Legislature(2021 - 2022)DAVIS 106
04/20/2021 11:30 AM House WAYS & MEANS
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| Audio | Topic |
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| Start | |
| HB165|| HJR1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 165 | TELECONFERENCED | |
| += | HJR 1 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 20, 2021
11:34 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story
Representative Mike Prax
Representative David Eastman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE JOINT RESOLUTION NO. 1
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund and to appropriations from
the Alaska permanent fund.
- MOVED CSSSHJR(W&M) 1 OUT OF COMMITTEE
HOUSE BILL NO. 165
"An Act making a special appropriation to the Alaska permanent
fund; and providing for an effective date."
- MOVED HB 165 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HJR 1
SHORT TITLE: CONST AM: PERMANENT FUND; POMV;EARNINGS
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS
02/18/21 (H) PREFILE RELEASED 1/8/21
02/18/21 (H) READ THE FIRST TIME
02/18/21 (H) SPONSOR SUBSTITUTE INTRODUCED
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) STA, JUD, FIN
03/10/21 (H) W&M REPLACES STA REFERRAL
03/10/21 (H) BILL REPRINTED
04/13/21 (H) W&M AT 11:30 AM DAVIS 106
04/13/21 (H) Heard & Held
04/13/21 (H) MINUTE(W&M)
04/20/21 (H) W&M AT 11:30 AM DAVIS 106
BILL: HB 165
SHORT TITLE: APPROP: EARNINGS RESERVE TO PERM FUND
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS
04/07/21 (H) READ THE FIRST TIME - REFERRALS
04/07/21 (H) W&M, FIN
04/13/21 (H) W&M AT 11:30 AM DAVIS 106
04/13/21 (H) Heard & Held
04/13/21 (H) MINUTE(W&M)
04/20/21 (H) W&M AT 11:30 AM DAVIS 106
WITNESS REGISTER
DEVEN MITCHELL, Debt Manager
Treasury Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
SSHJR 1 and HB 165.
CLIFF GROH
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 165.
BERT HOUGHTALING
Big Lake, Alaska
POSITION STATEMENT: Testified during the hearing on SSHJR 1 and
HB 165.
ROCKY MCKENZIE
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on SSHJR 1 and
HB 165.
CLEM TILLION, Chair
Permeant Fund Defenders
Halibut Cove, Alaska
POSITION STATEMENT: Testified in support of SSHJR 1.
ANDY CIZEK
Soldotna, Alaska
POSITION STATEMENT: Testified in opposition to SSHJR 1.
JEAN HOLT
Palmer, Alaska
POSITION STATEMENT: Testified during the hearing on SSHJR 1 and
HB 165.
BERT HOUGHTALING
Big Lake, Alaska
POSITION STATEMENT: Testified in opposition to SSHJR 1.
CLIFF GROH
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHJR 1.
CRIS EICHENLAUB
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to SSHJR 1.
MARY LEE GUTHIRE
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SSHJR 1.
SARRA KHLIFI, Community Advocate
Alaska Children's Trust
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHJR 1.
IAN LAING
Institute of the North
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHJR 1.
EMILY NAUMAN, Deputy Director
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions pertaining to SSHJR 1.
JONATHAN KREISS-TOMKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions pertaining to SSHJR 1,
as the prime sponsor.
ACTION NARRATIVE
11:34:12 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 11:34 a.m. Representatives
Josephson, Story, Prax, Eastman, and Spohnholz were present at
the call to order. Representatives Wool and Schrage arrived as
the meeting was in progress.
HB 165-APPROP: EARNINGS RESERVE TO PERM FUND
HJR 1-CONST AM: PERMANENT FUND; POMV;EARNINGS
11:35:33 AM
CHAIR SPOHNHOLZ announced that the only order of business would
be HOUSE BILL NO. 165, "An Act making a special appropriation to
the Alaska permanent fund; and providing for an effective date."
and SPONSOR SUBSTITUTE FOR HOUSE JOINT RESOLUTION NO. 1,
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund and to appropriations from
the Alaska permanent fund.
CHAIR SPOHNHOLZ reminded the committee that on April 13, a
member had asked whether the state's bond rating would be
impacted if the $4.35 billion contemplated in HB 165 were
transferred from the Earnings Reserve Account (ERA) to [the
Principle] of the Alaska Permanent Fund. She asked Mr. Mitchell
to speak to how the state's fiscal policy and this legislation
might relate to Alaska's bond rating.
DEVEN MITCHELL, Debt Manager, Treasury Division, Department of
Revenue (DOR), stated that there were two different things being
contemplated that would result in a different outcome in tandem
compared to their independent implications. He explained that
there were competing interests: the interest in having liquidity
and the interest in using the permanent fund in a fashion that
aligned with other endowment credit rating standards. He
emphasized that the credit rating agencies were significantly
concerned about the ERA not having sufficient funds due to
market "happenings" that could result in negative experience.
