04/17/2003 07:12 AM House W&M
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 17, 2003
7:12 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Jim Whitaker, Co-Chair
Representative Bruce Weyhrauch
Representative Peggy Wilson
Representative Max Gruenberg
MEMBERS ABSENT
Representative Cheryll Heinze
Representative Vic Kohring
Representative Norman Rokeberg
Representative Carl Moses
OTHER LEGISLATORS PRESENT
Representative Ralph Samuels
Representative Dan Ogg
Representative Paul Seaton
Representative Les Gara
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 9
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit and a spending limit.
- HEARD AND HELD
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 -
REFERRALS
01/31/03 0102 (H) STA, JUD, FIN
02/11/03 (H) STA AT 8:00 AM CAPITOL 102
02/11/03 (H) Heard & Held
MINUTE(STA)
03/28/03 0687 (H) COSPONSOR(S): ROKEBERG
04/04/03 0797 (H) W&M REFERRAL ADDED BEFORE STA
04/09/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
04/09/03 (H) Heard & Held
04/09/03 (H) MINUTE(W&M)
04/17/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska,
POSITION STATEMENT: As sponsor, commented on changes in Version
D of the proposed committee substitute to HJR 9.
GINGER BLAISDELL, Staff
to Representative Bill Stoltze
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions about HJR 9.
ACTION NARRATIVE
TAPE 03-9, SIDE A
Number 0001
CO-CHAIR JIM WHITAKER called the House Special Committee on Ways
and Means meeting to order at 7:12 a.m. Representatives Hawker,
Whitaker, Weyhrauch, Wilson, and Gruenberg were present at the
call to order. Representatives Samuels, Ogg, Seaton, and Gara
were also present.
HJR 9-CONST AM: APPROPRIATION/SPENDING LIMIT
CO-CHAIR WHITAKER announced that the only 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.
Number 0138
CO-CHAIR HAWKER moved to adopt committee substitute (CS) for HJR
9, Version 23-LS0435\D, Cook, 4/16/03, as the working document.
There being no objection, Version D was before the committee.
CO-CHAIR HAWKER explained that the proposed CS is substantially
identical to the original HJR 9. Section 1(a), establishing an
appropriation limit, has not changed. There are changes on page
2, lines 10-21, in subsections (b) and (c). In the original
resolution, subsection (b) allowed an additional 2 percent
appropriation from the base year on an affirmative vote of
three-quarters of the members of each house. In the same
resolution, subsection (c) stated that if appropriations for a
year exceed the amount allowed for appropriations, then the
governor should reduce expenses by the executive branch for its
operation and administration.
CO-CHAIR HAWKER continued that under the proposed CS, subsection
(b) allows the 2 percent increase of the base level by the
affirmative vote of two-thirds rather than three-quarters of the
members of each house. Subsection (c) in the CS allows a second
2 percent increment in addition to those from subsections (a)
and (b) but that second 2 percent increment requires the three-
quarter affirmative vote of both houses. Essentially, this CS
merges the language from SJR 23 in a prior year and the language
from this year's HJR 9.
Number 0426
REPRESENTATIVE GRUENBERG said a natural disaster would require
more of an expenditure. He urged the committee to consider
other escape clauses that would allow additional expenditures in
extraordinary situations. He said, "The only thing I've learned
in this business is that we can't think of everything."
Number 0502
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, sponsor
of HJR 9, directed Representative Gruenberg to page 1, lines 12-
13, an exemption from the spending limit ["to meet a state of
disaster declared by the governor"]. He noted that HJR 9 is his
first effort [at a constitutional spending limit] and thanked
the committee for its work. He said nothing in the resolution
is inviolate, but he would like to create as true a spending
limit as possible.
Number 0637
REPRESENTATIVE WEYHRAUCH asked if it's possible to have a sunset
[provision] in a constitutional amendment.
REPRESENTATIVE STOLTZE replied that there's a sunset clause on
page 2, lines 27-31, in Section 30. He said he's been told it
is constitutional, but he could not predict how the supreme
court would rule on it.
REPRESENTATIVE GRUENBERG said that a constitutional sunset would
depend on the provision, but in most cases, it would stand [a
court challenge].
CO-CHAIR HAWKER said he was confident that the sunset provision
in the prior session's SJR 23 was constitutional. He said the
resolution passed both houses, and he has faith in the attorneys
that crafted the sunset provision.
Number 0902
REPRESENTATIVE SEATON noted the exemption to the spending cap is
included for emergency situations. He questioned whether this
emergency funding would eventually become the base year for the
subsequent two years.
REPRESENTATIVE STOLTZE said it's problematic not to know what
the total budget figure is for a year.
REPRESENTATIVE SEATON explained that in a sequence of years in
the future, the legislature would appropriate more money to deal
with an earthquake or a fire. Then in future years, the base
year would be increased by the large escalator based on an
emergency [appropriation].
