Legislature(2007 - 2008)
04/20/2007 07:41 AM House W&M
| Audio | Topic |
|---|---|
| Start | |
| Discussion of Conceptual Elements of a Long Term Fiscal Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 20, 2007
7:41 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Anna Fairclough, Vice Chair
Representative Bob Roses
Representative Paul Seaton
Representative Peggy Wilson
Representative Sharon Cissna
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
^Discussion of Conceptual Elements of a Long Term Fiscal Plan
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
No witnesses to record
ACTION NARRATIVE
CHAIR MIKE HAWKER called the House Special Committee on Ways and
Means meeting to order at 7:41:37 AM. Present at the call to
order were Representatives Hawker, Fairclough, Wilson, Cissna,
Gruenberg, Roses, and Seaton.
7:42:43 AM
^Discussion of Conceptual Elements of a Long Term Fiscal Plan
CHAIR HAWKER explained that the purpose of today's meeting was
to discuss components of sustainable fiscal policy for the
state. He provided the committee with copies of documents
titled "Why was the Permanent Fund established?" from the
campaign literature related to formation of the permanent fund
in 1976. He also provided a document prepared by his office and
titled "Components of Sustainable Fiscal Policy for Alaska." He
said that these documents were for guidance, but do not set
forth specific proposals. He set forth that the committee may
want to discuss various ways fiscal issues can be addressed. He
noted that Representatives Gruenberg and Cissna had also
provided documents for committee consideration.
7:45:18 AM
REPRESENTATIVE GRUENBERG opined that there are at least three
possible dimensions related to discussions of long-term fiscal
planning. First, he indicated that one needs to consider whom
the planning is for. Secondly, one must consider the plan
specifics for each constituent group. Next, one should consider
a time framework within which to structure short, medium, and
long-term solutions. He addressed the first dimension by
setting forth that there is a responsibility to consider the
needs of large and medium state governmental entities as well as
individual citizens. He opined that there is also a need to
look at measures to raise revenues as well as to responsibly
manage existing assets. He offered that this type of framework
may help put these issues into perspective.
7:49:39 AM
REPRESENTATIVE WILSON reminded the committee that many southeast
coastal communities already have a local sales tax, and that
imposition of a statewide tax would be a burden to them,
especially since the cessation of revenue sharing. She opined
that it is important to look at the effects of revenue issues on
the state as a whole.
7:51:02 AM
REPRESENTATIVE GRUENBERG suggested the committee set forth ideas
that could be placed on a matrix or other organizational chart
for consideration within an integrated framework. He agreed
that policy decisions made for one group may have effects on
another group.
7:52:35 AM
CHAIR HAWKER suggested that the committee should consider the
direction it would like to take throughout its discussion of
fiscal issues. These discussions could be general or more
specific. He offered that there may be some value to
formulating a statement of objectives for guidance.
7:54:34 AM
REPRESENTATIVE WILSON suggested that an ideal situation may be
to suggest ways to bridge fiscal gap that may arise between now
and the start up of the gas pipeline. She suggested that
although she does not desire to impose taxes, she recognizes
that it may be a necessary component to address budget woes as
it is difficult to continue to cut budgets. She opined that
since there are no statewide taxes, Alaska is the only state
where the citizens do not "have a part to play" in state
government except to inform the legislature of what they want.
She offered her belief that if people help pay for governmental
services it may be beneficial to the decision-making process,
and recognized that taxes may be a burden to some.
7:56:46 AM
CHAIR HAWKER summarized that one issue to be addressed is how to
"bridge the gap" between now and future resource revenues. The
second issue is to address the citizens' role in long-term
fiscal policy. He noted that prior to statehood, the state
benefited greatly from federal funds. Upon statehood, the state
entered a "subsistence era" during which it relied heavily on
extraction of its natural resources. The oil era provided a
huge infusion of money, which allowed for formation of accounts
such as the Constitutional Budget Reserve fund (CBRF). He
predicted that the next era may be the "gas era."
REPRESENTATIVE ROSES noted there had been an income tax and a
school tax at one point.
7:59:33 AM
REPRESENTATIVE CISSNA referenced a document she provided the
committee dated April 20, 2007 and titled "Subject: Ways and
Means Fiscal Policy Discussion." She suggested that components
for fiscal policy include a stable investment climate and job
security, and perhaps the permanent fund provides part of the
resources necessary to meet these goals. She emphasized that
policy makers need to take the steps necessary to implement
agreed-upon strategies. She indicated that some type of
missions and measures tools may be helpful.
