Legislature(2003 - 2004)

05/02/2003 07:13 AM W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                          May 2, 2003                                                                                           
                           7:00 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker, Co-Chair                                                                                            
Representative Jim Whitaker, Co-Chair                                                                                           
Representative Cheryll Heinze                                                                                                   
Representative Vic Kohring                                                                                                      
Representative Norman Rokeberg                                                                                                  
Representative Bruce Weyhrauch                                                                                                  
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Dan Ogg                                                                                                          
Representative Paul Seaton                                                                                                      
Representative Jim Holm                                                                                                         
COMMITTEE CALENDAR                                                                                                            
BAR GRAPH PRESENTATION ASSUMING VARIOUS BUDGET SCENARIOS                                                                        
HOUSE JOINT RESOLUTION NO. 9                                                                                                    
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to an appropriation limit and a spending limit.                                                                        
     - MOVED CSHJR 9(W&M) OUT OF COMMITTEE                                                                                      
HOUSE JOINT RESOLUTION NO. 26                                                                                                   
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to and limiting appropriations from and inflation-                                                                     
proofing the Alaska permanent fund by establishing a percent of                                                                 
market value spending limit.                                                                                                    
     - MOVED CSHJR 26(W&M) OUT OF COMMITTEE                                                                                     
PREVIOUS ACTION                                                                                                               
BILL: HJR 9                                                                                                                   
SHORT TITLE:CONST AM: APPROPRIATION/SPENDING LIMIT                                                                              
SPONSOR(S): REPRESENTATIVE(S)STOLTZE                                                                                            
Jrn-Date   Jrn-Page                     Action                                                                                  
01/31/03     0102       (H)        READ THE FIRST TIME -                                                                        
01/31/03     0102       (H)        STA, JUD, FIN                                                                                
01/31/03     0102       (H)        REFERRED TO STATE AFFAIRS                                                                    
02/11/03                (H)        STA AT 8:00 AM CAPITOL 102                                                                   
02/11/03                (H)        Heard & Held                                                                                 
03/28/03     0687       (H)        COSPONSOR(S): ROKEBERG                                                                       
04/04/03     0797       (H)        W&M REFERRAL ADDED BEFORE STA                                                                
04/04/03     0797       (H)        REMOVED FROM STA REFERRED TO                                                                 
04/09/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/09/03                (H)        Heard & Held                                                                                 
04/17/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/17/03                (H)        Heard & Held                                                                                 
04/24/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/24/03                (H)        Heard & Held                                                                                 
04/29/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/29/03                (H)        Heard & Held -- Location                                                                     
                                   Change --                                                                                    
04/30/03                (H)        W&M AT 8:00 AM HOUSE FINANCE                                                                 
04/30/03                (H)        Heard & Held                                                                                 
05/02/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
BILL: HJR 26                                                                                                                  
SHORT TITLE:CONST. AM: PF APPROPS/INFLATION-PROOFING                                                                            
SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT BY                                                                             
Jrn-Date   Jrn-Page                     Action                                                                                  
04/17/03     1025       (H)        READ THE FIRST TIME -                                                                        
04/17/03     1025       (H)        W&M, JUD, FIN                                                                                
04/17/03     1025       (H)        REFERRED TO WAYS & MEANS                                                                     
04/22/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/22/03                (H)        Heard & Held                                                                                 
04/24/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/24/03                (H)        Heard & Held                                                                                 
04/25/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/25/03                (H)        Heard & Held                                                                                 
04/29/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
04/29/03                (H)        Heard & Held -- Location                                                                     
                                   Change --                                                                                    
04/30/03                (H)        W&M AT 8:00 AM HOUSE FINANCE                                                                 
04/30/03                (H)        Heard & Held                                                                                 
05/02/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
WITNESS REGISTER                                                                                                              
LARRY PERSILY, Deputy Commissioner                                                                                              
Office of the Commissioner                                                                                                      
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented bar graphs as requested by the                                                                   
committee co-chairs and answered questions from the members.                                                                    
REPRESENTATIVE BILL STOLZE                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As sponsor of HJR 9 commented on the                                                                       
committee substitute and answered questions from the members.                                                                   
TAMARA COOK, Director                                                                                                           
Legislative Legal and Research Services                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided a legal opinion on proposed                                                                       
amendments to HJR 9 and answered questions from the members.                                                                    
BOB BARTHOLOMEW, Chief Operating Officer                                                                                        
Alaska Permanent Fund Corporation                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on HJR 26  and answered questions                                                               
from the members.                                                                                                               
ACTION NARRATIVE                                                                                                              
TAPE 03-21, SIDE A                                                                                                            
Number 0001                                                                                                                     
CO-CHAIR JIM WHITAKER called the  House Special Committee on Ways                                                             
and Means meeting to order  at 7:13 a.m.  Representatives Hawker,                                                               
Whitaker,  Heinze, Kohring,  Weyhrauch,  Wilson,  and Moses  were                                                               
present  at the  call  to order.    Representatives Rokeberg  and                                                               
Gruenberg   arrived    as   the   meeting   was    in   progress.                                                               
Representatives Ogg, Seaton, and Holm were also present.                                                                        
BAR GRAPH PRESENTATION ASSUMING VARIOUS BUDGET SCENARIOS                                                                        
Number 0143                                                                                                                     
LARRY PERSILY,  Deputy Commissioner, Office of  the Commissioner,                                                               
Department of  Revenue, presented  bar graphs  at the  request of                                                               
the  committee   co-chairs,  and  answered  questions   from  the                                                               
members.   The  first graph,  titled "CBRF  End-of-Year Balance",                                                               
was  developed  with the  assumption  that  there  would be  a  5                                                               
percent  of market  value [POMV]  distribution  of the  permanent                                                               
fund  starting  in  FY  06,  which would  come  after  a  general                                                               
election vote  of the public  in November of 2004,  he explained.                                                               
This graph  also assumes that the  sales tax [HB 293]  would pass                                                               
[the legislature  and be  signed into law  by the  governor], and                                                               
that there has  been a full fiscal year in  which $300 million in                                                               
sales tax revenue  has been brought in.   Furthermore, this graph                                                               
also assumes  the passage of  Representative Rokeberg's  bill, HB                                                               
11, which  reduces the royalty  deposits into the  permanent fund                                                               
to the constitutional level of 25 percent.                                                                                      
Number 0324                                                                                                                     
CO-CHAIR  WHITAKER interjected  that  it  is extremely  important                                                               
that the members understand that  this first bar graph shows that                                                               
without  an  annual sales  tax  or  other revenue  measures,  the                                                               
beginning bar graph will be significantly less.                                                                                 
MR. PERSILY added that the budget  base would be zero if no other                                                               
revenue measures pass [the legislature].   He went on to say that                                                               
in  the spring  of  2003, revenue  forecasts  predicted that  the                                                               