REPRESENTATIVE STOLTZE explained that the exemptions are by
their nature one-time expenditures. For example, emergency
expenditures or receipt of federal money are not continuing and
should not be part of an escalator base.
REPRESENTATIVE WEYHRAUCH asked why HJR 9 is good public policy.
Number 1135
REPRESENTATIVE STOLTZE said that the public lacks confidence in
the legislature to control spending, even the most conservative
legislatures and governor. Legislatures see how difficult it is
[to contain or cut spending]. Alaska is facing declining
revenues and will have alternative revenue sources in the
future, if the public accepts them. Conservative Alaskans who
will have to swallow the new revenues have to know there's a
cap, that the new revenues won't be used to fuel an increase in
government. He said for him and for some of his colleagues on
both sides of the political spectrum, a spending limit is an
absolute necessity before they will even talk about new
revenues.
CO-CHAIR WHITAKER said the committee is considering HJR 9
because it has to deal with the political reality in order to
develop a fiscal regime that deals with the economic reality.
Number 1322
REPRESENTATIVE WEYHRAUCH reiterated that HJR 9 would give the
public a sense of comfort that spending is going to be
controlled by a cap except for extraordinary reasons. He asked
Representative Stoltze if he favors additional revenue-
generating measures with this kind of mechanism in place.
REPRESENTATIVE STOLTZE said he did not. He said there are other
[legislators who are] advocates for increased revenues. He said
[new revenues] are not a discussion point for him until there's
some type of protection [against excessive government spending].
He said HJR 9 is not part of his package to accompany new taxes;
that's not part of his agenda. He said he expects that others
will put forward taxes, and this resolution is his defensive
measure.
Number 1639
REPRESENTATIVE GRUENBERG identified a question in HJR 9 that is
common to a number of pieces of legislation - the issue of who
decides. He said that a constitutional spending limit is a
rigid framework because it's difficult to change. The
legislature cannot change [the budget cap] except in a narrow
way, 2 percent, year by year. That may not provide for all the
unseen problems the state could have, for example, inflation on
a national or international level. Another example is growth in
the economy, for example, ANWR, a gas pipeline, or an increased
military presence. He said there's no way the government can
keep pace to increase the number of teachers, firemen, and
police. This resolution doesn't allow this growth to occur, he
said. Alaska needs some flexibility in the constitution or the
legislature will have to keep amending this provision.
Number 1934
REPRESENTATIVE STOLTZE reminded the committee that he is
reluctant to amend the constitution. He said he's really
concerned about indexing because it leads to government growth.
This approach forces the legislature to make tough choices in
the face of inflation. He said that 4 percent growth,
especially considering the state's revenue picture, is generous.
CO-CHAIR HAWKER asked how a limitation on government spending
can accommodate economic growth. He said that currently
expenses exceed revenue, and he sees no immediate solution and
no immediate state growth. But over the course of time, perhaps
policymakers can balance the budget, control expenses, and
consider alternative revenues. He said somewhere down the road
when real growth finally happens, it will be necessary to expand
government. The sunset provision is an excellent tool that
gives the state six years to get its house in order and balance
its budget. After six years, if the public concurs, the
legislature gets the green light to go ahead and build the
state's infrastructure.
Number 2316
REPRESENTATIVE OGG asked how the spending cap can accommodate
the kinds of increases in government's fixed costs such as
insurance increases of 100-1,200 percent in the last two years
and heating fuel bills of 80 percent in the last year and a
half. How does this resolution address these kinds of
circumstances, he asked.
REPRESENTATIVE STOLTZE said the legislature can increase the
budget annually by up to 4 percent, but the answer is that the
[rising costs] force prioritization. He said that meeting fixed
costs would be the highest priority; it would probably force
local governments to absorb those costs. He said instituting a
statewide income tax is not an acceptable answer to him or to
the public. Inflation will force legislators to prioritize; the
choices won't be pretty, he admitted.
Number 2549
REPRESENTATIVE OGG said that many Alaskans experienced the
impact of the Trans-Alaska Pipeline and watched the increase of
property values, goods, and the influx of people. This happened
in a very short time period. He said he does not see how HJR 9
would allow the state to address that type of positive growth.
REPRESENTATIVE STOLTZE acknowledged that the committee may chose
to expand the spending limit. He said he tried to start with a
very conservative approach to government expenditures.
Number 2738
REPRESENTATIVE WILSON asked whether the language starting on
page 2, line 18, in subsection (b) rules out the next subsection
(c).
Number 2802
GINGER BLAISDELL, Staff to Representative Bill Stoltze, Alaska
State Legislature, said that subsection (c) covers an
appropriation that exceeds the limit under (a) and (b). The
initial 2 percent growth requires a two-thirds vote, and an
additional 2 percent, for a total of 4 percent growth, would
require a three-quarters vote. At most there could be a 4
percent growth, she testified.