8:03:13 AM
REPRESENTATIVE ROSES suggested that there are currently two ways
to bridge the fiscal gap: cut expenses, or use the permanent
fund. He opined that as long as there is reluctance to do
either of these, the only approach available to provide the
current level of services is to raise additional revenues. He
opined that the discussion should center on the philosophical
issue of whether the legislature will commit to spending within
the state's income limits. He noted it is difficult to satisfy
all user groups, yet restrain spending. He offered that
measures to increase taxes are based on the desire to generate
more revenues to maintain current program growth rates. If the
decision is made to spend more than one has, then one must
determine whether to use savings, or raise additional revenues.
He offered that there is a difference between spending for needs
and spending for "wants."
8:06:37 AM
CHAIR HAWKER set forth that there are trade-offs in making the
determinations of whether to reduce spending or raise revenues.
He noted that Alaskans only have to tax themselves to the degree
they are unwilling to use permanent fund earnings for public
services, a situation he described as the ""Alaska Dilemma."
8:08:26 AM
REPRESENTATIVE ROSES opined that it is poor business practice to
borrow money when there are funds available in a savings
account. Likewise, he suggested that the state does not need to
generate additional revenues when there are available savings
accounts. He said that when the permanent fund was being
debated, literature in support of establishing the fund
emphasized that it could fund projects "which could broaden
Alaska's narrow based economy and bring more stability to our
State," referring to the document titled "Why was the Permanent
Fund established?" He offered that the $500 million inducement
for the gas pipeline being offered in HB 177 could perhaps come
out of the permanent fund since it would help develop a new
source of state revenue. However, he opined that there are
significant political costs if a legislator recommends use of
permanent fund earnings.
8:10:22 AM
REPRESENTATIVE FAIRCLOUGH stated that the first issue is that
there seems to be a lack of confidence in legislative decisions,
perhaps due to the difficulty in predicting revenues in light of
fluctuating oil prices. This possible mistrust may contribute
to hesitation to use permanent fund earnings, she indicated.
She offered that any fiscal plan must offer spending safeguards
to help ensure public confidence. She opined that the citizenry
understands the basic issues regarding fiscal matters and that
education is a significant factor in obtaining support for
policy choices. She said that education will help explain
certain spending decisions based on policy, such as support of
rural areas and marine transportation system. She suggested
that being able to quantify spending is a valuable process and
contributes to public understanding of state spending decisions.
She expressed frustration with constant attempts to derail
attempts at economic growth. She noted that the timber business
has suffered significantly due to attempts of groups to stop
timber harvests and in spite of possible environmental benefits
to harvesting some older timber stands. She offered that she
would like to see progress towards "bridging the gap" between
now and the gas pipeline. She opined that the North Slope
producers are in a powerful position with respect to the gas
pipeline and are aware of the state's fiscal issues. She
expressed concern that the producers may have even more leverage
in the future as oil revenues continue to decline. She
suggested that any fiscal plan must contain some type of
limitation on government spending before the public would
support use of the permanent fund earnings. She offered that it
is an interesting concept to use the permanent fund as the
resource for the inducements being offered in HB 177, but opined
that now is not the time for that discussion. She closed by
stating her belief that people would be more likely to support
use of permanent fund earnings if they believed the money was
being wisely spent.
8:19:10 AM
CHAIR HAWKER agreed that any attempts at fiscal planning must
overcome the public's lack of confidence in the legislature's
approach to fiscal matters. Secondly, he noted that there is
need to spend responsibility and to support economic
development.
8:20:25 AM
REPRESENTATIVE SEATON agreed that humans naturally seek to
obtain more than one has. He noted that the permanent fund is
doing very well financially, although the state's income stream
may be declining. He emphasized that the state has large
savings accounts and opined it is somewhat ridiculous to hamper
policy decisions just to avoid causing potential minor
reductions in the amount of individual permanent fund dividends.
He noted that there are permanent fund earnings which can be
used. He reminded the committee that the legislature
appropriates up to 50 percent of the fund's earnings for the
dividend annually. Since these large savings accounts have
effectively been "taken off the table" the state must work to
generate revenue without taxing its citizens, he opined. He
offered that it is difficult to formulate a fiscal plan to solve
long-term problems in light of the reluctance to take steps to
solve currently known fiscal problems, such as that of unfunded
pension fund liabilities or community revenue sharing.