state  would  be out  of  money  in FY  06.    However, with  the                                                               
assumptions that were given for  this chart, it shows [the state]                                                               
starting  with  $1  billion in  the  CBR  [Constitutional  Budget                                                               
Reserve] rather than zero.   Those assumptions are the reason the                                                               
FY 06 CBR balance could be $1 billion.                                                                                          
CO-CHAIR WHITAKER commented  that the situation is  not as "rosy"                                                               
as it appears.   It is only  as reasonable as it  appears [on the                                                               
graph]  because  there  is  the  assumption  that  some  type  of                                                               
significant  revenue measure  has  passed  [the legislature,  the                                                               
governor has  signed it into  law] and thus it  is in place.   He                                                               
noted that the graph also assumes that HB 11 has become law.                                                                    
Number 0456                                                                                                                     
MR.  PERSILY added  that there  is also  the assumption  that the                                                               
POMV [constitutional  amendment in  HJR 26]  has been  put before                                                               
the  voters and  passed.   The  resolution would  allow  for a  5                                                               
percent  distribution of  the [percent  of] market  value of  the                                                               
fund.  The  assumption is that it would pass  in November of 2004                                                               
and that revenue  would be received by FY 06.   He explained that                                                               
the first  chart shows the end  of year balance of  the CBR under                                                               
three  different  distribution  scenarios  of the  5  percent  of                                                               
market  value.   The  first  option  [shown  in] the  tan  column                                                               
distributes  60 percent  to dividends  and 40  percent to  public                                                               
services.   That  option shows  a much  more rapid  decline to  a                                                               
negative on the CBR end-of-year  balance.  The next option, shown                                                               
in yellow,  is the 50  percent for  dividends and 50  percent for                                                               
public services; and  the final option, shown in blue,  is the 40                                                               
percent  to dividends  and 60  percent to  public services.   Mr.                                                               
Persily  pointed out  that  the higher  the  percentage from  the                                                               
permanent fund distribution that is  put into public service, the                                                               
healthier the CBR balance remains.                                                                                              
CO-CHAIR HAWKER  asked Mr. Persily  to explain the third  line of                                                               
the  chart, [which  says (Assumes  House  FY 2004  budget as  the                                                               
base, with no spending increase and no other new taxes)].                                                                       
MR. PERSILY  responded that the  other premise which was  used in                                                               
developing the chart  is that there had to be  some assumption of                                                               
what  spending would  be.   The  Department of  Revenue took  the                                                               
House FY 2004 budget, that has  already been adopted, and used it                                                               
as the base  with the assumption that there will  be no other new                                                               
taxes, other  the $300 million  broad based [sales] tax  that the                                                               
department was  told to insert.   For the purposes of  this chart                                                               
the department  assumed no  spending increases.   This is  a flat                                                               
$2.5  billion general  fund  budget.   He  pointed  out that  the                                                               
members  could look  at  this chart  and see  that  if there  are                                                               
additional spending  needs, that [appropriation] will  reduce the                                                               
CBR balance or a cut [in the budget] would increase the balance.                                                                
Number 0651                                                                                                                     
REPRESENTATIVE WILSON  asked Mr.  Persily what percent  of market                                                               
value has been used for the dividends in the past five years.                                                                   
Number 0713                                                                                                                     
MR. PERSILY asked if she wanted  him to take the current dividend                                                               
distribution and convert  it to what percent of  market value has                                                               
been  used  in  [the]  past  [five]  years.    To  Representative                                                               
Wilson's  positive response,  he  said he  believes  it has  been                                                               
about 4 percent or 80 percent of the 5 percent distribution.                                                                    
REPRESENTATIVE WILSON  asked if  there is  any correlation  as to                                                               
how the  permanent fund dividend  is currently  being distributed                                                               
in the three different scenarios [presented in the chart].                                                                      
MR. PERSILY  responded that there  is no correlation.   The three                                                               
scenarios that  are presented are  those that the  department was                                                               
asked to chart out.  He  pointed out that according to this chart                                                               
the [legislature]  cannot afford  to give  more to  dividends and                                                               
still have  enough to pay for  public services.  He  also offered                                                               
that politically [the legislature] also  could not afford to give                                                               
less to dividends.  He suggested  that the range will probably be                                                               
40-60 percent.                                                                                                                  
CO-CHAIR WHITAKER  announced for the record  that Representatives                                                               
Gruenberg and Rokeberg had joined the committee.                                                                                
MR.  PERSILY  asked the  members  to  look  at the  second  chart                                                               
[titled   "CBRF  End-of-Year   Balance"]   that   has  the   same                                                               
assumptions in  terms of  starting points for  the budget:   $300                                                               
million  in  taxes,  the  5   percent  permanent  fund  endowment                                                               
distribution [POMV],  and the passage  of HB 11.   The difference                                                               
this chart shows  is what happens to the CBR  balance if there is                                                               
a 2 percent spending increase factored  in each year.  He pointed                                                               
out that a  constant spending increase does  seriously affect the                                                               
CBR balance.                                                                                                                    
Number 0857                                                                                                                     
CO-CHAIR  HAWKER  pointed  out  the difference  between  the  two                                                               
graphs.  In looking at the  first one, the situation is such that                                                               
the  legislature   has  exercised   the  discipline   to  control                                                               
spending.    Chart  2  is a  modeling  component  that  increases                                                               
spending cumulatively  2 percent per  year.  In the  recent past,                                                               
the legislature  has had the discipline  not to spend.   The real                                                               
purpose  of the  two charts  is  to emphasize  the importance  of                                                               
[spending]  discipline.   If the  legislature does  exercise that                                                               
latitude  and increase  [spending] 2  percent cumulatively  every                                                               
year, there is a significant  [impact] such a decision would have                                                               
on  how quickly  the  CBR  funds would  be  exhausted.   Co-Chair                                                               
Hawker  reiterated his  comments by  saying that  the two  charts                                                               
demonstrate the  difference between  the legislature's  action in                                                               
adding 2 percent or holding the [spending] steady.                                                                              
REPRESENTATIVE  WILSON   commented  that  [2   percent  increased                                                               
spending] is  not even  keeping up with  inflation.   She pointed                                                               
out  that the  legislature  is really  "going  backwards" in  the                                                               
amount of money actually being spent,  and the budget is still in                                                               
Number 1052                                                                                                                     
REPRESENTATIVE GRUENBERG  asked what the  affect would be  if the                                                               
legislature  used the  first model  and  implemented no  spending                                                               
increases, given the  current rate of inflation.   He inquired as                                                               
to the effective decrease in today's dollars.                                                                                   
MR. PERSILY responded  that the permanent fund assumes  about a 3                                                               
percent rate of inflation, although the state is below that now.                                                                
REPRESENTATIVE GRUENBERG interjected that it  would be about a 36                                                               
percent reduction in today's dollars.                                                                                           
Number 1201                                                                                                                     
MR.  PERSILY replied  that argument  could be  made if  the state                                                               
loses 3 percent per year to inflation.                                                                                          
CO-CHAIR  WHITAKER commented  that  Representative Gruenberg  has                                                               
made his  point, but  that there  is a  counter argument  to that                                                               
MR. PERSILY agreed  that that is a counter argument.   He went on                                                               
