02/25/2005 08:33 AM House W&M
| Audio | Topic |
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| Start | |
| HB143 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
February 25, 2005
8:33 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Paul Seaton
Representative Peggy Wilson
Representative Max Gruenberg
Representative Norman Rokeberg
MEMBERS ABSENT
Representative Ralph Samuels
Representative Carl Moses
COMMITTEE CALENDAR
HOUSE BILL NO. 143
"An Act relating to the policy of the state regarding the source
of funding used to cover a shortfall in general fund revenue."
- HEARD AND HELD
HOUSE BILL NO. 52
"An Act relating to adoption and revision of a comprehensive
long-range fiscal plan for the State of Alaska."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 143
SHORT TITLE: POLICY ON GENERAL FUND REVENUE SHORTFALL
SPONSOR(S): WAYS & MEANS
02/14/05 (H) READ THE FIRST TIME - REFERRALS
02/14/05 (H) W&M, STA, FIN
02/18/05 (H) W&M AT 8:30 AM CAPITOL 106
02/18/05 (H) Heard & Held
02/18/05 (H) MINUTE(W&M)
02/25/05 (H) W&M AT 8:30 AM CAPITOL 106
BILL: HB 52
SHORT TITLE: LONG-RANGE FISCAL PLAN
SPONSOR(S): REPRESENTATIVE(S) GRUENBERG
01/10/05 (H) PREFILE RELEASED 1/7/05
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) W&M, FIN
02/18/05 (H) W&M AT 8:30 AM CAPITOL 106
02/18/05 (H) Heard & Held
02/18/05 (H) MINUTE(W&M)
02/25/05 (H) W&M AT 8:30 AM CAPITOL 106
WITNESS REGISTER
No witnesses to record.
ACTION NARRATIVE
CHAIR BRUCE WEYHRAUCH called the House Special Committee on Ways
and Means meeting to order at 8:33:47 AM. Representatives
Weyhrauch, Wilson, Gruenberg, and Seaton were present at the
call to order. Representative Rokeberg arrived as the meeting
was in progress.
The committee took an at-ease from 8:34:08 AM to 8:38:00 AM.
HB 143 - POLICY ON GENERAL FUND REVENUE SHORTFALL
8:38:57 AM
CHAIR WEYHRAUCH [announced that the only order of business would
be HOUSE BILL NO. 143, "An Act relating to the policy of the
state regarding the source of funding used to cover a shortfall
in general fund revenue."] He explained:
HB 143 would essentially set as policy for the State
of Alaska that if there were any budget shortfalls,
... if there was a gap between what the state receives
as revenue and what the state ... spends, that the gap
would be filled with permanent fund earnings and the
constitutional budget reserve in equal amounts.
CHAIR WEYHRAUCH continued:
I had not planned to take any action on that bill
today, but what I did want to ask the committee
members ... if there was any other testimony that ...
the committee would like to hear on that bill or any
other information related to that bill, and I will set
that up for next week. ... I would like to get a sense
of what the committee would like to do before we do
anything more with that bill. Generally what I wanted
to do is get a bill like HB 143 which would fill any
gap with constitutional budget reserve and permanent
fund earnings, and have that in conjunction with
potential new revenue sources like taxes. And so what
the rest of this committee's work is going to do is
either be spent on bills right now before the
committee are constitutional amendments, or a review
of taxes. And that gets us to the last part of this
agenda, and that is oversight hearings on long-term
fiscal plan. ... What I had indicated to the media
that I would be doing was be introducing what I had
called an omnibus tax bill. And it took roughly four
weeks in working with Legislative Affairs on that
bill, and it took that long for lots of reasons.
Number one, I simple had to make policy choices on my
own about what taxes we wanted to include in that
bill. ... When I finally got a bill back, it was such
a large bill that I saw it might fall from its own
weight.
8:41:14 AM
CHAIR WEYHRAUCH continued:
In addition, because the omnibus tax bill that I had
prepared was roughly the size of a phone book, it
would be a tremendous use of potential paper and
expenses for no reason. And so what I had instead
decided to do is use the opportunity and ... the
organizational abilities of our legal drafters that
had gathered together the whole range of taxes that we
presently have as a state and ... that we could adopt
as a state in one form. And simply have hearings then
on each component on this omnibus tax bill, and
approach it as an oversight on potential tax revenues
and draft measures before the committee and before the
public so that we knew what we were discussing. And I
think that way it might be much more wieldy to move
out pieces of a tax package out of the committee. In
addition, what I wanted to do was have, for the
benefit of the committee and the benefit of the
public, at least the [House Special Committee on Ways
and Means] would be able to say with ... full
credibility that we had everything on the table. ...
