Legislature(2023 - 2024)DAVIS 106
03/06/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB90 | |
| HJR7 | |
| HJR8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 90 | TELECONFERENCED | |
| *+ | HJR 7 | TELECONFERENCED | |
| *+ | HJR 8 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
March 6, 2023
6:00 p.m.
MEMBERS PRESENT
Representative Ben Carpenter, Chair
Representative Jamie Allard
Representative Tom McKay
Representative Kevin McCabe
Representative Cathy Tilton
Representative Andrew Gray
Representative Cliff Groh
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 90
"An Act relating to income of the Alaska permanent fund and the
amount available for appropriation; relating to appropriations
from the earnings reserve account; relating to the amount of the
permanent fund dividend; and providing for an effective date."
- HEARD & HELD
HOUSE JOINT RESOLUTION NO. 7
Proposing amendments to the Constitution of the State of Alaska
requiring payment of a dividend to eligible state residents.
- HEARD & HELD
HOUSE JOINT RESOLUTION NO. 8
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund and appropriations from
the Alaska permanent fund.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 90
SHORT TITLE: PERMANENT FUND DIVIDEND; $1000 DIVIDEND
SPONSOR(s): REPRESENTATIVE(s) FIELDS
03/01/23 (H) READ THE FIRST TIME - REFERRALS
03/01/23 (H) W&M, FIN
03/06/23 (H) W&M AT 6:00 PM DAVIS 106
BILL: HJR 7
SHORT TITLE: CONST AM: PERMANENT FUND DIVIDEND
SPONSOR(s): WAYS & MEANS
03/01/23 (H) READ THE FIRST TIME - REFERRALS
03/01/23 (H) W&M, JUD
03/06/23 (H) W&M AT 6:00 PM DAVIS 106
BILL: HJR 8
SHORT TITLE: CONST AM: GUARANTEE PERM FUND DIVIDEND
SPONSOR(s): WAYS & MEANS
03/01/23 (H) READ THE FIRST TIME - REFERRALS
03/01/23 (H) W&M, JUD
03/06/23 (H) W&M AT 6:00 PM DAVIS 106
WITNESS REGISTER
REPRESENTATIVE ZACK FIELDS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented HB 90.
EVAN ANDERSON, Staff
Representative Zack Fields
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis and fiscal
note for HB 90 on behalf of Representative Fields, prime
sponsor.
EMILY NAUMAN, Director
Legislative Legal Services
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
90 and HJR 7.
KENDRA BROUSSARD, Staff
Representative Ben Carpenter
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HJR 7 and HJR 8 on behalf of the
House Special Committee on Ways and Means, sponsor, on which
Representative Carpenter serves as chair.
SENATOR SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony during the
hearing on HJR 8.
ACTION NARRATIVE
6:00:40 PM
CHAIR BEN CARPENTER called the House Special Committee on Ways
and Means meeting to order at 6:00 p.m. Representatives Groh,
McKay, McCabe, Gray, Tilton, and Carpenter were present at the
call to order. Representative Allard arrived as the meeting was
in progress.
HB 90-PERMANENT FUND DIVIDEND; $1000 DIVIDEND
6:01:55 PM
CHAIR CARPENTER announced that the first order of business would
be HOUSE BILL NO. 90, "An Act relating to income of the Alaska
permanent fund and the amount available for appropriation;
relating to appropriations from the earnings reserve account;
relating to the amount of the permanent fund dividend; and
providing for an effective date."
6:02:17 PM
REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, as prime
sponsor, presented HB 90.
6:02:41 PM
The committee took an at-ease from 6:02 p.m. to 6:06 p.m.
6:06:38 PM
REPRESENTATIVE FIELDS began a PowerPoint presentation [hard copy
included in the committee packet] titled, "HB 90: $1000
Permanent fund Dividend," on slide 1. He explained that the
impetus of HB 90 was made through conversations with his
colleagues, who told him that the main issue is not the
permanent fund dividend (PFD) amount, but rather its
predictability. He informed members that the first PFD check in
Alaska was $1,000 in 1982, and that is about what the state can
afford in the future without raising new taxes. Further, he
noted that $1,000 is similar than the historic average. He
acknowledged conversations in the legislature around capping the
PFD at $1,000, as some believe that the formula used in the 1982
distribution would become unaffordable. He said he wanted to
offer HB 90 as a no-tax option, in that it would give the state
a balanced budget and give Alaska residents PFD predictability.
He moved to slides 2 and 3 to review the creation of the PFD
program. In 1976, Alaska residents voted to establish the
permanent fund, with the intent of making Alaskans feel vested
in the program as stakeholders, and the fund would be protected
and not squandered. He moved to slides 4 and 5 and noted that
past oil volume was four times greater in 1982, and that the PFD
distribution formula worked well up until about 2012. He
further explained that at that time the state was experiencing
declining revenue and oil prices. He stated that Alaska has not
been able to afford the original formula in the last ten years,
and that the state will not be able to afford it without new
taxes.