to  say  that  assuming  there is  inflation  and  assuming  that                                                               
spending  is held  flat,  something  has to  give.    It will  be                                                               
necessary  to  cut  expenses  if  dealing  with  an  inflationary                                                               
increase.   On  the other  hand,  if the  legislature decides  to                                                               
increase  spending  it is  important  to  know  that it  will  be                                                               
necessary to find revenue to pay for the increases.                                                                             
CO-CHAIR WHITAKER told  the members that is a good  point to lead                                                               
back to  the basic assumptions  that the members  are discussing.                                                               
Even with the following basic  assumptions:  the POMV method will                                                               
be used,  a $300 million  tax of  some sort will  be implemented,                                                               
and HB 11 will pass,  there still are significant challenges with                                                               
regard to future budgets.                                                                                                       
Number 1256                                                                                                                     
MR. PERSILY commented  that if the legislature  decides there are                                                               
additional  needs,  then  it  will   be  necessary  to  look  for                                                               
additional revenue.                                                                                                             
MR. PERSILY  asked the members  to look  at the next  two charts,                                                               
titled "Amount  Available for Public  Services" and  "Annual Per-                                                               
Capita  Dividend  Under  POMV  Sharing,"  which  show  the  three                                                               
percentage  options  of  how  much  is  available  each  year  in                                                               
hundreds of millions  of dollars.  The first  chart shows options                                                               
for  public  services and  what  share  of  that 5  percent  POMV                                                               
distribution  could be  used to  pay for  those public  services.                                                               
The next chart  shows the estimated per capita  dividend based on                                                               
three  percentage  options.   These  [estimates]  assume that  in                                                               
November of 2004  the voters pass a  constitutional amendment for                                                               
5  percent of  POMV  and  that in  this  session the  legislature                                                               
passes and the  governor signs HB 11.  He  pointed out that these                                                               
models are  obvious in that the  more money held back  for public                                                               
services, the  lower the dividend  will be, the more  money given                                                               
to the dividend, less money will  be available for services.  Mr.                                                               
Persily commented  that it is a  set pot, so the  question is how                                                               
to divide it.                                                                                                                   
MR. PERSILY said the next  chart provides actual dollars from the                                                               
data from  previous charts.   These include the  amount available                                                               
for  public  services, the  dividend  [amount  per capita],  flat                                                               
budget  figures, 2  percent increase  [to  the budget],  and a  3                                                               
percent increase [to the budget].                                                                                               
MR. PERSILY  directed attention to  the last chart  titled "State                                                               
Expenditures  with  Constitutional  Spending  Limit  HJR  9"  [2%                                                               
Annual  Budget Increase].   He  turned  to the  question of  what                                                               
would be the total state spending  number for FY 04, under HJR 9,                                                               
that will become the base for  FY 06.  The department worked with                                                               
the Office of  Management & Budget and began  with the governor's                                                               
amended FY 04  [budget] total statewide funds.  As  per HJR 9 the                                                               
department  subtracted  appropriations   to  the  permanent  fund                                                               
dividend,  operations,  the  Disaster Relief  Fund,  the  general                                                               
obligation revenue bond proceeds,  the debt service payments, the                                                               
federal  receipts,  and the  interagency  transfers  of the  same                                                               
dollars.  Mr.  Persily announced that the total  state funds that                                                               
would  be  subject to  the  spending  limit  in  HJR 9  is  $3.19                                                               
billion.  If starting with the $3  billion as a base in FY 06 and                                                               
if the  legislature increases spending  2 percent per  year, this                                                               
chart shows where spending will be in FY 12, he said.                                                                           
Number 1620                                                                                                                     
CO-CHAIR HAWKER  reemphasized Mr. Persily's last  point that this                                                               
charts shows state expenditures if there  is a 2 percent per year                                                               
increase  in  spending.    He   noted  that  this  chart  is  for                                                               
discussion purposes, and not a  plan that is being recommended as                                                               
the appropriate way to go.                                                                                                      
MR.  PERSILY agreed  with  Co-Chair Hawker  that  this chart  was                                                               
graphed to show  a continuing trend.  He said  then there are the                                                               
questions of what  is inflation; what is  population growth; what                                                               
is  the public  service need;  and of  course, what  are the  two                                                               
constraints - the political will  to spend and the cash available                                                               
to spend.                                                                                                                       
HJR  9-CONST AM: APPROPRIATION/SPENDING LIMIT                                                                                 
Number 1737                                                                                                                     
CO-CHAIR  WHITAKER announced  that  the first  order of  business                                                               
would be  HOUSE JOINT RESOLUTION  NO. 9, Proposing  amendments to                                                               
the  Constitution  of   the  State  of  Alaska   relating  to  an                                                               
appropriation limit  and a spending limit.   [Contains discussion                                                               
of HB 11]                                                                                                                       
CO-CHAIR  WHITAKER  announced  that  CS  for  HJR  9  (W&M),  23-                                                               
LS0435\D, Cook, 4/30/04,  is before the committee.   He asked the                                                               
members  to  look  at  the last  chart  reviewed  [titled  "State                                                               
Expenditures with Constitutional Spending  Limit HJR 9, 2% Annual                                                               
Budget Increase"], where  a 2 percent increase  requires a simple                                                               
majority  vote.   If  the legislature  chooses  to exercise  that                                                               
option, then he  asked members to look at the  chart titled "CBRF                                                               
End-of-Year Balance" [second chart  in the packet], which assumes                                                               
a  2 percent  spending  increase  and no  other  new  taxes.   He                                                               
pointed out that  this chart shows what happens to  the CBR given                                                               
an  annual 2  percent increase  in spending.   Co-Chair  Whitaker                                                               
asked the  members to  compare this  chart to  the chart  that is                                                               
being handed  out [titled "CBRF  End-of-Year Balance,  Assumes 5%                                                               
POMV,  $300 Million  Annual Sales  Tax,  and Passage  of HB  11",                                                               
(Assumes House  FY 2004 budget  as the  base, with a  3% spending                                                               
increase and no other new taxes)]  and note what happens when the                                                               
legislature spends 3 percent.   Although 3 percent does not sound                                                               
like much,  this chart  shows what happens  very quickly  [to the                                                               
CBR].   Co-Chair Whitaker urged the  members to keep in  mind the                                                               
assumptions upon  which this discussion  is based -  $300 million                                                               
of new taxes and HB 11 having been in place a year and a half.                                                                  
Number 1919                                                                                                                     
REPRESENTATIVE  GRUENBERG  told the  members  that  there is  one                                                               
other factor  that has not  been discussed.   That factor  is the                                                               
affect  of   required  federal  programs  and   unfunded  federal                                                               
mandates  or  federal programs  that  continue  with the  federal                                                               
dollars going away after a period of  time.  He also said that it                                                               
would be  important to consider  the "Stevens'" factor,  which is                                                               
what happens when  Senator Stevens is no longer in  Congress.  He                                                               
asked  if Mr.  Persily  would  comment on  any  or  all of  those                                                               
MR.  PERSILY said  if  he  understood Representative  Gruenberg's                                                               
point  correctly  in  referring to  the  constitutional  spending                                                               
limit  [HJR  9],  federal  funds   are  exempted  from  the  cap.                                                               
However, it would  be a difficulat situation  for the legislature                                                               
if a program  that previously received federal funds  did not, in                                                               
a subsequent,  year.  He noted  that there are escape  clauses in                                                               
that  a  two-thirds  vote  [of   the  legislature]  can  increase                                                               