He said a transfer to the Principle would be viewed with concern
from credit rating analysts, as it would result in an increased
probability of the ERA being insufficient. Additionally, if
SSHJR 1 were to pass, there was concern about the state using
the ERA account similarly to the CBR, which historically, was
used to solve budget deficits rather than adhering to the
standard for endowment draws. To the extent that [HB 165/SSHJR
1] were to be approved by the legislature and the voters, they
would provide structure that despite the loss in liquidity,
would increase the likelihood of having the annual draw, he
said.
REPRESENTATIVE PRAX asked how making a transfer from the ERA
without paying the state's debts, such as the past due permanent
fund dividend (PFD) payments, the oil tax credits, and the
unfunded PERS/TRS liability, would affect Alaska's credit
rating.
MR. MITCHELL replied that a simple transfer of money without
some framework adjustment around the percent of market value
(POMV) issue would have a negative impact. He added that the
state's other obligations had varying degrees of requirement.
He shared his understanding that if those specific items
remained unpaid, it would not have any additional affect on the
impact of that transfer.
11:43:26 AM
CHAIR SPOHNHOLZ opened public testimony on HB 165 and SSHJR 1.
11:43:48 AM
CLIFF GROH expressed his support for both HB 165 and SSHJR 1.
He explained that his support was based on more than four
decades of experience working on Alaska fiscal policy. Further,
he noted that he had written more about the creation of the
dividend than anyone else. He opined that adoption of the two
measures was critical but insufficient in addressing Alaska's
fiscal crisis. Enacting HB 165 and SSHJR 1, he said, would help
force a solution to the state's giant structural fiscal deficit.
Nonetheless, he reiterated that the two measures alone would not
solve the problem. He urged the legislature to take other
steps, including the passage of legislation, raising additional
revenues, and (indisc.) the budget. He restated his support for
both measures.
11:45:28 AM
BERT HOUGHTALING said he was not necessarily against HB 165. He
opined that inflation proofing was necessary; however, he
suggested lowering the dollar amount to $1 billion. He believed
that transferring such a large amount at this particular time
was not a smart idea and would justify the avoidance of paying a
statutory dividend or returning last year's "stolen" portion of
the PFD.
11:47:05 AM
CHAIR SPOHNHOLZ closed public testimony on HB 165 [but left
public testimony on SSHJR 1 open].
11:47:10 AM
REPRESENTATIVE PRAX asked which group Mr. Houghtaling
represented.
CHAIR SPOHNHOLZ clarified that Mr. Houghtaling was not speaking
on behalf of a group.
11:47:27 AM
The committee took a brief at-ease.
11:47:40 AM
CHAIR SPOHNHOLZ invited further questions from the committee.
Seeing none, she requested a motion on HB 165 from
Representative Wool.
11:47:52 AM
REPRESENTATIVE WOOL moved to report HB 165 out of committee with
individual recommendations and the accompanying fiscal notes.
REPRESENTATIVE PRAX objected. He opined that it was not a good
time to remove liquidity from the state's assets without taking
other measures into consideration.
11:48:49 AM
REPRESENTATIVE EASTMAN echoed the comments of Representative
Prax. He said he believed that it was important to know ahead
of time that there were enough votes to pass both measures in
tandem rather than finding out later in the process that there
was only enough support for a portion of the proposal, which
would defeat the intent of the "package." He added that he was
skeptical that there were enough votes to pass both pieces of
legislation.
11:49:37 AM
CHAIR SPOHNHOLZ clarified that each of these bills could be
addressed independently. She explained that one was a
resolution that would require a vote of the people and had a
two-thirds vote threshold, which was a more difficult standard.
On the other hand, HB 165 was a simple bill, she said, that only
required a majority vote in each body. She opined that HB 165
was more of a short-term measure. Further, she recalled
testimony from the Alaska Permanent Fund Corporation (APFC),
Office of Management & Budget (OMB), and the Legislative Finance
Division (LFD), which clarified that the permanent fund was
extremely important to the State of Alaska. She expressed a
"huge" concern about the ERA potentially being treated as
another reserve account, as it could be spent with a simple
majority vote. She shared her belief that the risk of
overspending the permanent fund was huge because the ERA was
more accessible than other funds that had since been depleted.
She emphasized that the strategic importance of the fund
necessitated passing both measures.
11:51:26 AM
A roll call vote was taken. Representatives Wool, Josephson,
Story, and Spohnholz voted in favor of moving HB 165 out of
committee with individual recommendations and the accompanying
fiscal notes. Representatives Eastman and Prax voted against
it. Therefore, HB 165 was reported out of the House Special
Committee on Ways and Means by a vote of 4-2.
11:52:00 AM
The committee took an at-ease from 11:52 a.m. to 11:54 a.m.
11:54:31 AM
CHAIR SPOHNHOLZ returned to public testimony on SSHJR 1.