6:10:22 PM
EVAN ANDERSON, Staff, Representative Zack Fields, Alaska State
Legislature, clarified that the data on slide 5 originates from
the permanent fund corporation, and that the percent change is
year over year.
6:10:42 PM
REPRESENTATIVE FIELDS returned to the presentation on slide 6 to
discuss legislative finance models. He reiterated that
dividends distributed via the 1982 formula will not be
affordable without new tax revenue. He said a 50/50 [percent of
market value (POMV) split] dividend is not affordable without
significant taxes, and that a 75/25 dividend split may be
affordable, but is dependent upon optimistic assumptions to
avoid taxes. He commented that the state would be able to
afford the PFD program that uses the formula prescribed in HB
90, which he said will give residents predictability with the
program, and the state would be able to maintain a low tax
regime. He stated that, while his own constituents are
comfortable with him voting for new taxes - if they are fair for
working people - he opined that the legislature won't raise
significant revenue, so HB 90 was presented.
6:12:14 PM
REPRESENTATIVE FIELDS moved to slide 7 to present fiscal
modeling done by the Legislative Finance Division, which he said
shows that HB 90 would be affordable if the state were to not
raise any new taxes. He moved to slide 8, which shows further
division modeling, but on the question of what the price of oil
would need to be in order to pay a $1,000 dividend. He said
that it is reasonable to anticipate oil prices to be at the
numbers show on the slide. On slide 9 he outlined the goals of
HB 90 to provide PFD predictability for Alaskans, fund services
consistent with constitutional intent, and to maintain low/zero
tax burden. He reiterated his understanding that the
legislature will not raise new taxes. He moved to slide 10 and
commended last year's energy relief check to residents, and
further, that the money is tax free. He moved to slide 11 and
noted that proponents of last year's vote on whether to hold an
Alaska constitutional convention had suggested putting the PFD
into the document; residents ultimately voted no on holding a
constitutional convention, which he said is an indication that
what is in the Alaska Constitution is broadly supported. He
stated that it is on the legislature to change PFD statute.
6:14:43 PM
MR. ANDERSON gave the sectional analysis to HB 90 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1: This section amends AS 37.13.140, which
defines net income of the Alaska Permanent Fund as
income of the earnings reserve account. This section
leaves unchanged the five percent Percent-Of-Market-
Value draw for appropriations, and it limits the
amount available for appropriation to no greater than
the balance in the earnings reserve account described
in AS 37.13.145.
Section 2: This section amends AS 37.13.145(b) to
authorize the legislature to appropriate funds from
the earnings reserve account to the dividend fund each
year and to pay out a dividend of up to $1,000 to each
eligible individual per fiscal year.
Section 3: This section amends AS 37.13.145(c) to give
the legislature the ability to appropriate additional
funds from the earnings reserve account to the
principal of the Permanent Fund in order to offset the
effect of inflation during that fiscal year.
Section 4: This section amends AS 37.13.145(d)
replacing the words "distribution" and "transfer" with
"appropriation" to conform with previous sections.
Section 5: This section amends AS 37.13.145(f), which
gives the legislature the authority to appropriate
funds from the earnings reserve account to the general
fund.
Section 6: This section amends AS 37.13.300(c), making
conforming changes to the statute that disallows the
legislature from including income from the mental
health trust fund in the funds available for
appropriation.
Section 7: This section makes a conforming change to
AS 43.23.025(a), which determines the value of the
permanent fund dividend.
Section 8: This section repeals AS 37.13.145(e), which
mandated a 50% draw on the earnings reserve account
for annual payments.
Section 9: This section provides for an immediate
effective date.
6:17:49 PM
MR. ANDERSON explained that HB 90 has an indeterminate fiscal
note. He said that setting one specific dollar amount in statue
could lead to budget surpluses and deficits; therefore, a fiscal
note [with a determined amount] could not be made.
6:18:35 PM
REPRESENTATIVE GROH thanked Representative Fields for bringing
HB 90 forward. He asked if the $1,000 figure was not inflation
adjusted, and whether there were no inflation adjustment
provisions.
REPRESENTATIVE FIELDS answered yes. He explained that he sought
to put forward the most fiscally conservative and predictable
dividend that he believes the state could offer, which is why
there are no inflation adjustment provisions. He shared that he
has no strong feelings on whether to add such a provision, but
he wanted a predictable figure, which he said is $1,000. He
clarified that the figures shown in past slides are not
inflation adjusted.
REPRESENTATIVE GROH shared that $1,750 would be the historical
average of the PFD, if using 2021 dollars. He asked for
Representative Field's "school of thought" on who should pay the
state's structural deficit.