[spending]  an additional  2 percent,  and a  three-quarters vote                                                               
[of the legislature] can increase [spending] another 2 percent.                                                                 
Number 2030                                                                                                                     
REPRESENTATIVE GRUENBERG clarified his  question by asking if the                                                               
Department of Revenue can estimate  the impact that would have on                                                               
this chart.                                                                                                                     
MR. PERSILY  asked Representative Gruenberg which  chart would he                                                               
prefer he use.                                                                                                                  
CO-CHAIR WHITAKER noted that the  committee recognizes that there                                                               
is  a factor  there; this  is only  an estimate  and it  would be                                                               
difficult to quantify.                                                                                                          
MR. PERSILY  responded that he  really could  not guess.   Of the                                                               
federal  money that  comes  to Alaska,  much of  it  goes out  in                                                               
grants and  federal payroll and  a significant amount  of federal                                                               
money  is earmarked  for transportation  projects.   Mr.  Persily                                                               
said he  could not  estimate how  much money  that goes  into the                                                               
operating  budget might  have to  be replaced  by [general  fund]                                                               
money if the  federal money stopped [coming in], or  how much the                                                               
legislature might want to replace  as opposed to just letting the                                                               
programs go  away.  Common sense  says that if the  federal money                                                               
is cut  back, the state would  definitely end up with  some holes                                                               
in its budget, he said.                                                                                                         
Number 2226                                                                                                                     
REPRESENTATIVE   OGG  asked   if   these  calculations   included                                                               
consideration  for  economic  growth,   a  flat  economy,  or  an                                                               
economic decline.                                                                                                               
MR.  PERSILY  replied  that  those  factors  were  omitted.    He                                                               
explained that he  was thinking with a fiscal  note mentally when                                                               
making up  the charts.   He  explained that  fiscal notes  do not                                                               
factor  in  growth or  inflation,  they  are  flat lined.    This                                                               
assumes that a $300 million broad based  tax in FY 06 is going to                                                               
generate $300 million  in tax revenue in FY 12.   He advised that                                                               
the  Department of  Revenue will  make up  another set  of graphs                                                               
assuming  some  reasonable  growth   factor.    Looking  at  this                                                               
cumulatively, for example,  if there were $300  million in annual                                                               
broad  based  tax  revenues  starting   in  FY  06  and  if  with                                                               
inflation, population  growth, and economic development  it could                                                               
be increased  3 percent per  year, the cumulative result  by 2012                                                               
would be an additional $200  million.  Mr. Persily commented that                                                               
factoring that in can be a significant gain.                                                                                    
Number 2336                                                                                                                     
CO-CHAIR WHITAKER  asked if a  growth factor was included  in the                                                               
POMV.  He  also asked if there was growth  factor included in the                                                               
$300 million  in taxes.   In response  to Mr.  Persily's negative                                                               
response, he asked if the  same assumptions were used with regard                                                               
to growth  on [tax revenues],  what would the  cumulative numbers                                                               
MR. PERSILY replied  that by FY 12 it would  be cumulatively $200                                                               
million in additional revenue for the CBR.                                                                                      
CO-CHAIR  HAWKER  commented that  in  not  including the  [growth                                                               
factor] in  some ways  it mitigates  not including  the inflation                                                               
factor in the base general fund.                                                                                                
Number 2415                                                                                                                     
MR. PERSILY  pointed out that the  State of Alaska does  not have                                                               
any revenue source  that grows with economic activity.   If there                                                               
were a broad base  [tax], whether it is a sales  tax or an income                                                               
tax,  hopefully there  would  be increased  revenue  to meet  the                                                               
increased  needs as  the population  grows, inflation  grows, and                                                               
the demand for services increases.   Although there would be some                                                               
growth in revenue,  it certainly would not be enough  to cover it                                                               
all, he said.                                                                                                                   
REPRESENTATIVE OGG  asked if there  is economic growth  factor in                                                               
the HB 11 option.                                                                                                               
MR. PERSILY  explained that HB 11  is a function of  the price of                                                               
oil and how much oil is pumped  out of the ground.  These numbers                                                               
are  based on  the spring  of FY  03 revenue  oil forecast  which                                                               
[assumes]  a  long-term  oil  price   of  $22  [per  barrel]  and                                                               
production holding steady at about 1 million barrels per day.                                                                   
REPRESENTATIVE OGG  asked if there  is a growth  factor [included                                                               
in the forecast].                                                                                                               
MR.  PERSILY   replied  no  growth  factor   would  be  included.                                                               
However, if  there were additional discoveries  that number would                                                               
CO-CHAIR  WHITAKER pointed  out  that that  number will  increase                                                               
sometime in the future, perhaps even before 2012.                                                                               
Number 2540                                                                                                                     
REPRESENTATIVE HEINZE  asked Mr. Persily  to give the  members an                                                               
idea how this  picture would look without the  $300 million sales                                                               
tax.  What would the impact be on either chart, she asked.                                                                      
MR. PERSILY highlighted  that the first chart  uses the following                                                               
assumptions:   no spending increase,  no sales tax revenue  in FY                                                               
04 of  about $125  million because  it is a  fraction of  a year.                                                               
Under the aforementioned  scenario, the state would  not get $300                                                               
million per year in  FY 05 through FY 12, so  there would be $2.5                                                               
billion less  revenue.  If  the $300  million broad base  tax did                                                               
not exist  and in  FY 12  the legislature put  60 percent  of the                                                               
permanent fund  distribution into public services  and 40 percent                                                               
into dividends, the CBRF would be  more than a billion dollars in                                                               
the hole  instead of ending  FY 12 with a  $1 billion and  a half                                                               
[in  the CBRF].   It  would  make a  significant difference,  Mr.                                                               
Persily commented.                                                                                                              
Number 2703                                                                                                                     
REPRESENTATIVE ROKEBERG  said he wanted to  correct one statement                                                               
made by  Mr. Persily.   He  said Mr.  Persily forgot  to indicate                                                               
that  oil and  gas production  growth  does have  a positive  tax                                                               
REPRESENTATIVE  ROKEBERG asked  if there  is any  way to  display                                                               
these same types of graphics  showing the current situation in FY                                                               
03 or FY 04.  What he would  like to see, he said, is a base line                                                               
start because it would show the  impacts of no action on the CBRF                                                               
and the spending  lines would be used as starting  points.  Also,                                                               
as Representative  Heinze asked, it  would be interesting  to see                                                               
the  impacts  of  HB 11  or  the  lack  of  that component.    He                                                               
commented  that he  is not  shilling for  HB 11,  but he  said he                                                               
believes  that  a chart  would  show  the failure  or  cumulative                                                               
impact  in 10  years.   There  would either  be  no dividends  or                                                               
decreased dividends.   This would  show the  long-term cumulative                                                               
affect of a small component as  well as help to make judgments as                                                               
to   the  importance   of   taxation   and  spending   variables.                                                               
Representative Rokeberg said  another chart he would  like to see                                                               
is a 1 percent decrease in spending.                                                                                            
Number 2936                                                                                                                     