We still will have every single potential tax that now
is present in the state or could be implemented in the
state, such as an income tax, an education tax, [and]
a sales tax on the table for discussion. It just
won't be in the form of an omnibus bill package.
8:43:02 AM
REPRESENTATIVE GRUENBERG commented that he would like a copy of
the [draft omnibus tax bill] so that he can "see the best
thinking so far as well as anything else you have. I think your
idea's great. But I'd like to see all the work that's been put
in."
CHAIR WEYHRAUCH responded that the preliminary questions have to
do with the organizational aspect of how to do the review for
the tax policies.
REPRESENTATIVE ROKEBERG stated that he agreed with Chair
Weyhrauch's analysis and approach. He remarked that it might be
helpful for the committee to review past work on tax issues. He
referred to past work on an education tax and a sales tax.
8:46:17 AM
REPRESENTATIVE SEATON commented that he thought that [this plan]
would be a valuable way to bring all the issues to the table.
REPRESENTATIVE WILSON stated that she thought it was a good way
to do [deal with tax issues]. She said, "It's a systematic way
to look at it ... without emotion because it's not a bill before
us." She commented that it's important that all parts of the
state be affected similarly.
8:47:54 AM
REPRESENTATIVE ROKEBERG said:
One good part of the exercise is to help educate the
public about the actual potential income streams that
could be derived from any different types of revenue-
enhancing measures. And I find it very striking right
now, particularly in the context of our budget-
building process this year with the recommended
increases in the budget, [and] ... the impact of the
PERS [Public Employees' Retirement System] TRS
[Teachers' Retirement System] situation on the budget,
which I view as almost like a $300 million plus
structural jump shift in our baseline and our budget.
... I think this committee in the past has had
testimony that the historic income tax we've had
before would generate maybe $300-500 million, and ...
if we continue increasing our spending at the rate
that we are now projecting, there is no way we can pay
for ourselves a decade or two down the road. ... Even
if we were to implement every tax under the sun, we
couldn't balance the budget. So there's got to be a
recognition of what those things can generate, how
they fit into an entire long-range fiscal plan....
8:49:43 AM
CHAIR WEYHRAUCH reiterated that he had drafted the bill on his
own without discussing any of it with anyone in the legislature
until it was finished; when he finally got a hard copy of it, he
realized what it would mean to introduce a bill as opposed to
having a segmented hearing approach. He remarked that this was
the first time that the committee had discussed this topic. In
addition, he commented that it became very clear to him that if
there was a [budgetary] gap and the legislature wanted to use
permanent fund earnings and the constitutional budget reserve in
equal portions, [the state] would still run out of money. He
said:
People have said to me [that] we need a long-term
fiscal plan without defining what that means. ... What
it means to that individual is: "Raise taxes, as long
as taxes are on somebody else; cut a program, as long
as the program is somebody else's; and continue to
give me my permanent fund dividend check and make sure
it grows." And that simply is inconsistent with
reality of the state.
8:52:18 AM
CHAIR WEYHRAUCH pointed out that the next House Special
Committee on Ways and Means announcement to come out on the
House floor should have a list of the days the committee will
hear specific hearings on specific taxes and revenue measures.
He said that the types of taxes that are included are: sales,
education, cruise ship, corporate income, oil and gas, mining
(non-oil and gas revenue sources), income, and fish and game
(including wildlife conservation fees and viewing fees).
8:53:09 AM
REPRESENTATIVE SEATON remarked that there have been polls
showing that some people are willing to pay an income tax.
CHAIR WEYHRAUCH agreed that people have voiced willingness to
pay taxes. However, he said, there is a concern that one
business might be segregated out from the rest of the business
community, then they're less willing to support a component of a
fiscal plan if they feel that they are bearing the brunt of it.