REPRESENTATIVE FIELDS answered that in 1996 voters put the
permanent fund into the constitution and turned a non-renewable
resource into a renewable resource with the explicit intent of
funding services. He said that was a good idea, as too was when
the legislature established in statue a PFD program with the
intent of growing the fund. He said the data is clear that the
PFD has a positive impact on ameliorating poverty. He said
that, since Alaska has four times less oil coming through the
pipeline, it can't afford a 1982 formula dividend. Unless there
was higher oil revenue, oil taxes, or a substantial new form of
revenue, the state has to balance services and dividends; but it
should recognize that the most impacted would be the working
poor.
6:23:27 PM
CHAIR CARPENTER asked what would make the legislature follow a
statute that prescribes a $1,000 PFD, and further, what kind of
appropriation structure language is in HB 90. He inquired as to
how such a law would get the state in a stable environment
whether it still would be subject to appropriation.
REPRESENTATIVE FIELDS answered that if HB 90 is passed,
legislators can relay to their constituents that they are highly
likely to get a $1,000 PFD. He said it is likely that oil
prices will allow the state to afford the PFD, even if the price
dips below the projected average. He said that HB 90 maintains
the POMV spending cap law, which he supports.
6:24:50 PM
REPRESENTATIVE MCCABE inquired about the use of "may", which he
noted occurs on page 2, lines 12 and 19, and on page 3, line 16
of the proposed legislation.
REPRESENTATIVE FIELDS deferred to Legislative Legal and Research
Services.
6:25:46 PM
EMILY NAUMAN, Director, Legislative Legal Services, Legislative
Agencies and Offices, explained that HB 90 - as well as other
bills to be presented tonight - are drafted as they are in order
to be consistent with Wielechowski v. Alaska. She said the case
held that appropriation for PFDs is not mandatory, and that the
legislature is free to appropriate any amount for PFDs in any
given year; therefore, changing the language from "shall" to
"may" makes the language consistent with that holding. Further,
even as the statutes are drafted now with the word "shall", the
legislature is still free to appropriate any amount for the PFD.
REPRESENTATIVE MCCABE asked, "Then why do we even need this?"
Acknowledging that the legislature is free to appropriate
however it likes, he asked whether inserting "shall" rather than
"may" might make a future legislature less able to circumvent
the language.
MS. NAUMAN answered, "I don't believe so." She pointed out that
the current language states "shall" and the legislature
nonetheless has chosen to not appropriate the amount prescribed
in statute.
6:27:44 PM
REPRESENTATIVE FIELDS relayed that he is alright with using
"shall" within the bill.
6:28:15 PM
REPRESENTATIVE FIELDS, asked about slide 5 and his previous
comments regarding the figures not being inflation adjusted,
acknowledged that the data on slide 5 is a typo and the historic
PFD average should be about $1,750.
REPRESENTATIVE MCKAY said that if the PFD were to be "held
flat," it would be eroded. He shared that this conversation
reminds him of the 1994 vote, in that Alaska residents had voted
not to use the permanent fund to balance the state budget.
REPRESENTATIVE FIELDS commented that he would be in support of
inflation indexing.
6:30:40 PM
CHAIR CARPENTER said it would be helpful to see inflation data
on past PFD payments.
6:30:59 PM
REPRESENTATIVE GRAY commented that he likes the idea of doing
energy rebate disbursements, namely because they are tax free.
He asked how high the state can spend on energy rebate
disbursements.
REPRESENTATIVE FIELDS responded that while the argument could be
made to disburse a $100 PFD and then disburse the rest of the
revenue to residents as an energy rebate check, he is unsure as
to whether the Internal Revenue Service (IRS) has provided
guidance on such an action.
6:31:41 PM
CHAIR CARPENTER suggested that the committee confer with the IRS
in getting an answer to the last question.
6:31:54 PM
REPRESENTATIVE MCCABE suggested the committee investigate "hold
harmless" provisions. He offered the understanding that Alaska
pays the federal government a certain amount of money based on
the PFD for people that would normally have to pay tax on it but
do not. He said if the state renamed the PFD for hold harmless
portions, the savings would be $20 million.
CHAIR CARPENTER added that both the energy rebate and hold
harmless are going to have a tangential impact on the decisions
the legislature makes around the PFD, so research on the topic
will be done and shown to the committee.
6:33:01 PM
REPRESENTATIVE GROH stressed that there are people that would
lose money by receiving the PFD if there were no hold harmless
provisions, under certain circumstances.
REPRESENTATIVE FIELDS answered that he is aware of hold harmless
but not that element of the legislative history.
6:33:49 PM
CHAIR CARPENTER announced that HB 90 was held over.
HJR 7-CONST AM: PERMANENT FUND DIVIDEND
6:34:32 PM
CHAIR CARPENTER announced that the next order of business would
be HOUSE JOINT RESOLUTION NO. 7, "Proposing amendments to the
Constitution of the State of Alaska requiring payment of a
dividend to eligible state residents."