CO-CHAIR HAWKER  responded that those  charts will be  before the                                                               
committee tomorrow.                                                                                                             
REPRESENTATIVE  HOLM  questioned   whether  the  legislature  has                                                               
considered  reducing  spending  and  whether  the  administration                                                               
plans some kind of reduction in spending.                                                                                       
CO-CHAIR WHITAKER commented that  is certainly something that the                                                               
legislature can  do.  The  legislature has reduced the  budget in                                                               
the past and can certainly do it again.                                                                                         
REPRESENTATIVE  GRUENBERG  surmised  that the  charts  take  into                                                               
consideration that  as the CBR goes  down it will earn  less, and                                                               
therefore there will be some kind of geometric affect.                                                                          
MR. PERSILY responded that is  correct.  These charts assume that                                                               
whatever balance is in the  CBR generates investment earnings and                                                               
[those earnings]  are put  back in for  appropriation.   The less                                                               
money in  the CBR, the less  it earns, and the  less is available                                                               
for appropriation.                                                                                                              
Number 3147                                                                                                                     
REPRESENTATIVE BILL STOLZE, Alaska  State Legislature, as sponsor                                                               
of  HJR 9,  commented on  the committee  substitute and  answered                                                               
questions from the members.   He observed that the CS liberalizes                                                               
the constitutional  spending limit significantly.   It allows for                                                               
three times the increases that  the original resolution proposed.                                                               
He asked  why a section  was taken  out that would  have directed                                                               
the  governor to  make necessary  reductions  in expenditures  to                                                               
meet the  spending limit.   He  said he was  not involved  in the                                                               
process [of writing the CS].                                                                                                    
CO-CHAIR  WHITAKER responded  that  the section  that would  have                                                               
required   the  governor   to   make   necessary  reductions   in                                                               
expenditures to  meet the spending  limit was removed  because of                                                               
concerns that the governor would  be constrained and left without                                                               
the option of  spending in a manner deemed appropriate.   He said                                                               
there was  the recognition  that there  would be  consequences to                                                               
that change in terms of budgets ramifications.                                                                                  
REPRESENTATIVE STOLTZE  said he  wanted it  noted on  record that                                                               
this is the Co-Chair's choice, and not his.                                                                                     
Number 3344                                                                                                                     
REPRESENTATIVE GRUENBERG,  commenting as a lawyer,  remarked that                                                               
the language  on page 2,  Section 16(c), lines 17-21,  would have                                                               
resulted  in allowing  the governor  to  reduce expenditures  and                                                               
divest  the  legislature  of  the  authority  to  override  those                                                               
vetoes.  He asked if that was Representative Stoltze's intent.                                                                  
REPRESENTATIVE STOLTZE replied that  he believed the language was                                                               
clear and  that [his intent] was  that he wanted the  governor to                                                               
comply with the spending limit.                                                                                                 
REPRESENTATIVE GRUENBERG  reiterated his belief that  a lawyer or                                                               
judge  would  interpret the  language  to  mean that  it  clearly                                                               
divests the legislature of any participation in the process.                                                                    
REPRESENTATIVE  STOLTZE clarified  that his  intent was  that the                                                               
legislature  pass  the  budget.   The  governor  could  call  the                                                               
legislature back  into session,  or the legislature  could demand                                                               
to come back into session with  the requisite number of votes, he                                                               
said.   Representative Stolze said  he does not believe  there is                                                               
an abrogation [of powers].                                                                                                      
Number 3557                                                                                                                     
REPRESENTATIVE ROKEBERG moved to  adopt a conceptual amendment to                                                               
CSHJR 9, Version H.  He  said the amendment would remove language                                                               
on page 2, lines 11-16.                                                                                                         
REPRESENTATIVE ROKEBERG objected for purposes of discussion.                                                                    
REPRESENTATIVE  ROKEBERG  explained   the  current  [work]  draft                                                               
allows  for  three  incremental  increases of  2  percent.    The                                                               
proposed amendment would eliminate the  second level of 2 percent                                                               
increase  and a  two-thirds vote  of each  house.   Therefore, it                                                               
would  limit the  cap  to 4  percent with  a  standard 2  percent                                                               
increase and would require a  three-quarter vote for any increase                                                               
in the budget.   Representative Rokeberg said that  the 6 percent                                                               
increase annually  really does not  look like much of  a spending                                                               
cap to him, and that is the rationale for this amendment.                                                                       
CO-CHAIR WHITAKER  stated that  Conceptual Amendment  1 to  HJR 9                                                               
would delete subsection (b), page 2, lines 10-16.                                                                               
Number 3721                                                                                                                     
REPRESENTATIVE GRUENBERG objected.                                                                                              
REPRESENTATIVE WILSON  said that  she really  has a  problem with                                                               
this amendment  because in thinking  realistically of  the future                                                               
of  the  state  she  sees  many problems,  such  as  the  teacher                                                               
shortage.  This  is a crisis situation and she  predicted that in                                                               
order to attract teachers it  will be necessary to increase their                                                               
pay.   Representative Wilson  said that  if the  legislature puts                                                               
itself in too tight  of a box, the state will  be in big trouble.                                                               
She emphasized that the legislature  needs to think realistically                                                               
and face the future.                                                                                                            
REPRESENTATIVE KOHRING  asked for  the sponsor's reaction  to the                                                               
Conceptual Amendment 1.                                                                                                         
REPRESENTATIVE STOLTZE responded that  it is an improvement [from                                                               
the committee substitute].                                                                                                      
A  roll   call  vote  was  taken.     Representatives  Weyhrauch,                                                               
Rokeberg, Kohring,  Heinze, Whitaker,  and Hawker voted  in favor                                                               
of  Conceptual Amendment  1.   Representatives Moses,  Gruenberg,                                                               
and Wilson voted  against it.  Therefore,  Conceptual Amendment 1                                                               
passed by a vote of 6-3.                                                                                                        
Number 3921                                                                                                                     
CO-CHAIR HAWKER  moved Amendment 2 [23-LS0435\H.1,  Cook, 5/1/03]                                                               
which read as follows:                                                                                                          
     Page 2, line 16, following "made":                                                                                         
          Insert ", excluding appropriations listed in                                                                          
     (a)(1) - (10) of this section"                                                                                             
     Page 2, line 22, following "made":                                                                                         
          Insert ", excluding appropriations listed in                                                                          
     (a)(1) - (10) of this section"                                                                                             
Number 3934                                                                                                                     
CO-CHAIR  WHITAKER  objected  and  noted  that  Amendment  2  was                                                               
developed  by  Legislative  Legal  and  Research  Services.    He                                                               
explained  that Amendment  2 clarifies  that  if the  legislature                                                               
does  obtain the  supermajority level  for expenditures,  it does                                                               
not become part of the base for future appropriations.                                                                          
REPRESENTATIVE WILSON asked for further explanation of the bill.                                                                
CO-CHAIR HAWKER  told the  members that this  Amendment 2  adds a                                                               
line on page 2, line 22, at  the end of the paragraph, which says                                                               
if  the  legislature  makes an  appropriation  that  exceeds  the                                                               
amount allowable  under this [constitutional] amendment,  it will                                                               
require three-quarters  of each  house of  the legislature  to do                                                               