11:54:59 AM
ROCKY MCKENZIE shared that he had suffered numerous injuries on
the North Slope and relied on the permanent fund to pay for his
medical bills. He stressed the necessity of the dividend.
11:55:48 AM
CLEM TILLION, Chair, Permeant Fund Defenders, shared a personal
anecdote and opined that touching the Principal would be a
"fatal" error. He expressed his preference for the [original
statutory dividend formula] and a 4 percent POMV to allow the
fund to grow. He urged legislators not to use permanent fund
moneys to pay off the state's debts.
11:59:13 AM
CHAIR SPOHNHOLZ asked whether Mr. Tillion supported or opposed
SSHJR 1.
11:59:20 AM
MR. TILLION stated his support for SSHJR 1.
11:59:35 AM
ANDY CIZEK expressed his opposition to SSHJR 1. He shared his
belief that it was enacted "underhandedly" by Governor Mike
Walker via the legislature who wasted time during the regular
legislative session to "steal" the PFD from the people during
special session. He opined that state spending was out of
control and that no legislation had been passed to reduce
overall spending. Further, he believed that money was being
stolen from the people to fund government and special interests
via the POMV. He reiterated his opposition to SSHJR 1 and
expressed support for the statutory dividend formula.
CHAIR SPOHNHOLZ clarified that SSHJR 1 would constitutionally
protect the POMV draw from the permanent fund. She stated that
it would restrict the amount of money that could be appropriated
from the permanent fund, adding that the proposed resolution was
"silent" on the issue of the dividend. She reiterated that the
passage of the resolution in its current form would not change
the PFD formula.
12:03:51 PM
JEAN HOLT shared her perspective on the dividend, asserting that
the PFD was not an entitlement. She urged the legislature to
"get the budget in line" to avoid overspending and reduced
dividends.
12:06:27 PM
BERT HOUGHTALING informed the committee that he was testifying
on behalf of the 4,000 followers of his publication. He opined
that solidifying the POMV into the constitution would allow the
legislature to ignore the statutory dividend in favor of the
POMV draw. He stated that he would consider supporting this
resolution if it was written like SJR 1 and constitutionally
protected the traditional statutory PFD formula with the
inclusion of a POMV draw. He characterized SSHJR 1 in its
current form as a systematic theft of the PFD designed to
justify the legislature's ability to spend from the ERA for
special interests. He suggested cutting the education budget by
implementing virtual schooling with an established homeschool
program.
12:08:59 PM
CLIFF GROH, believed that despite being a necessary an important
step for Alaska, SSHJR 1 alone would not sufficiently address
the overall fiscal crisis. He stated that many people
misunderstood how the PFD was created, later noting that the
permanent fund was created to save money for the future. He
asserted that it was a violation of the historical record to say
that the permanent fund was created to pay dividends. He
reiterated his support for the proposed resolution along with
other measures that would address Alaska's fiscal crisis.
12:11:04 PM
CRIS EICHENLAUB expressed his opposition to SSHJR 1 and shared
his support for the management style of the PFD pre governor
Walker. He opined that the state's current situation was due to
a mismanagement of resources. He believed that dividends were
being "funneled" to special interest that were failing.
Additionally, he stated his opposition to the POMV, as it relied
on a fluctuating stock market.
12:14:14 PM
MARY LEE GUTHIRE stated her support for SSHJR 1 and its
objective to ensure the sustainability of the permanent fund.
She believed that Alaskans' unfamiliarity with paying taxes had
led them to be casually informed about the state's fiscal
situation and uninformed about the uniquely lucrative period of
high oil revenue, as well as the dynamics of the permanent fund
investments. She shared her belief the because of the state's
debts, the legislative and political incentives would always
favor immediate use over long-term goals. She said would like
to see if the legislature would get on board with a long-term
goal of a light tax burden and building up the permanent fund
over time.
12:16:16 PM
SARRA KHLIFI, Community Advocate, Alaska Children's Trust,
stated that the permanent fund had always been recognized as the
cornerstone of Alaska's future; however, it was currently at
risk of being used unsustainably. She believed that SSHJR 1
would ensure sustainable use of the permanent fund for all
generations of Alaskans. She opined that unsustainable spending
from the fund was fundamentally unfair to future generations;
additionally, that failing to protect the fund today would lead
to some combination of more cuts to government services, higher
taxes, and the future elimination of PFDs. She shared her
understanding that sustainable use of the permanent fund was one
part of a fiscal plan that most people agreed on. She
emphasized that SSHJR 1 would ensure that the protection of the
permanent fund. She reiterated her support for SSHJR 1 in
tandem with reliable forms of revenue that would bolster the
economy.