6:34:19 PM
The committee took an at-ease from 6:34 p.m. to 6:35 p.m.
6:35:05 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, presented HJR 7 on behalf of the House
Special Committee on Ways and Means, sponsor, on which
Representative Carpenter serves as chair. She read the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
For almost thirty years, Alaskans could count on their
annual dividend checks as the state legislature
followed the law that directed the dividend to be paid
by a statutory formula.
The trust between the government and the people of
Alaska was broken in 2016 when Governor Walker vetoed
a portion of the annual dividend and the Alaska
Supreme Court ultimately determined that dividends
were subject to the annual appropriations process.
While the legislature could choose to follow the law
and appropriate the dividend according to statute and
separate it from the budget, they have not done so.
Instead, the permanent fund dividend has been
subjected to the budget process, where the dividend
competes with government spending and often becomes
the deficit reduction solution.
HJR7 requires the state to pay the annual Permanent
Fund dividend according to a formula in statute,
rather than by the whims of the annual appropriations
process.
The amendments in HJR7 address the constitutional
issues raised by the Supreme Court in its Wielechowski
opinion that allowed the legislature to appropriate
the annual dividend rather than pay it out by formula.
Neglecting to constitutionalize the PFD would permit
lawmakers to continue avoiding their obligation to
address the shortcomings of Alaska's fiscal and
economic planning, placing the Permanent Fund at risk.
Constitutionally enshrining the Permanent Fund
Dividend will provide for the maximum benefit of all
Alaskans and ensure the prosperity of the Permanent
Fund for generations of Alaskans to come.
6:37:20 PM
MS. BROUSSARD proceeded to read the following sectional analysis
[included in the committee packet], which read as follows
[original punctuation provided]:
Section 1
Article IX, section 7 of the Constitution of Alaska is
amended to except the payment of Permanent Fund
dividends from the prohibition of dedication of funds.
Section 2
Article IX, section 13 of the Constitution of Alaska
is amended to except the payment of Permanent Fund
dividends from the requirement to appropriate all
funds that are paid out of the state treasury.
Section 4
Article IX, Section 15 of the Constitution of Alaska
is amended to require the state to pay a permanent
fund dividend according to a formula in law.
Section 5
Article XV of the Constitution is amended to add a new
transition section that would make the constitutional
changes effective for fiscal year 2026.
Section 6
Provides that this amendment to the Constitution be
placed before voters at the next general election.
6:38:26 PM
REPRESENTATIVE MCCABE turned attention to page 2, line 13, "Each
fiscal year, without appropriation, the State shall pay a
dividend". He asked about the use of the word "shall".
6:38:53 PM
CHAIR CARPENTER asked Ms. Nauman what the effect of putting the
word "shall" would have on the resolution.
EMILY NAUMAN, Director, Legislative Legal Services, Legislative
Agencies and Offices, explained that HJR 7 proposes a
constitutional amendment, and that the Wielechowski v. Alaska
decision was an interpretation of state constitution as it
exists today; under that interpretation, appropriations for
dividends must be made by the legislature and are subject to the
legislative appropriation cycle annually. Since HJR 7 is
seeking to change the constitution, the resolution itself does
not need to abide by Wielechowski v. Alaska, so it is
permissible to use the word "shall".
CHAIR CARPENTER asked whether the justices recommended that a
constitutional amendment would be necessary if the legislature
wanted to dedicate money to the PFD.
MS. NAUMAN responded that she does not recall the case saying
anything about a constitutional [amendment].
6:40:43 PM
REPRESENTATIVE GROH sought confirmation that HJR 7 requires the
payment of the PFD but does not prescribe a distribution
formula.
MS. BROUSSARD answered that's correct.
6:41:22 PM
REPRESENTATIVE MCCABE shared that the Fiscal Policy Working
Group held hours of conversation with Legislative Legal Services
and the Legislative Finance Division about whether to put a
distribution formula in the constitution. He said the group had
settled on just putting language in the state constitution
mandating that the state pay the PFD, while putting formula law
into state statute.
6:41:57 PM
CHAIR CARPENTER asked what the reasoning was behind seeking that
the language be put in the constitution.
REPRESENTATIVE MCCABE answered that it was because even if the
bill language says "shall" the legislature could still violate
the law. He relayed that his constituents wanted both the PFD
and the formula in the constitution; however, having a formula
in the constitution would not only be problematic but dangerous
during a major economic downturn. He reiterated the working
group's compromise: put the PFD in the constitution, because in
the constitution, the word "shall" can be used, and the
legislature must follow it.
CHAIR CARPENTER asked Ms. Nauman how easily the legislature
could ignore the statute to which HJR 7 would refer.