it; [Amendment  2] makes  it very  clear that  the amount  of the                                                               
appropriation may not  exceed 2 percent.  The 2  percent is based                                                               
on the  amount appropriated  in the  two fiscals  years preceding                                                               
the years for which the appropriations  are made.  That 2 percent                                                               
does not apply  to those exceptional items in  Section 16 (a)(1)-                                                               
(10), on  page 1,  lines 10-16  and page  2, lines  1-10.   It is                                                               
strictly  a  2 percent  increment  based  on  the base  level  of                                                               
government expenditures.   This  would not include  the permanent                                                               
fund  distributions, disaster  response, general  obligation bond                                                               
issues, reappropriation money, and all  the other items listed in                                                               
(1)-(10).   This amendment would clearly  restrict the overriding                                                               
capacity  of   the  legislature  to   the  base  amount   in  the                                                               
constitutional amendment.                                                                                                       
The committee took an at-ease from 7:55 to 7:56 a.m.                                                                            
Number 4300                                                                                                                     
CO-CHAIR WHITAKER withdrew  his objection to Amendment  2.  There                                                               
being no objection, Amendment 2 was adopted.                                                                                    
Number 4351                                                                                                                     
REPRESENTATIVE  ROKEBERG  proposed Amendment  3.    He asked  the                                                               
members to  look at  Version A  of HJR 9,  which is  the original                                                               
version of  the bill as  offered by the sponsor.   Representative                                                               
Rokeberg explained  that on  page 2,  lines 17-21,  the provision                                                               
that  the sponsor  talked  about with  respect  to directing  the                                                               
governor to  make a cut in  funding if the legislature  failed to                                                               
do  so, should  be reinserted.   He  said that  he would  like to                                                               
insert  that   language  in   as  subsection   (c)  on   page  2.                                                               
Representative Rokeberg read [subsection  (c) of Version A] which                                                               
said:   "(c)  If  appropriations  for a  fiscal  year exceed  the                                                               
amount  that  may be  appropriated  under  (a)  and (b)  of  this                                                               
section, the governor shall reduce  expenditures by the executive                                                               
branch  for  its  operation  and  administration  to  the  extent                                                               
necessary  to avoid  spending more  than the  amount that  may be                                                               
appropriated under  (a) and (b)  of this section."   He commented                                                               
that this was  excised from the original resolution  and he would                                                               
like to reinsert this language.                                                                                                 
Number 4614                                                                                                                     
REPRESENTATIVE ROKEBERG moved Amendment 3 as follows:                                                                           
     On page 2, line 17,                                                                                                        
     Insert the following:                                                                                                      
     "(c)  If appropriations  for a  fiscal year  exceed the                                                                
     amount that  may be appropriated  under (a) and  (b) of                                                                
     this  section, the  governor shall  reduce expenditures                                                                
     by  the   executive  branch   for  its   operation  and                                                                
     administration  to   the  extent  necessary   to  avoid                                                                
     spending more than the amount  that may be appropriated                                                                
     under (a) and (b) of this section."                                                                                    
REPRESENTATIVE GRUENBERG objected.                                                                                              
TAPE 03-21, SIDE B                                                                                                            
Number 4650                                                                                                                     
REPRESENTATIVE  GRUENBERG told  the members  he is  not sure  how                                                               
this  amendment  would  work,  and would  have  no  objection  to                                                               
Amendment 3;  however, he sees  two different ways  this language                                                               
could  be  interpreted.    For example,  the  language  could  be                                                               
interpreted  to  mean  that  even  though  $1  million  has  been                                                               
appropriated  for the  Alaska Department  of Fish  and Game,  the                                                               
governor  does not  need  to spend  all of  that  money and  [the                                                               
administration] should make its best efforts  not to do so.  This                                                               
language  could  also   be  interpreted  to  mean   that  if  the                                                               
legislature appropriated  too much  money under  the Constitution                                                               
[under   this   amendment],   the   governor   could   veto   the                                                               
appropriations  bill and  the legislature  would constitutionally                                                               
have no  power to override  that veto.   Representative Gruenberg                                                               
highlighted the  legal importance  of knowing  the intent  of the                                                               
amendment.  It has got to be  clear in the language, he said, and                                                               
asked for the intent of this language.                                                                                          
REPRESENTATIVE  STOLTZE commented  that  he would  have a  better                                                               
appreciation for  the members' concerns  about passing  powers to                                                               
the governor if Representative Gruenberg  had not voted for a $20                                                               
million  unallocated reduction  for  the governor  to  make as  a                                                               
budget amendment.                                                                                                               
Number 4354                                                                                                                     
REPRESENTATIVE  ROKEBERG  agreed  that  Representative  Gruenberg                                                               
raised  a very  good and  interesting point  with respect  to the                                                               
amendment and the issue of constitutional separation of powers.                                                                 
REPRESENTATIVE  GRUENBERG  reiterated  that   he  would  have  no                                                               
problem   with  Amendment   3  if   the  intent   is  the   first                                                               
interpretation of the amendment.                                                                                                
REPRESENTATIVE  ROKEBERG   commented  that  there  may   be  some                                                               
ambiguity  in  the amendment  and  would  like to  get  counsel's                                                               
opinion on this issue.                                                                                                          
CO-CHAIR  HAWKER  responded  that  he   does  not  have  a  legal                                                               
background so his  approach is the doctrine of common  sense.  If                                                               
the  purpose  of  [HJR  9]  is  as stated  on  page  1,  line  6,                                                               
"Appropriations made  for a fiscal  year shall not  exceed", [the                                                               
word] "shall"  seems to be an  imperative.  He asked  the members                                                               
to  look at  the  proposed additional  language  which says,  "If                                                               
appropriations  exceed".    There  seems to  be  a  contradiction                                                               
within the amendment itself, he  commented.  Co-Chair Hawker said                                                               
that with  all due  respect, this  is a  constitutional amendment                                                               
proposition  and it  appears  that this  language  would build  a                                                               
conundrum into the Constitution.                                                                                                
Number 4214                                                                                                                     
REPRESENTATIVE  ROKEBERG  responded   that  everyone  knows  that                                                               
because  of supplemental  appropriations [the  budget can  exceed                                                               
the  spending  limit].    The  other factor  is  if  there  is  a                                                               
legislature or governor that is  predisposed to [increase] rather                                                               
than  decrease  spending,  there  could   be  the  problem  of  a                                                               
constitutional challenge.  He said  he looks at this amendment as                                                               
a further check on that separation of  powers.  He went on to say                                                               
that the  ability of the  legislature to  override by veto  is an                                                               
important question.                                                                                                             
CO-CHAIR  WHITAKER  pointed  out   that  the  next  committee  of                                                               
referral  is  the House  Judiciary  Standing  Committee where  he                                                               
believes that issue will be discussed at great length.                                                                          
Number 4052                                                                                                                     
REPRESENTATIVE  SEATON told  the members  that he  believes there                                                               
are constraints put  on the legislature that  prevent the members                                                               
from living  up to  this matter  in the  amount spent  on capital                                                               
expenditures.   He noted that  he is  in favor of  this amendment                                                               
because it  inserts a  dual requirement  that if  the legislature                                                               
