The budget requirement
in the constitution assumes a balanced budget, but it does not
clearly and definitively state it. He opined that when the
constitution was drafted, the writers didn't envision the
extreme amounts of income in the late 1970s and the 1980s - how
the government would grow and then be faced with this situation.
CO-CHAIR WHITAKER noted the additional factor of extreme
fluctuations up and down. The state is having difficulty
adjusting to that downward trend, he suggested.
MR. HOGAN said the [language in the constitution] would have to
be more clearly and definitively laid out to require a true
balanced budget.
Number 3017
REPRESENTATIVE GRUENBERG said this discussion is at the core of
what this committee and the legislature are doing. He
reiterated his interest in continuing this discussion with Mr.
Hogan and others and his desire to follow up with draft
language.
CO-CHAIR WHITAKER announced that between now and the next
hearing of this bill, he will meet and discuss this issue with
Representative Stoltze, staff, and any interested committee
members. He expressed concern that the committee not get so
broadly focused that it fails to take meaningful action.
Number 2754
REPRESENTATIVE HEINZE commented that the committee has been
tasked with producing [new sources of revenue] in a short window
of time. She said she would like to establish goals, and then
members could learn additional information on their own time.
CO-CHAIR WHITAKER told members that at the next meeting, he and
Co-Chair Hawker would present a more crystallized vision of the
committee's mission. He highlighted the resolution that created
this special committee with a purview that isn't broad. Among
the free-ranging discussions, he said, there is urgency relative
to the committee's specific tasks. [HJR 9 was held over.]
ADJOURNMENT
Number 2547
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
8:15 a.m.
| Document Name | Date/Time | Subjects |
|---|