He commented that the oil industries and the cruise ship
companies have both indicated that [they feel they are being
singled out to pay additional taxes.] He stated that [this
feeling] is diminished somewhat if people feel they are
receiving fair treatment, where a place at the table to discuss
the tax and the revenue system is fairly applied.
8:55:27 AM
REPRESENTATIVE SEATON reiterated that his district is willing to
pay taxes. He asked that someone prepare a chart showing the
economic value of the different industries in Alaska and the tax
contribution those industries make to the state. This way, he
said, the committee can determine if there is a fair application
of taxes across the state.
REPRESENTATIVE WILSON pointed out that, though this is a state
government, sometimes they have to think like a business, which
must look into the future to determine if it can continue on the
same course. She noted that the state has a number of expenses
that it has no control over, including Medicaid expenses,
retiring baby-boomers, and the rising price of fuel and
insurance. She expressed concern about whether the state can
even sustain current programs.
8:59:28 AM
CHAIR WEYHRAUCH said:
I want to apologize to the committee and to the public
for not setting forth an aggressive agenda ...
initially. ... One thing that has influenced my ...
approach on this whole taxation policy is, number one,
the state has what's called [a] windfall. And people
have been playing with this notion that we have a
windfall because the amount that has budgeted for
expenses has been exceeded by the amount we've
received as revenue from high oil prices. And because
of that there has been a perception that we don't need
to act because ... we're awash in cash that we can
spend. But nothing so far that I've heard in any
hearing so far or on any issue has ... put the lie to
that, because we are ... still in a structural problem
that we haven't been able to address on a long-term
basis. And notwithstanding money that we have this
year, simply discussing how we fund education and the
increase in the base student allocation over the long
term is an impossible task because we're not going to
have that spike forever.
9:00:44 AM
CHAIR WEYHRAUCH continued:
And the other thing that has chilled ... my setting a
more aggressive agenda on consideration of additional
taxes or tax policy discussion is the notion that
somehow we might have to aggressively start dealing
with stranded gas act kinds of concepts, which has not
happened. And I'm a little bit discouraged that it
hasn't and ... I need frankly more information on what
the status of those negotiations are and how fast or
slow things are going to move in that. Because
there's a lot of assumptions built into the public
sentiment that we don't really need to act because we
have ANWR [Arctic National Wildlife Refuge] coming
online, and we have stranded gas and we could be awash
in cash and gas from that. But I don't think that's
the reality I see shaping up in the near term.
9:01:35 AM
CHAIR WEYHRAUCH:
The other thing that has shaped my feelings on this is
that the House of Representatives has always ...
acted. We've adopted fiscal plan and we've adopted
POMV [percent of market value] approach to management
of the permanent fund. We've dealt with balanced
budget amendments, and I do not want to be part of an
entity that doesn't work and doesn't act. I'm here
for two years ... and I feel there's an important
belief that the public put us here to do something.
And I'm not going to sit here anymore and not do
something about it.
CHAIR WEYHRAUCH commented that he agreed with Representatives
Gruenberg and Rokeberg that the legislature should have a fiscal
plan.
9:02:27 AM
REPRESENTATIVE GRUENBERG remarked that he agreed with these
comments and that he would like to spend time becoming more
knowledgeable in taxation and fiscal planning.
CHAIR WEYHRAUCH responded that [the committee] has to educate
themselves as well as the public while providing a "substantive
basis for the kinds of legislative measures we may want to put
forward [to] additional committees that move out of this one as
part of a fix to the structural problem we have with a failure
of recurring expenses to meet recurring revenues."
9:04:57 AM
REPRESENTATIVE SEATON expressed concern that HB 143 was
basically making the House Special Committee on Ways and Means
go away until 2013. He said, "I don't think that our tax system
in this state is fair. I don't think that we have equality
among industries, and I don't think we should be looking at
tying our hands." He recommended that part of line 9 be
eliminated.
CHAIR WEYHRAUCH reiterated that he did not intend to take action
on HB 143, but would take amendments on the bill and deal with
it at a future hearing.
REPRESENTATIVE SEATON stated that his amendment would be to
remove the line "before the enactment of a new tax" on line 9.
REPRESENTATIVE WILSON said that she agreed with Representative
Seaton because of the need for the committee to thoroughly study
the issues first.