6:44:20 PM
MS. NAUMAN answered that it's hard to predict how the Alaska
Supreme Court is going to interpret constitution or statute, but
if HJR 7 were to pass, the Alaska Supreme Court would require
the legislature to appropriate money for dividends according to
the formula in statue. She noted that one caveat is that the
court does not have a mechanism to make such an appropriation
happen; the legislature must make the appropriation ultimately.
If the court orders the legislature to make an appropriation, it
is unclear what would happen if the legislature did not do so,
she stated.
6:45:43 PM
REPRESENTATIVE GROH referenced page two, lines 13-15, "Each
fiscal year, without appropriation, the State shall pay a
dividend from the income of the permanent fund to eligible
residents of the State, according to a formula set out in law."
He shared that alternative language that focuses on the formula
set out in law or statute rather than an appropriations bill or
the budget, and he asked what the differences are between those
two proposals.
MS. NAUMAN answered that the language that orders the state to
pay a dividend but states that it is not an appropriations bill
is insurance, while an appropriations bill is law; therefore,
stating that a dividend shall be paid according to state law
would not be sufficient to ensure that the legislature would pay
a dividend according to a set formula. In the case of HJR 7,
the state pays a dividend according to formula, and it would not
face the same issue.
6:47:51 PM
REPRESENTATIVE GRAY surmised that if the legislature were to
pass only HJR 7, and not accompanying statutory legislation, it
would be ordering the legislature to do what it has already been
doing, which is paying dividends.
CHAIR CARPENTER rephrasing Representative Gray's remark into a
question, asked whether, if HJR 7 were to pass, an additional
piece of legislation would be required to make HJR 7 effective
or current legislation would fit within the resolution.
6:48:55 PM
MS. NAUMAN answered that current statute governing the amount
paid in a PFD, based on a fiscal situation, could conflict. If
HJR 7 were to pass, she advised, the legislature would need to
clean up existing PFD statute. In response to Representative
Gray's remark, she confirmed that HJR 7 would require the
legislature to pay out a PFD into the future.
REPRESENTATIVE GRAY asked for confirmation that if the
legislature were to pass only HJR 7, it could change statute at
any time but still would be required to pay a PFD.
MS. NAUMAN confirmed that's correct, in that the legislature
could pass an appropriations bill to pay a PFD, and then make a
statutory change to the formula.
6:50:35 PM
CHAIR CARPENTER recognized that HJR 7 tells the legislature
that, without appropriation, the state shall pay a PFD from a
statute that is established. He asked what the effect would be
if the legislature attempted to pay a PFD through the
appropriations process instead. Further, he asked if there
would be conflict between the statute that is on the books and
an appropriations bill that would pay an amount that differs
from what statute orders.
MS. NAUMAN corrected her previous answer after recollecting that
HJR 7 does not require a PFD appropriation; it would be a
mandatory transfer without appropriation. She said that the
hope is that such a situation wouldn't happen, and that the
legislative intent in making the appropriation would need to be
clear whether the intention of the legislature was to
appropriate for the transfer or to make an appropriation on top
of the transfer.
6:52:03 PM
REPRESENTATIVE GROH asked, regarding proposed constitutional
amendments, what risk there is that any amendment that is being
considered in committee might run afoul with the doctrine from
the Alaska Supreme Court Case, Bess v. Ulmer, regarding revision
versus amendment. He requested Ms. Nauman to talk about that
doctrine and how it might affect the committee's consideration
of constitutional amendments.
MS. NAUMAN outlined that there are two ways to amend the state
constitution, as prescribed within the document itself: first
is the process happening right now, in that there is a
legislative resolution followed by a vote of the people; second
is via a constitutional convention. The Alaska Supreme Court
conveyed that if the conditional changes are significant enough,
it must go through a constitutional convention process. She
said the court's analysis in Bess v. Ulmer looked at it in two
ways: qualitative, the nature of changes; and quantitative, the
number of changes required to rebalance government power. For
constitutional amendments around the permanent fund, she said
the driver of the determinations on whether the amendment would
constitute a revision is how much the change impairs the
legislature's already broad appropriation authority over all the
money coming from the permanent fund. She said there is only
one case on the issue, which is Bess v. Ulmer, which she pointed
out does not provide much guidance on circumstances relating to
the PFD.
6:55:09 PM
CHAIR CARPENTER announced that HJR 7 was held over.
HJR 8-CONST AM: GUARANTEE PERM FUND DIVIDEND
6:55:22 PM
CHAIR CARPENTER announced that the final order of business would
be HOUSE JOINT RESOLUTION NO. 8, "Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund and appropriations from the Alaska permanent
fund."