does not appropriate the way  the Constitution says, which is now                                                               
the case with  the capital budget, then the  governor is directed                                                               
to  make these  changes.   Representative  Seaton summarized  his                                                               
comments by saying he thinks the amendment is appropriate.                                                                      
REPRESENTATIVE  GRUENBERG  commented   that  his  question  still                                                               
remains  unanswered,  and asked  if  Ms.  Cook would  provide  an                                                               
Number 4003                                                                                                                     
TAMARA COOK,  Director, Legislative Legal and  Research Services,                                                               
Alaska State Legislature,  provided a legal opinion on  HJR 9 and                                                               
proposed  amendments, and  answered questions  from the  members.                                                               
Ms. Cook asked if Representative  Gruenberg's question is whether                                                               
the  legislature  would retain  veto  power  if the  language  in                                                               
subsection  (c)  from  the  original  bill  is  reinserted.    In                                                               
response to Representative  Gruenberg's affirmative response, she                                                               
commented  that  everyone  who  has touched  upon  the  issue  is                                                               
correct, this  is an issue  that needs to  be addressed.   If the                                                               
issue is  not addressed  she believes  the legislature  would not                                                               
have veto  power because  the override  power applies  to vetoes.                                                               
This is clearly  not a veto; it is direction  to the governor not                                                               
to spend money that has, in fact, been appropriated.                                                                            
MS.  COOK  told  the  members  that she  does  not  know  of  any                                                               
mechanism in the Constitution whereby  the legislature can veto a                                                               
decision  of the  [governor] not  to  spend money  that has  been                                                               
appropriated.   She  pointed out  that the  Sheffield case  dealt                                                               
with that situation  with the North Star Borough.   In that case,                                                               
then-Governor  Bill  Sheffield  ordered a  reduction  in  certain                                                               
expenditures due to  the state facing a decrease  in revenues and                                                               
a budget  that was not  balanced.  The time  for him to  veto the                                                               
appropriation  had long  since expired.   He  was not  vetoing an                                                               
appropriation in the  sense that the legislature  would then have                                                               
something to  override.   He was  directing the  executive branch                                                               
[of  government] not  to  spend  money that  had,  in fact,  been                                                               
appropriated, she  said.  That  [action] resulted  in litigation.                                                               
She  pointed  out  that  the  reductions  by  [the  then-Governor                                                               
Sheffield] were  overturned in court.   The legislature responded                                                               
by  coming  back into  session  and  ratifying those  reductions.                                                               
Ultimately the  decisions that then-Governor Sheffield  made were                                                               
upheld by  the action of the  legislature.  She said  that as she                                                               
reads  this provision,  absence any  clarification, she  believes                                                               
[the amendment]  would be  building that  kind of  situation into                                                               
the  Constitution.   She said  that what  this does  is tell  the                                                               
governor  that  despite   the  fact  that  the   money  has  been                                                               
appropriated, it  will be  the governor's  decision not  to spend                                                               
it.   In fact, the governor  must decide not to  spend some money                                                               
that  is appropriated  to the  Executive Branch  since he  cannot                                                               
reduce  money   to  the  Judicial  or   Legislative  Branches  of                                                               
government.  The governor must elect  to not spend some money if,                                                               
in fact, the  money appropriated exceeds the spending  limit as a                                                               
constitutional matter.                                                                                                          
Number 3710                                                                                                                     
REPRESENTATIVE   ROKEBERG   withdrew  Conceptual   Amendment   3.                                                               
However,  he said  he  hopes  it will  be  considered during  the                                                               
bill's referral to the House Judiciary Standing Committee.                                                                      
Number 3627                                                                                                                     
REPRESENTATIVE GRUENBERG said he does  support a mechanism to get                                                               
state  spending under  control; however,  he is  not sure  how it                                                               
should be done.  Representative  Gruenberg expressed concern that                                                               
this measure may tie the hands  of the legislature at a time when                                                               
it  is  important   to  have  options  to   make  very  difficult                                                               
decisions.  He  pointed to the 1970s where  the state experienced                                                               
runaway  inflation,  which is  something  beyond  the control  of                                                               
legislature in the constitutional sense.   Another issue might be                                                               
some  kind of  situation that  does not  fall into  one of  these                                                               
escape clauses.  He expressed  concern that the committee adopted                                                               
Amendment 1 and thus eliminated  subsection (b), which would have                                                               
been helpful.  On page 2,  line 20, the resolution specifies that                                                               
the legislature  cannot under any circumstances  exceed 2 percent                                                               
of the previous amount.  That  2 percent figure is going be grave                                                               
and in stone.   Representative Gruenberg said he  would feel more                                                               
comfortable about  this resolution if  there were some  method of                                                               
giving the legislature, under some  circumstances, the ability to                                                               
get  around  that.   Representative  Gruenberg  pointed out  that                                                               
something  may  occur  that  no  one  in  this  room  could  have                                                               
foreseen,   something    that   could   require    an   immediate                                                               
appropriation; the  only way that  the legislature would  be able                                                               
to  make  that appropriation  is  by  amending the  Constitution,                                                               
which could not be done until the next general election.                                                                        
Number 3237                                                                                                                     
REPRESENTATIVE HEINZE  moved to report  CSHJR 9, as  amended, out                                                               
of  House Special  Committee on  Ways and  Means with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection,  CSHJR 9(W&M) was  reported from the  House Special                                                               
Committee on Ways and Means.                                                                                                    
HJR 26-CONST. AM: PF APPROPS/INFLATION-PROOFING                                                                               
Number 3153                                                                                                                     
CO-CHAIR  WHITAKER announced  that  the final  order of  business                                                               
would be HOUSE  JOINT RESOLUTION NO. 26,  Proposing amendments to                                                               
the Constitution of the State  of Alaska relating to and limiting                                                               
appropriations from  and inflation-proofing the  Alaska permanent                                                               
fund by  establishing a percent  of market value  spending limit.                                                               
He  noted that  CS for  HJR  26, 23-LS1006\I,  Cook, 4/29/03,  is                                                               
before committee.                                                                                                               
The committee took an at-ease from 8:15 to 8:17 a.m.                                                                            
[Due to  technical difficulties the  log numbers from  this point                                                               
through  the  end  of  the minutes  are  ascending,  rather  than                                                               
Number 3151                                                                                                                     
CO-CHAIR HAWKER  moved Amendment 1 to  CS for HJR 26,  Version I,                                                               
which reads as follows:                                                                                                         
     On page 1, line 3                                                                                                          
     delete the word "ensure"                                                                                               
     insert the word "assure"                                                                                               
     On page 1, line 4                                                                                                          
     delete "is preserved"                                                                                                  
     insert "will be preserved over the long term"                                                                          
     On page 2, line 3                                                                                                          
     after the words "will be preserved"                                                                                        
     insert "over the long term"                                                                                            
CO-CHAIR WHITAKER objected for purposes of discussion.                                                                          
CO-CHAIR HAWKER said that there  have been lengthy discussions in                                                               
earlier meetings  on prefacing language.   He commented  that the                                                               
original version of the resolution  had predicate language and it                                                               