8:25:40 AM
REPRESENTATIVE CISSNA reminded the committee that there are
significant differences in the wants and needs of Alaska's
citizens. She agreed that human nature is to obtain as much as
possible for the lowest cost possible. She opined that the
citizens of Alaska have more interest and concern about
government than citizens of other states. She set forth that
the citizens are concerned about the issues of unfunded pension
liabilities. She suggested that determining spending patterns
and identifying "sacred cows" when formulating fiscal plans
would be beneficial. She offered her belief that money is going
places "that we are not being really aware of or owning up to,"
and suggested that be looked at.
8:30:07 AM
REPRESENTATIVE FAIRCLOUGH noted that the permanent fund dividend
is a common thread among all Alaskans and suggested there may be
ways to look at this common thread in a new way to help find a
financial path that is palatable for all concerned.
8:31:57 AM
REPRESENTATIVE WILSON opined that the committee members can work
to envision the future to come up with strategies for the
future. She expressed the need to examine public perception as
"perceptions are reality." Once the perceptions are determined,
then education efforts can be used to correct any inaccuracies
and to explain future plans. She offered that perhaps
educational efforts regarding the state's positive environmental
efforts would be helpful to change any negative public
perception in this area. She suggested that the permanent fund
dividend program be evaluated to consider the possibility of a
future limit on the growth of the dividend amount. She
suggested that, if done now, dividend receipts could plan on
knowing that their dividends would be capped at a certain point
and that the additional earnings would be used for other
purposes. She noted that flat funding in areas such as
education results in a budget reduction for those areas. She
opined that education efforts regarding long-term fiscal matters
may be difficult due to differences in individuals' abilities to
evaluate possible future scenarios.
8:38:58 AM
CHAIR HAWKER agreed that it would be useful to consider some
type of limit or cap on the growth of permanent fund dividends,
and perhaps some mechanism to allocate earnings between
dividends and other public purposes.
8:39:34 AM
REPRESENTATIVE GRUENBERG suggested that there are some common
threads to the comments made and opined that order can come out
of chaos. He noted that there are several different audiences
to consider including the public and those within the
legislature itself. He suggested that this committee has the
luxury to consider a broad and basic mandate when reviewing the
state's approach to fiscal matters. He opined that this
committee's task may be to focus people's attention on fiscal
issues. He predicted that the state will begin to do long-range
planning in the near future. He suggested the committee could
focus on "bridging the gap" from now until the start of the gas
pipeline by defining the gap and suggesting methods to sustain
fiscal stability in light of a possible gap between revenues and
spending.
8:45:42 AM
REPRESENTATIVE ROSES reminded the committee that communities
started imposing fees for water and sewer costs as state funding
to communities lessened. When revenue sharing ceased, many
communities increased property taxes, he explained. As a
result, citizens have been paying some share of costs for
services, he opined. He suggested that citizens do pay for
services because communities will issue bonds or assess sales
taxes to get around spending limits caused by taxation caps.
8:48:58 AM
REPRESENTATIVE WILSON agreed that local communities pay for
services, but at different rates. She suggested that some
smaller communities pay more in taxes than larger ones.
CHAIR HAWKER noted that there is a geographic difference across
the state in the amount of taxes paid.
8:51:43 AM
REPRESENTATIVE FAIRCLOUGH set forth the possibility of a
roundtable discussion with the administration with regard to
fiscal matters, especially in light of the political climate
supporting ethical, honest, and transparent behavior leading to
change. She clarified that she understands that the state
currently has a poor cash flow, but significant savings accounts
available. She offered that such an approach may be helpful to
the formulate a future vision for financial planning.
8:54:06 AM
REPRESENTATIVE GRUENBERG expressed support for actions which may
focus some attention on this committee's work and provide
additional support for the passage of HB 125.
CHAIR HAWKER reminded the committee of the need to be mindful of
the separation of powers and the possible controversial nature
of some issues presented.
REPRESENTATIVE GRUENBERG suggested that communication with the
administration may help to set a tone and provide a positive
start for the discussion of fiscal issues.
CHAIR HAWKER explained that the future schedule would be
determined next week, noting that the committee had considered
all bills referred to it.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
8:57:03 AM.
| Document Name | Date/Time | Subjects |
|---|