6:55:35 PM
MS. BROUSSARD, Staff, Representative Ben Carpenter, Alaska State
Legislature, presented HJR 8 on behalf of the House Special
Committee on Ways and Means, sponsor, on which Representative
Carpenter serves as chair. She read the sponsor statement,
[included in the committee packet], which read as follows
[original punctuation provided]:
For almost thirty years, Alaskans could count on their
annual dividend checks as the state legislature
followed the law that directed the dividend to be paid
by a statutory formula. The trust between the
government and the people of Alaska was broken in 2016
when Governor Walker vetoed a portion of the annual
dividend and the Alaska Supreme Court ultimately
determined that dividends were subject to the annual
appropriations process. While the legislature could
choose to follow the law and appropriate the dividend
according to statute and separate it from the budget,
they have not done so. Instead, the permanent fund
dividend has been subjected to the budget process,
where the dividend competes with government spending
and often becomes the deficit reduction solution.
House Joint Resolution 8 aims to enshrine the PFD
program in the Alaska Constitution to create stability
for Alaskans who rely on their annual dividend, and to
create stability for the long-term fiscal plan of the
state. Without stability, those who receive state
funding, through the dividend or from government
programs, cannot plan for their businesses or their
lives for a duration of more than a year.
HJR8 adds protection against overspending of the Fund
by moving the balance of the Earnings Reserve Account,
which currently holds the Permanent Fund's investment
earnings, into the Fund corpus, where all future
earnings will be retained and thereby safeguarded from
access.
HJR8 then limits the permissible draw from the Fund to
five percent (5%) of a five-year averaged market value
of the Fund. The people would then be apportioned
either fifty percent (50%) of the draw value or the
amount of the historic calculation formulawhichever
is greater. In this way, the people will always
receive first call on the earnings of the Fund, ahead
of government. Failing to constitutionalize the PFD
would enable a disproportionate distribution of
Alaska's oil wealth to growing government at the
expense of Alaskan citizens.
Neglecting to constitutionalize the PFD would permit
lawmakers to continue avoiding their obligation to
address the shortcomings of Alaska's fiscal and
economic planning, placing the Permanent Fund at risk.
Constitutionally enshrining the Permanent Fund
Dividend will provide for the maximum benefit of all
Alaskans and ensure the prosperity of the Permanent
Fund for generations of Alaskans to come.
6:58:11 PM
MS. BROUSSARD moved on to the sectional analysis [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1.
Eliminates the earnings reserve account of the
Permanent fund. All income of the Permanent Fund that
is not directed to the dividend payment or to the
general fund shall be retained in the corpus of the
Permanent Fund.
Section 2.
Article IX, Section 15 of the Constitution is amended
to provide for a draw from the Permanent Fund of five
percent of the market value (POMV) of the Fund.
Section 2 then requires the state to pay a permanent
fund dividend that is the greater of two calculations:
the traditional PFD calculation or fifty percent of
the five percent POMV.
The remainder of a five percent POMV may be
appropriated by the legislature for state government.
Section 3.
Article XV of the Constitution is amended to provide
for transition timing of effective actions once voters
approve this amendment to the Constitution.
At the end of fiscal year 2023, the balance of the
earnings reserve account would be transferred into the
corpus of the Fund.
The substantive provisions would be effective
beginning fiscal year 2026.
Section 4.
Provides that this amendments to the Constitution be
placed before voters at the next general election.
6:59:36 PM
CHAIR CARPENTER said that HJR 8 differs in effect from HJR 7.
6:59:46 PM
REPRESENTATIVE GROH thanked Chair Carpenter for introducing the
two resolutions. He pointed out that HJR 8 would
constitutionalize the POMV rules and create a single account
structure - a change he supports. He noted that the
constitutional amendment proposed in HJR 8 would set out
alternative formulas as a way of figuring out what the PFD would
be in future years. He said that HJR 8 does not address
revenues; it is said that if there's a 50/50 POMV split per
allocation between PFDs and general government, that creates a
hole that the Senate Finance Committee estimated to be $800
million a year. He asked if the sponsor could address the
policy question of why HJR 8 does not address revenues.
CHAIR CARPENTER answered that the intent of HJR 8, as it is
drafted, was not to address revenue options; the intent of the
committee is to address revenues, if necessary, with other
accompanying legislation, and model all of the propositions
before the committee to see how they interact. He said it is
premature to have a conversation based on what was presented to
other committees, but HJR 8 was not meant to deal with new
revenues, which he said was a recommendation of the Fiscal
Policy Working Group.
REPRESENTATIVE GROH commended members of the working group,
whose recommendations included a variety of proposals. He
advised members that if the 50/50 POMV formula is put in the
constitution, there must be revenues for public services, ergo,
why the working group recommended revenues of between $500
million to $775 million a year.
CHAIR CARPENTER offered that another perspective would be that
it adds economic growth in the state that would provide new
revenue to the state.