12:18:11 PM
IAN LAING, Institute of the North, expressed his strong support
for SSHJR 1. He stated his belief that unsustainable spending
from the permanent fund was the greatest threat to Alaska, as it
would directly dictate the future of the state. He believed the
only way to protect against that was through a constitutional
amendment. He noted that the permanent fund currently supported
70 percent of state spending, thus making Alaska an endowment
state; however, the proper legal protections were not in place
to ensure that the endowment would continue to function
sufficiently. He explained that the proposed resolution was
necessary because there was a 50 percent chance of being unable
make the statutory POMV draw over the next 20 years under the
current structure. Beyond that, he said the simple financial
imprudence of overspending was hard to overstate. He pointed
out that it would only lead to higher taxes, greater services
reductions, or elimination of dividends. Additionally, he
emphasized that the permanent fund was an asset that belonged to
all generations of Alaskans. For those reasons, the idea of
converting the fund to a constitutional endowment was the
oldest, most well-studied, widely supported but unimplemented
idea in Alaskan public policy. He said it had always been
recognized as the cornerstone of the future. In addition to
good policy, he opined that the resolution was the necessary
vehicle to resolving the larger fiscal problem, as it would
place a deadline on unsustainable spending from the fund and
drive negotiations. He said he believed that some form of SSHJR
1 needed to pass, adding that it was the most important factor
in a prosperous future for Alaska.
12:22:20 PM
CHAIR SPOHNHOLZ closed public testimony on SSHJR 1.
12:22:32 PM
CHAIR SPOHNHOLZ moved to adopt Amendment 1, labeled 32-
LS0167\B.3, Nauman, 4/19/21, which read:
Page 2, following line 2:
Insert a new subsection to read:
"(c) Each fiscal year, the legislature shall
appropriate a portion of the amount appropriated under
(b) of this section for use in a program of dividend
payments to State residents, as provided by law."
Reletter the following subsection accordingly.
12:22:44 PM
REPRESENTATIVE JOSEPHSON objected for the purpose of discussion.
12:22:51 PM
CHAIR SPOHNHOLZ explained that Amendment 1 to SSHJR 1 stipulated
that a PFD would be paid from the POMV. She noted that the
proposed amendment did not specify the dividend amount, as that
was a much larger conversation. She said she was incredibly
supportive of SSHJR 1, but it was unlikely to reach the two-
thirds vote threshold required to pass the legislature without
some form of a dividend. She recalled testimony from the
Institute of Taxation and Economic Policy and Alaskans for a
Sustainable Budget, which indicated that reducing the permanent
fund [dividend] was the most regressive way to fund government.
Additionally, she shared her belief that the dividend had been
instrumental in protecting the permanent fund. For those
reasons, she said, there was value in including a reference to
the dividend [in SSHJR 1]. Further, she opined that Amendment 1
did this in a way that would give the legislature maximum
discretion to have the conversation about the dividend formula
in a separate piece of legislation. She continued to share her
observation that the public was frustrated by a lack of clarity
and certainty about the PFD formula; however, the PFD discussion
would undermine the ability of SSHJR 1 to reach the required
vote threshold to advance to a vote of the people, which was why
it was not included.
12:24:31 PM
REPRESENTATIVE JOSEPHSON maintained his objection.
12:25:04 PM
REPRESENTATIVE JOSEPHSON pointed out that Amendment 1 would
require that the dividend payment be made from the draw. He
recalled several years in which the dividend was paid from some
other source, such as the CBR. He asked Mr. Mitchell whether
losing the flexibility to pay the dividend from another source
would matter.
MR. MITCHELL sought clarification as to the objective of
Amendment 1. He asked whether it would add a constitutional
dividend distribution to SSHJR 1.
REPRESENTATIVE JOSEPHSON confirmed. He said the proposed
amendment stated that there would be a dividend, which would be
distributed from the 5 percent POMV draw, without declaring the
PFD amount.
MR. MITCHELL stated that from a debt perspective, he saw no
issue with adding a requirement for the dividend to be paid from
the draw; however, he pointed out that a formulaic approach
would automatically diminish the flexibility to pay for other
things.
12:27:44 PM
REPRESENTATIVE PRAX expressed his support for establishing a
dividend payment in the constitution.
REPRESENTATIVE PRAX [moved to adopt] a conceptual amendment to
Amendment 1, such that "a portion of the amount appropriated
under (b) of this section" would be deleted and replaced with
"the income of the fund".
CHAIR SPOHNHOLZ objected.
12:28:37 PM
REPRESENTATIVE PRAX explained that he was offering the
conceptual amendment because many Alaskans view the PFD as a
right. He stated that the whole permanent fund and the state's
resources belong to the people as opposed to "the state." In
contention with prior testimony, he argued that Alaska did not
have the lowest tax burden because the majority of the income
from the state's resources and the permanent fund was
appropriated by the legislature, effectively creating a tax on
Alaskans. He believed that giving the income back to the people
would provide a clean slate for the legislature to begin
considering a tax.