now has  a prefacing clause.   As a result of  those discussions,                                                               
this  amendment  was  drafted in  coordination  with  the  Alaska                                                               
Permanent  Fund   Board  and   Legislative  Legal   and  Research                                                               
Number 3319                                                                                                                     
CO-CHAIR  HAWKER  explained that  the  changes  from "ensure"  to                                                               
"assure"  revolve   around  a  legal  subtlety   that  is  better                                                               
explained  by  an  attorney.    He  told  the  members  that  the                                                               
amendment  restores   one  important  clause  in   the  prefacing                                                               
language clarifying that  this amendment is intended  to refer to                                                               
"over  time" as  over the  "long term".   He  explained that  the                                                               
words  "long term"  seemed to  be more  definitive language  than                                                               
"over time".  Co-Chair Hawker said  that the third change is just                                                               
additional  conforming   language  [on  the  same   issue].    He                                                               
recommended the committee  adopt this amendment since  it is most                                                               
closely akin to  that which was introduced by  the Permanent Fund                                                               
Corporation.    He  noted  that  HJR 26  will  go  to  the  House                                                               
Judiciary Standing  Committee where it may  be more appropriately                                                               
reviewed from a  legal prospective.  He commented  that the House                                                               
Special  Committee  on  Ways  and  Means  focus  is  a  bit  more                                                               
financial than judicial.  He  noted his confidence that the House                                                               
Judiciary  Standing Committee  will  give the  resolution a  more                                                               
appropriate hearing.  He summarized  his statement by saying that                                                               
he believes  the committee  is in agreement  as to  the financial                                                               
appropriateness,  correctness,  and  quality of  this  resolution                                                               
with the inclusion of Amendment [1].                                                                                            
Number 3507                                                                                                                     
REPRESENTATIVE  GRUENBERG   stated  that  he   strongly  supports                                                               
Amendment [1].                                                                                                                  
Number 3535                                                                                                                     
There being no objection, Amendment 1 was adopted.                                                                              
Number 3537                                                                                                                     
REPRESENTATIVE HEINZE moved  to report CSHJR 26,  as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying fiscal notes.                                                                                                      
REPRESENTATIVE KOHRING  objected.   He told  the members  that he                                                               
has concerns  about this legislation  and will be  voting against                                                               
it.   He said he can  see the writing on  the wall as far  as the                                                               
support for this  resolution and he said he  respects the members                                                               
of the committee.   He said that he also  respects the efforts to                                                               
address the fiscal  situation [of the state].   However, he views                                                               
this legislation as a creative way  for more money to be spent on                                                               
government    appropriations    from    the    permanent    fund.                                                               
Representative Kohring  said he is concerned  because he believes                                                               
the proposal before the legislature is  based on the value of the                                                               
fund, as  opposed to  the performance  of the fund.   He  said he                                                               
thinks it could  be a potential bonanza if the  value of the fund                                                               
were  to  go up  as  far  as what  could  be  made available  for                                                               
expenditures.   He said he does  not see a problem  that warrants                                                               
this  kind of  filter since  the legislature  has exercised  good                                                               
fiscal discipline with  years of effort in cutting  spending.  He                                                               
believes  the legislature  should go  a lot  further [in  cutting                                                               
spending]  particularly in  the areas  of making  government more                                                               
efficient  through mergers,  consolidations, and  other measures.                                                               
He also expressed  concern that these monies could  take away the                                                               
incentive  to  engage  in  serious  spending  reductions  in  the                                                               
future.   The  one  saving grace,  he commented,  is  that if  it                                                               
passes the  legislature it  will go before  the voters  and maybe                                                               
the voters  will see the  wisdom of turning  this [constitutional                                                               
amendment]  down.   Representative  Kohring stated  that he  will                                                               
campaign against the passage of this constitutional amendment.                                                                  
REPRESENTATIVE  KOHRING removed  his objection,  but restated  he                                                               
does not support the legislation.                                                                                               
Number 3745                                                                                                                     
REPRESENTATIVE HEINZE  stated for record  that she would  like to                                                               
clarify  the  main difference  between  this  resolution and  the                                                               
initiative, which was  defeated in 1999.  She  explained that she                                                               
sees this resolution  as a way to protect the  dividend, and that                                                               
is far from  [the purpose of the resolution] that  was before the                                                               
voters in 1999.                                                                                                                 
Number 3814                                                                                                                     
REPRESENTATIVE  GRUENBERG   stated  for   the  record   that  the                                                               
resolution that will  be passing out of the  committee deletes on                                                               
page 1, line 10,  the word "in".  He said that  he missed some of                                                               
the discussion on  the bill and asked for  clarification on this.                                                               
He also asked  for clarification on the language on  page 2, line                                                               
5, where it says  "the first five of", and asked  why is the last                                                               
year of  the preceding six  years being  eliminated.  Why  will a                                                               
five-year reference be used, instead  of a six-year average, once                                                               
Number 3923                                                                                                                     
BOB BARTHOLOMEW,  Chief Operating Officer, Alaska  Permanent Fund                                                               
Corporation,  explained that  the  line  to which  Representative                                                               
Gruenberg is  referring defines  which five-year-average  will be                                                               
used.  The objective of going  back and not using the most recent                                                               
fiscal year is to allow the  legislature and the governor to know                                                               
at  the  time  the  budget  is being  prepared  exactly  what  is                                                               
REPRESENTATIVE  GRUENBERG responded  that  answers his  question.                                                               
He stated he has no objection to moving the resolution.                                                                         
CO-CHAIR  WHITAKER objected  for the  purposes of  continuing the                                                               
discussion of the resolution.                                                                                                   
Number 4013                                                                                                                     
CO-CHAIR  HAWKER acknowledged  Representative Kohring's  personal                                                               
position against  the bill, his statesmanship,  and true courage.                                                               
He said  he appreciates  his willingness to  move a  bill forward                                                               
that  he does  not support,  knowing that  it will  ultimately be                                                               
placed before the  people of Alaska for a concurrence  vote.  Co-                                                               
Chair Hawker said that he hopes  all the members of the body will                                                               
take a lead  from Representative Kohring in  his demonstration of                                                               
true statesmanship in  this matter.  Co-Chair  Hawker removed his                                                               
Number 4103                                                                                                                     
REPRESENTATIVE WILSON  commented for  the record  that this  is a                                                               
step  to protect  the permanent  fund dividend  and will  help to                                                               
assure continuity and stability in  the dividend that will not be                                                               
there otherwise.                                                                                                                
REPRESENTATIVE HOLM pointed  out that percent of  market value is                                                               
not a very well understood term.   He said he believes it is very                                                               
important that  it is made  clear what it  does and does  not do,                                                               
and how volatile it is.                                                                                                         
With no  further objections, CSHJR  26, as amended,  was reported                                                               
out of the House Special Committee on Ways and Means.                                                                           
There being no  further business before the  committee, the House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
8:30 a.m.                                                                                                                       

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