7:04:06 PM
REPRESENTATIVE MCCABE relayed that HJR 8 essentially limits the
earnings reserve account (ERA). Speaking on revenues, he said
there is no way - except perhaps a large income tax - that the
revenue from the citizens of Alaska could make up the budget
shortfall. He shared that the working group investigated an
income tax structure for Alaska extensively, but "it just
doesn't work with our tax base."
7:05:11 PM
REPRESENTATIVE GROH recounted that the State House of
Representatives had passed a bill to raise an income tax, which
the Department of Revenue estimated to generate $700 million in
revenues in 2017. He said he is supportive of development
projects that raise revenues, but if PFDs and distribution
formulas are inserted into the state constitution, there must be
a way to ensure that there are revenues for public services.
7:06:34 PM
REPRESENTATIVE GRAY asked why the sponsor chose to pair the
elimination of the ERA with a fixed PFD formula.
CHAIR CARPENTER relayed two recommendations from the working
group: consolidate to a single fund source for the permanent
fund and constitutionalize the permanent fund program. He
stated that putting both of those items into one resolution is
the way to carry them out.
7:07:43 PM
REPRESENTATIVE ALLARD asked Representative Groh if he is
suggesting that the state underspends on public services and
takes money out of the PFD before it cuts the budget.
REPRESENTATIVE GROH answered no, but said he is looking out for
the views of those that make $20-$25 an hour, despite people
advising him to look out for people making $2,000 an hour. He
said that the people within his district are more likely to have
a second job than a second home. He shared that he would like
to see a balanced approach, like what the working group
recommended in 2021.
7:09:29 PM
CHAIR CARPENTER stated that the goal of today's meeting was to
hear three separate and unique bills and said that the committee
will get to Representative Allard's question when it sees the
other proposals that come from components of the working group's
work.
7:10:28 PM
REPRESENTATIVE GRAY said that as a new legislator, he is trying
to reconcile all the bills the committee has heard in the
unlikely event that they all pass. In considering a 75/25 POMV
split, a $1,000 PFD, and the two proposed constitutional
amendments, the amendments would trump statutory related policy.
He said all the bills cannot be reconciled together. He asked
Chair Carpenter how he can see the whole legislature working
together.
CHAIR CARPENTER responded that one criticism of the working
group's report was that it was just theoretical recommendation,
not a bill or resolution to be taken up by the legislature. He
said the group could have developed a recommendation towards a
piece of legislation and submit it for consideration. He said
that this committee is seeking to bring options so the
conversations are no longer theoretical. He stated that he does
not envision all the bills passing because some compete with
each other through varying actions; what he hopes the House
Special Committee on Ways and Means will do is pick something
one which members agree. Further, the intent in weeks to come
is to use a legislative finance tool to "plug" in the different
proposals to see how each of them intersect.
7:13:24 PM
CHAIR CARPENTER asked Senator Shelley Hughes to speak as a
member of the working group, as well as a member of the previous
PFD group. She was asked to share her thoughts now that the
committee has the measures before them.
7:14:11 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau,
Alaska, shared that she was a member of a bicameral PFD working
group, as well as the recent Fiscal Policy Working Group. She
explained, in considering the varied legislation before the
committee, that all the different pieces must come together, and
that once one bill passes, another bill must pass in order to
function. She advised that resolutions that propose
constitutional amendments are more difficult to pass, but
determine what is left over for the budget, which is what leads
to the revenue and reduction questions being raised. She said
that passing measures that settle the PFD and provide a spending
cap provide a framework for which the other pieces of
legislation can be carried out. She said that whatever is put
forward has to appear fair to the people and receive their
approval. She said this is the reason she likes the resolutions
that offer what the PFD would be; however, if the sponsor can
get the votes only within the state capitol, she feels more
comfortable with that now than when fund drawing began in 2016.
Further, for about eight years now there has been no bill passed
aimed at changing the PFD formula, she said. She acknowledged
the talks around workforce recruitment and retention of public
employees, as well as school funding concerns. She stressed
that fiscal certainty in the state should be addressed first.
She shared that Milton Friedman was consulted as to what to do
with the permanent fund and recommended that some of the funds
should go out to the private sector. She said, "Anything that
goes into the budget, whether operating or capital, ultimately
is serving some special interest group." She further quoted
Milton Friedman as stating that offering a permanent fund is
moving away [from special interests] because everyone is treated
equally by receiving the money, and "a dollar in the private
sector economy has a higher multiplier than in the government
sector."