9:07:12 AM
REPRESENTATIVE ROKEBERG remarked:
I would like to ... get a legal opinion as to the
effect of a statutory policy statement and its impact
on future ... legislatures and therefore the
enforceability of enacting such as this. ... I believe
that this statute is frankly meaningless, and in the
main, diminishes legislative constitutionally invested
powers. ... I don't believe there's anyway I could
ever support [HB 143].
REPRESENTATIVE GRUENBERG commented that he also had problems
with the bill.
9:09:10 AM
REPRESENTATIVE SEATON referred to a handout from a previous
committee meeting entitled, "House Bill 143: A Policy on General
Fund Revenue Shortfall." He said:
We need to realize that on page 10 where it's showing
ERA [Earnings Reserve Account] draw and CBR
[Constitutional Budget Reserve] draw, and that line is
the same rate as our constitutional ... amendment that
we passed last time ... [which] was that we wouldn't
be able to increase spending above 2 percent. And
that is the line that is incorporated in ... the
constitutional spending limit. ... This line is
incorporating the maximum rate that we could've
contributed at, under our constitutional limit. ...
And when we reference these charts we have to realize
that this ... was projected at what the House said
would be the maximum that we could spend, other than
... using a supermajority and other things.
CHAIR WEYHRAUCH commented that a lot of assumptions were made to
make the charts.
9:10:41 AM
REPRESENTATIVE SEATON replied that when [the charts] go out to
the public, the public might not understand the assumptions that
have been made. He pointed out that the chart says that the
base is inflated by 2 percent, but "we have to realize that that
2 percent was what we incorporated in a constitutional
amendment, so you cannot go beyond this."
9:11:11 AM
REPRESENTATIVE ROKEBERG stated that last year's House Special
Committee on Ways and Means was working on a project regarding
longer range expenditure projections because the Department of
Revenue had historically published their future projections on a
flat line basis for expenditures, which [the committee] believed
was incorrect. He said:
I think that we've been vindicated in that work and
... the committee should continue on that work as
perhaps even a high priority to try to get some type
of a projection of realistically looking at what those
demands are going to be for expenditures in future
years. It seems clear, now that the revelations
around TRS/PERS, and the becoming-clearer problems ...
under Medicaid and Social Services budgets, make 2
percent, particularly in the near term, way under
estimates.
9:12:30 AM
REPRESENTATIVE GRUENBERG commented that he thought POMV and
constitutional amendments are within the jurisdiction of the
House Special Committee on Ways and Means. He said:
When the POMV constitutional amendment was under
discussion, I voted against it. But I do support the
idea, at least for consideration as a statutory POMV,
which doesn't get into the corpus of the permanent
fund. And I would like to know ... if a statutory
POMV piece of legislation were introduced, whether the
Chair would be willing to consider that within this
committee's jurisdiction.
REPRESENTATIVE ROKEBERG raised for a point of order. He said,
"I don't think it's a very fair question."
9:14:10 AM
CHAIR WEYHRAUCH responded:
I didn't want to encumber the [POMV] resolution with
yet another committee, which would have made it four
or five committees. ... The statutory POMV, I've
already been working with legislative legal ... on
[an] approach to do that. It's not a simple task. ...
There are simply policy issues that have to be
addressed and I haven't come to resolution on that,
but ... when I get something a little bit further
along, I was going to introduce a committee bill as a
statutory form of [POMV].
9:15:03 AM
CHAIR WEYHRAUCH asked for questions from the press. There were
none. [HB 143 was held over.]
9:15:25 AM
CHAIR WEYHRAUCH said that the committee will discuss income tax
at the next meeting, and later will discuss the ELF (economic
limiting factor).
REPRESENTATIVE WILSON asked if Chair Weyhrauch will provide the
committee members with information, or if each member
individually should try to find information.
CHAIR WEYHRAUCH responded that for the income tax discussion,
they will use the same information the committee used for
discussion last year.
REPRESENTATIVE SEATON asked whether the committee would be using
last year's bill from Representative Wilson or from
Representative Moses.
CHAIR WEYHRAUCH clarified that the committee would be using the
bill from Representative Moses.
REPRESENTATIVE SEATON commented that it would be advantageous to
have both of the bills for discussion.
REPRESENTATIVE ROKEBERG remarked that it might be helpful to the
committee members if information about the historical Alaskan
tax system was included as part of the committee background
package.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
9:17:32 AM.
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