CHAIR SPOHNHOLZ asked Representative Prax to repeat the
conceptual amendment.
12:30:24 PM
REPRESENTATIVE PRAX stated that the conceptual amendment to
Amendment 1 would delete "a portion of the amount appropriated
under (b) of this section for use in" and insert "the income
from the fund".
CHAIR SPOHNHOLZ restated her objection. She explained that the
conceptual amendment would essentially require that the entire
POMV go to PFDs, which was not her intent. She believed that
the POMV restriction was critical. Further, she shared her
belief that the conceptual amendment would increase the PFD
amount and prohibit the legislature from using POMV earnings for
the purposes of state government and PFDs. She said that
implication was deeply concerning, as 70 percent of the state
budget came from the permanent fund.
12:31:49 PM
REPRESENTATIVE JOSEPHSON expressed his concern with the
conceptual amendment because it addressed the income of the
fund, whereas the objective of Amendment 1 was to dispense with
that. He said the fund would still have an income, but it would
stay with the fund. He opined that the conceptual amendment
would negate the intent of Amendment 1.
CHAIR SPOHNHOLZ agreed.
12:32:35 PM
REPRESENTATIVE EASTMAN requested that Representative Prax read
the proposed conceptual amendment in its entirety.
CHAIR SPOHNHOLZ suggested that the conceptual amendment be
written up to provide further clarity.
12:32:49 PM
The committee took an at-ease from 12:32 p.m. to 12:39 p.m.
12:39:40 PM
CHAIR SPOHNHOLZ read the conceptual amendment to Amendment 1 by
Representative Prax as follows:
Each fiscal year, the legislature shall appropriate
the income from the fund in a program of dividend
payments to state residents, as provided by law.
CHAIR SPOHNHOLZ maintained her objection for the reasons stated
prior.
12:40:07 PM
REPRESENTATIVE PRAX confirmed that the conceptual amendment
would effectively take the entire income from the fund, as drawn
through the POMV, and distribute it directly to the people. He
said if this were to pass, his intent would be for the
legislature to discuss some form of tax. He said he believed
that the conceptual amendment would connect Alaskans to their
government.
12:41:09 PM
REPRESENTATIVE SCHRAGE stated that the permanent fund was
created to preserve wealth for current and future generations,
adding that the dividend was not explicitly spelled out at the
creation of the fund. He opined that while the PFD had a role
to play, the fund's sole purpose should not be to pay out
dividends, as provided by the conceptual amendment. He opined
that with the current price of oil and the low amount of
revenue, part of wealth preservation was providing for
functional state through state services. He said it did not
make sense to utilize the entirety of the fund's income to pay
out dividends, as residents would have to use their PFD for
things like repairing state infrastructure. He reiterated that
he could not support an amendment that would cause the entirety
of the appropriation from the fund to go strictly to dividends.
12:42:25 PM
REPRESENTATIVE JOSEPHSON asked Representative Prax to define
"the income of the fund" and questioned whether he was referring
to the 5 percent draw.
REPRESENTATIVE PRAX confirmed that he was referring to the 5
percent draw. He said the conceptual amendment would
effectively set a POMV distribution of dividends from the
permanent fund.
REPRESENTATIVE JOSEPHSON pointed out that the proposed
conceptual amendment would create an annual deficit of $3
billion, further noting that a typical income tax model was $700
million. He asked how Representative Prax intended to make up
for the additional $2.3 billion.
REPRESENTATIVE PRAX replied, "That would obviously be a
discussion the legislature would need to have." He suggested
that people could elect to return a portion of their dividend to
the state. He reiterated his belief that the permanent fund
belonged to the people.
12:44:08 PM
REPRESENTATIVE WOOL pointed out that instead of proposing a
50/50 split or an 80/20 split, the conceptual amendment offered
a 100/0 split; thus, 100 percent of the 5 percent draw would be
allocated to dividends, which would provide a PFD of
approximately $4,000 per individual. He said it could be argued
that the Alaska Marine Highway System (AMHS), highways, and
schools also belonged to the people and if so, the legislature
was responsible for maintaining them as well, as opposed to
solely the individual checking accounts of Alaskans. He stated
that the conceptual amendment would create a massive fiscal
crisis, which is why he opposed it.
12:45:13 PM
REPRESENTATIVE EASTMAN said he interpreted the conceptual
amendment differently than his fellow committee members. He
directed attention to the language "as provided by law" on line
5, which he understood to mean that if the legislature were to
set the statutory dividend at $1, it would satisfy the
amendment. He believed the conceptual amendment was stating
that constitutionally, the legislature was constrained to follow
the law.
12:47:14 PM
REPRESENTATIVE STORY asked whether constitutional law trumped
statutory law.
CHAIR SPOHNHOLZ answered yes; therefore, the conceptual
amendment would outweigh statute and require that the entire
POMV go to dividends, which the sponsor had confirmed was his
intent.