SENATOR HUGHES referred to a document authored in 2021 by
herself and former Representative Johnathan Kriess-Thompkins,
which addressed a larger PFD, and that in looking at HJR 8, the
legislation calls for a larger PFD, so the document is
applicable. She said that the data within the report suggests
that a $3,000 PFD results in $2-$3 billion income to Alaska
residents, positive impacts on employment, 10,000 to 17,000
jobs, and 36,000 to 45,000 residents out of poverty. She said
that the Institute of Social and Economic Research (ISER)
studies suggest that about $750 out of a $3,000 PFD would go to
nondurable goods, like food, entertainment, and travel. She
quoted segments of the ISER report that emphasize the
relationship between policy uncertainty, the recession, and
"significant negative effects on aggregate investment and on
employment". She said economic policy uncertainty can explain
up to 32 percent of the drop in corporate investment. She
continued, "The decline in spending due to policy uncertainty
would indicate that waiting is not a costless option, in fact,
the losses due to uncertainty are important, and similar in
magnitude to the ones the economy would experience due to
attacks or due to further government cuts." She shared that the
state's lack of having its fiscal house in order has cost the
state half a billion dollars.
SENATOR HUGHES said a sizeable PFD impacts the business sector.
According to the University of Alaska Anchorage's Business
Enterprise Institute, 64 percent of start-ups will go to
families first for capital; therefore, if there is a sizable
PFD, the state will see more start-ups, as well as other
businesses, expand. She said that 23 percent of start-ups begin
with $10,000 or less, and that for a family of four receiving
PFDs, the total they accumulate would be $12,000. She stressed
that if the legislature settles the PFD issue, it will increase
Alaskans' income, reduce poverty, improve health, expand
businesses, increase employment, increase jobs, and increase
private investment.
7:26:16 PM
SENATOR HUGHES asked whether HJR 8 is like legislation drafted
by Senator Wielechowski.
CHAIR CARPENTER indicated that HJR 8 mirrors SJR 1.
SENATOR HUGHES stated that if the PFD issue were settled through
the state constitution, then that would provide more certainty
than if it were settled in statute.
CHAIR CARPENTER asked if Senator Hughes could provide the
documentation referred to in her presentation.
SENATOR HUGHES agreed to share the information.
7:27:29 PM
SENATOR HUGHES, in response to Representative Gray, indicated
that ISER had conducted a study showing that a larger PFD
resulted in the birth of larger babies.
REPRESENTATIVE GRAY commented that he would like to see the
study.
7:28:09 PM
REPRESENTATIVE GROH said that, as someone who assisted in
creating the PFD, he is happy to hear all the substantial
benefits. He relayed that business leaders have impressed upon
him the need of fiscal stability to help grow the economy.
Further, such leaders stressed the need for amenities and basic
services; such factors are important to them in deciding where
to locate businesses and attract employees. He asked whether
Senator Hughes had done the research on this.
SENATOR HUGHES answered that she has, and that business leaders
like HJR 8 because it is a comprehensive approach, since they
too want to ensure there are good schools and roads so that the
state doesn't apply heavy taxes on the businesses.
7:29:36 PM
CHAIR CARPENTER asked whether it would take investment earnings
or economic growth in the future to pay for good roads and
services. He said the committee is figuring out what is the
most stable system to create.
7:30:17 PM
REPRESENTATIVE MCCABE pointed out that money in the private
sector returns nine times the amount invested; conversely,
government investment returns are at 1:2. He said the idea is
that the jobs need to be created first, then the roads. He
illustrated an example from Phoenix, Arizona, in which people
came, moved in, built houses, and then everyone complained
because there were no roads, despite having the tax base to
build one. He said the "chicken or the egg" question will be a
big part of the upcoming conversation.
SENATOR HUGHES recounted a "crash" in Alaska in the 1980s which
emptied homes. She said there must be an economy to support the
services.
7:32:13 PM
REPRESENTATIVE GRAY said he supports growing the economy, but
that if the economy is not sending money to government to pay
for services, then no matter how big it gets, it would not pay
for services.
CHAIR CARPENTER explained that the structure the state has now
pays for services from its "one-trick pony" [oil], and that it
may be years from now when the state finds a revenue
alternative. He said the point is that if the state is known
only for oil revenue, then the state is in a "pickle." He
pointed out that the legislature has not been having the
conversation on how to incentivize economic growth. He opined
that if the state wishes to incentivize such growth, it
shouldn't have high corporate taxes, and rather there should be
a positive environment in which businesses are able to take
risks.
[HJR 8 was held over.]
7:35:33 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
7:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0090A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Sponsor Statement.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - Sectional Analysis.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| Historical average dividend since 1982.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - WM Bill Hearing Presentation 3.6.23.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HJR007A.PDF |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sponsor Statement HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sectional Analysis HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR 7 Fiscal Note.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR008A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| Sponsor Statement HJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| SectionalAnalysisHJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| HJR 8 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| ISER Presentation Economic Impacts of Fiscal Options and Uncertainty - Dr Guettabi.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| UAA Business Enterprise Institute Presentation - Christi Bell.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| Bicameral Permanent Fund Working Group Report With Title Page, 20 January 2020.pdf |
HW&M 3/6/2023 6:00:00 PM |