12:47:46 PM
CHAIR SPOHNHOLZ asked Ms. Nauman to speak to the conceptual
amendment.
12:48:09 PM
EMILY NAUMAN, Deputy Director, Legislative Legal Services,
Legislative Affairs Agency, shared her understanding that to the
extent the conceptual amendment required the entire amount of
the income of the fund be dedicated to dividends, that would be
supreme over any dedication or designation of revenue in
statute. She believed there was also a question as to what "as
provided by law" meant in this context, as an appropriation bill
was also law. She said it was unclear whether "as provided by
law" would be satisfied by following the dividend formula in law
or simply appropriating any amount for a dividend, which could
potentially be considered "as provided by law."
12:49:34 PM
A roll call vote was taken. Representative Prax voted in favor
of the adoption of the conceptual amendment to Amendment 1.
Representatives Eastman, Wool, Josephson, Schrage, Story, and
Spohnholz voted against it. Therefore, the conceptual amendment
to Amendment 1 failed by a vote of 1-6.
CHAIR SPOHNHOLZ resumed the discussion on Amendment 1.
12:50:28 PM
REPRESENTATIVE WOOL said he was hesitant to add dividend
language to the resolution because it would open the door to
determining a constitutional amount. He recalled when the
pipeline shut down for a period of time last year due to
economic reasons. He pondered what would happen if that were to
occur again in the future, adding that if the state was limited
to little oil income, it would need every penny from the POMV
draw to sustain government services. He said if the resolution
were to pass with the current statutory dividend, the
legislature would be obliged to pay the statutory formula of
approximately $3,000 per individual. He reiterated his
hesitancy to Amendment 1.
12:52:32 PM
MS. NAUMAN restated her understanding that the language "as
provided by law" in Amendment 1 was ambiguous and could be
satisfied in two ways: first, by following the statutory
dividend formula; and second, with an appropriation bill. She
stated that how the court would interpret that language was an
open question.
REPRESENTATIVE WOOL inquired about the tax status of the
permanent fund.
MS. NAUMAN explained that there was an open question regarding
whether requiring a dividend payout from the constitution would
jeopardize the overall tax status of the permanent fund. She
noted that the permanent fund was not currently subject to
federal income taxation; however, it was not clear under what
mechanism of federal law the fund was not subject to federal
taxation. She said there was a possibility that by requiring a
dividend, the basic nature of the fund would be change from one
that generally supported government and the people to one more
similar to an investment account wherein residents have a right
to some portion of that fund. She opined that this type of
amendment would not jeopardize the tax status of the fund;
however, she said she was not entirely certain. She encouraged
researching the potential implications in further detail before
making the proposed constitutional change to ensure that it
wouldn't change the fund's tax status. She noted that there
were options to inquire with the Internal Revenue Service (IRS)
before subjecting this amendment to a vote of the people.
12:55:28 PM
REPRESENTATIVE EASTMAN remarked:
Under the amendment, when it speaks of "a portion of
the amount appropriated under (b)", what is the timing
of this? Is this such that the appropriation under
(b) has taken place and now this amendment's
provisions kick in or are these taking place
concurrently? I'd just like to understand what
exactly is happening before and after.
12:56:19 PM
MS. NAUMAN expressed her understanding that in its current form,
the bill required the legislature to make a series of
appropriations. She characterized it as a cascading
appropriation where the legislature would appropriate from the
POMV and continue to disperse some of that money to dividends.
She said she believed that both appropriations would
simultaneously occur within the same bill.
12:57:05 PM
REPRESENTATIVE EASTMAN asked whether the intent to implement a
cascading effect wherein the legislature would make an
appropriation from the permanent fund; subsequently, the
legislature would use a portion of the appropriated moneys for
the dividend program.
CHAIR SPOHNHOLZ confirmed.
REPRESENTATIVE EASTMAN suggested removing the ambiguity that Ms.
Nauman spoke to with regard to the language "as provided by
law." He sought to clarify whether the language was referring
to an appropriation bill or a statute.
CHAIR SPOHNHOLZ replied that she had intentionally left that
language ambiguous.
12:58:12 PM
REPRESENTATIVE PRAX asked whether replacing the word "law" with
"statute" would remove the ambiguity.
12:59:01 PM
MS. NAUMAN speculated that a court would still perceive an
appropriation bill as "by statute." In general, she advised
against the change suggested by Representative Prax. She
pointed out that Article 12, Section 11, of the constitution
specifically addressed the term "by law," as it is consistently
used throughout the constitution. She opined that introducing a
new phrase could be confusing and lead to future litigation.
She reiterated that as a drafter, her preference would be to
keep the "by law" language because it's consistent with the
constitution.
1:00:02 PM
REPRESENTATIVE JOSEPHSON said he was grateful for the amendment,
as it had generated a thoughtful dialogue. Nonetheless, he said
his concern stemmed from thinking about conversations that took
place in the capital building in 2017 when the idea of a POMV
draw gained momentum. At the time, there was billions in the
CBR, and the legislature had not "tested the taxation water."
Further, he recalled thinking that a 75/25 split might be
plausible. He highlighted that there was currently $1 billion
in the CBR, half of which needed to be preserved for cash flow
purposes. He opined that even a 90/10 split, which would
provide $300 million for the PFD, would be "insulting" to many
Alaskans; furthermore, it would not be affordable unless there
was evidence to the contrary. He concluded that for those
reasons, he was concerned about guaranteeing [the dividend] in
the proposed resolution.
1:02:14 PM
REPRESENTATIVE EASTMAN asked how the language "the legislature
shall appropriate" was any different than the current process of
paying dividends. For example, if the legislature did not
appropriate these funds to the dividend program, he asked
whether that would create a "cause for action" from the public
against the legislature.
MS. NAUMAN shared her understanding that per Amendment 1, the
legislature would be required to make an appropriation. She
explained that currently, the legislature had some flexibility
in its appropriations for dividends because of the dedicated
funds clause under Article 9, Section 7 of the constitution.
She believed that with the addition of this to the constitution,
the legislature would be required to appropriate some amount for
a dividend; further, if the appropriation was not made, a person
who would have otherwise received a dividend would have a solid
case against the legislature for failing to meet the
constitutional requirements.
REPRESENTATIVE EASTMAN considered a scenario in which an
individual sued the legislature for lack of action and in
response, the legislature distributed a dividend of $1. He
asked whether that would resolve the cause for action.
MS. NAUMAN noted that Legislative Legal Services liked to shy
away from hypotheticals for a reason. She surmised that an
outcome of such a case would depend on the evidence presented
and refer to some of the committee discussions about legislative
intent.
1:05:12 PM
REPRESENTATIVE STORY asked the sponsor of SSHJR 1 to share his
thoughts on Amendment 1.
1:05:39 PM
JONATHAN KREISS-TOMKINS, Alaska State Legislature, prime sponsor
of SSHJR 1, said he was deferential to the will of the
committee. He opined that the process was the most important
thing to get a sense of different ideas and lines of support for
the purpose of reaching a vote threshold of two-thirds, which
was requisite for any solution.
CHAIR SPOHNHOLZ observed that there was a wide range of opinions
about the purpose and role of the dividend. She emphasized that
she was a believer in the PFD; additionally, that flexibility
was needed to address the PFD formula. She opined that
Amendment 1 would provide certainty for Alaskans who believe in
the dividend program, which was an important value statement.
She continued to explain that reaching a two-thirds vote on the
House and Senate floor would require votes from both believers
in the POMV and believers in the PFD. She shared her belief
that both were not mutually exclusive, as it was possible to
have a hard constitutional POMV and a commitment to a PFD. She
said her intention was to strike a compromise between
constitutionalizing the POMV and expressing a commitment to the
dividend. She reiterated her belief that without some PFD
reference, the resolution would not pass the legislature.
1:08:39 PM
A roll call vote was taken. Representatives Prax, Story, and
Spohnholz voted in favor of the adoption of Amendment 1.
Representatives Eastman, Wool, Josephson, and Schrage voted
against it. Therefore, Amendment 1 failed by a vote of 3-4.
1:09:41 PM
CHAIR SPOHNHOLZ invited additional comments from the committee.
1:09:52 PM
REPRESENTATIVE EASTMAN suggested eliminating paragraph (b) under
Section 30 of SSHJR 1, as the amendments could not feasibly
apply to appropriations made for the fiscal year ending June 30,
[2023].
CHAIR SPOHNHOLZ pointed out that Representative Eastman had not
formally submitted this change by the amendment deadline, which
had already passed. She said she would entertain the
discussion; however, she characterized the lateness of this
conceptual amendment as obstructionist.
REPRESENTATIVE KREISS-TOMKINS deferred to Ms. Nauman for an
analysis on the chronology of paragraph (b) on page 2.
MS. NAUMAN acknowledged that there may be an issue with the
timing. She stated that if SSHJR 1 were to pass, it would be on
the ballot in November 2022. She shared her understanding that
the legislature could make that appropriation retroactive. She
suggested that the 2021 date on line 11 of page 2 should be
updated to 2022.
REPRESENTATIVE KREISS-TOMKINS said he would not object to
changing 2021 to 2022 on page 2, line 11.
1:13:12 PM
REPRESENTATIVE EASTMAN moved to adopt Conceptual Amendment 2 to
SSHJR 1, such that lines 11-13 would be deleted on page 2.
CHAIR SPOHNHOLZ objected for the purpose of discussion. She
asked why Representative Eastman was not proposing to change the
date, 2021, on line 11 to 2022.
REPRESENTATIVE EASTMAN agreed that "The 2021 amendments" on line
11 should be labeled as "The 2022 amendments"; however, the
amendments should not be made to apply to something that
happened before they were put into the constitution.
1:14:22 PM
CHAIR SPOHNHOLZ shared her understanding that this particular
sequence was about the transition of implementation. She
presumed that if the amendments passed in 2022, they would apply
to appropriations made for the fiscal year ending 2023. She
opined that removing the entire provision did not make sense;
further, that changing the date on line 11 would suffice.
REPRESENTATIVE EASTMAN stated his understanding that once the
amendments were added to the constitution, they would become
relevant to all appropriations made after that point if the
provision was eliminated.
1:15:24 PM
MS. NAUMAN explained that paragraph (b) was intended to provide
transition language. She stated that if paragraph (b) was
eliminated, the fiscal year SSHJR 1 applied to may be in
question. She suggested that another option could be to bump
the dates back an additional year. Alternatively, the
legislature could potentially put in contingent appropriations
if SSHJR 1 made it on the ballot to deal with the possibility of
it passing.
CHAIR SPOHNHOLZ opined that changing the dates would be
preferable to eliminating the entire paragraph.
1:16:24 PM
REPRESENTATIVE EASTMAN withdrew his motion to adopt Conceptual
Amendment 2.
REPRESENTATIVE EASTMAN moved to adopt [Conceptual Amendment 3]
to SSHJR 1, such that "2021" on page 2, line 11, would be
changed to "2022", and "2023" on page 2, line 12, would be
changed to "2024". There being no objection, Conceptual
Amendment 3 was adopted.
CHAIR SPOHNHOLZ invited final comments from the committee.
1:17:22 PM
REPRESENTATIVE EASTMAN noted that he would be voting against
moving the proposed resolution from committee because he did not
believe it would have a positive impact on the dividend.
CHAIR SPOHNHOLZ clarified that there was nothing in the
resolution that precluded the legislature from paying out a
statutory PFD. She pointed out that, unfortunately,
Representative Eastman had voted against Amendment 1, which
would have required the payment of a dividend. Nonetheless, she
said she supported SSHJR 1, [as amended], and thanked the bill
sponsor for introducing it. She believed the single most
important thing that could be done for the future of Alaska was
to protect the permanent fund from being overdrawn.
REPRESENTATIVE SCHRAGE expressed his strong support for SSHJR 1,
[as amended]. He stated that the resolution would ensure the
protection of the permanent fund for future generations.
1:19:41 PM
REPRESENTATIVE WOOL moved to report SSHJR 1, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes.
REPRESENTATIVE EASTMAN objected.
1:20:02 PM
A roll call vote was taken. Representatives Story, Wool,
Josephson, Schrage, and Spohnholz voted in favor of reporting
SSHR 1, as amended, out of committee. Representatives Prax and
Eastman voted against it. Therefore, CSSSHJR 1(W&M) was
reported out of the House Special Committee on Ways and Means by
a vote of 5-2.
1:20:41 PM
CHAIR SPOHNHOLZ remarked on the committee's upcoming schedule.
1:21:02 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
1:21 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 1 Amendment #1.pdf |
HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Additional Document - APFC POMV Statement.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Background - APFC Resolution POMV 2003-05.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Background - APFC Resolution POMV 2004-09.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Background - APFC Resolution POMV 2020-01.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Background - APFC Trustees’ Paper Volume 9 1.15.2020.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Background - Institute of the North Position Paper.pdf |
HJUD 4/26/2021 1:00:00 PM HJUD 4/30/2021 1:00:00 PM HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Presentation by Institute of North 4.13.2021.pdf |
HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| SSHJR 1 Sectional Analysis 3.12.21.pdf |
HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| SSHJR 1 Sponsor Statement 3.12.21.pdf |
HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HB 165 Sectional Analysis 4.12.21.pdf |
HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HB 165 |
| HB 165 Sponsor Statement 4.12.21.pdf |
HW&M 4/13/2021 11:30:00 AM HW&M 4/20/2021 11:30:00 AM |
HB 165 |
| HB 165 Sectional Analysis 4.12.21.pdf |
HW&M 4/20/2021 11:30:00 AM |
HB 165 |
| HJR 1 Opposing Document - Testimony as of 4.20.2021.pdf |
HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HJR 1 Supporting Document - Testimony as of 4.20.2021.pdf |
HJUD 4/30/2021 1:00:00 PM HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HB 165 - Opposition Testimony as of 4.20.20.pdf |
HW&M 4/20/2021 11:30:00 AM |
HB 165 |
| HJR 1 - Testimony, Opposition as of 4.21.21.pdf |
HW&M 4/20/2021 11:30:00 AM |
HJR 1 |
| HB 165 - Testimony, Opposition as of 4.21.21.pdf |
HW&M 4/20/2021 11:30:00 AM |
HB 165 |