REPRESENTATIVE WILSON noted that even though the language
restricts the budget to the two fiscal years preceding the
fiscal year for which appropriations are made, that's not what
HJR 9 does.
REPRESENTATIVE STOLTZE stated that the legislature can raise the
budget by 4 percent with a super majority vote.
REPRESENTATIVE WILSON reiterated her understanding that the
resolution appears to state something different.
Number 2959
MS. BLAISDELL explained that the resolution uses the previous
two fiscal years as the base, so that the legislature knows how
much money has been appropriated. The one-year prior budget is
usually not complete. For example, the legislature is working
on the FY 04 budget now, but the state is currently operating in
FY 03. Because there might be some unexpected expenditures or
supplementals, the base number for FY 03 is not yet known.
REPRESENTATIVE WILSON said she understands what Ms. Blaisdell is
saying. On page 2, line 16, the words "an appropriation that
exceeds the limit under (a) and (b)" refers to the first 2
percent [increase] and the legislature is considering another 2
percent increase. But on line page 2, lines 18-21, the
resolution reads, "The total amount of appropriations ... may
not exceed two percent of the amount appropriated for the last
two fiscal years preceding the fiscal year for which the
appropriations are made."
Number 3122
CO-CHAIR HAWKER noted that Representative Wilson left out three
words [on page 2, line 19], "under this subsection". He said
that within this subsection, an incremental 2 percent may be
made with the same parameter that is applied in the previous
paragraph.
REPRESENTATIVE STOLTZE confirmed that the subcommittee that
developed the proposed CS intended two possible 2 percent
increases.
REPRESENTATIVE GRUENBERG suggested that the drafters review this
section to make sure that it cannot be misinterpreted.
Number 3318
REPRESENTATIVE GARA noted that last year's budget contained
proposals to cut school budgets. The Kenai school district
would have lost almost 60 teachers; communities in Southeast
would have lost 25 percent of their teachers. He cautioned that
by imposing a spending cap, the legislature might
institutionalize failure and might prevent Alaskans from
responding to their greatest needs. He noted that last year the
state could not provide foster children with the number of
social workers needed for the foster care system to succeed. By
imposing a spending cap, he said, the legislature can't go
beyond the failure that was institutionalized last year. He
asked how a spending cap on last year's budget will allow the
state to ever solve those ills.
REPRESENTATIVE STOLTZE replied that the spending cap will force
the legislature to set priorities and address how to pay for
them.
Number 3552
REPRESENTATIVE WEYHRAUCH confirmed with Representative Stoltze
that the intent of placing this cap in the constitution is to
discipline the legislature to control its spending and before it
increases revenues through taxation, a cap must be in place. He
asked if this measure will be necessary when spending and income
become the same or when revenues exceed spending.
REPRESENTATIVE STOLTZE said that if the revenues were there and
the public was comfortable with the spending level, this
resolution would not be necessary. But he noted that he lives
in a different world.
Number 3720
REPRESENTATIVE WEYHRAUCH said the constitution is the
underpinning of state government, and a change to it will be
long lasting. Aside from the sunset date, would it be possible
to [set aside the limit] during times when income is greater
than expenses, letting the budget grow more than 4 percent, he
asked.
REPRESENTATIVE STOLTZE noted that the sunset provision gives the
public the opportunity at six years [to assess the usefulness of
the spending cap] and then every six years after that.
REPRESENTATIVE WEYHRAUCH asked for clarification about the
sunset provision. He explained his understanding of HJR 9: the
public votes on it; if approved, it becomes part of the
constitution; when the sunset date comes into play, this
provision leaves the constitution; the only way it comes back
into the constitution is if the voters approve it again.
Number 3935
REPRESENTATIVE STOLTZE said HJR 9 has a big red button that
allows the voters to jettison the whole idea.
REPRESENTATIVE WEYHRAUCH asked if after the sunset, the
legislature debates a new resolution [and decides whether] to
put it before the voters again.
Number 4001
REPRESENTATIVE STOLTZE said the issue of continuing the cap
automatically goes before voters.
REPRESENTATIVE WEYHRAUCH asked if it would be worthwhile to have
the legislature debate whether it should go on the ballot again.
He asked if it ties the hands of future legislatures by not
being able to discuss it before it goes on the ballot again.
REPRESENTATIVE STOLTZE replied that the legislature could repeal
this constitutional amendment with another [constitutional
amendment].
Number 4055
REPRESENTATIVE WEYHRAUCH asked if the provision is intended to
remain in the constitution.
REPRESENTATIVE STOLTZE said that the provision would be repealed
if the voters rejected it every six years.
REPRESENTATIVE WEYHRAUCH said this is not a complete sunset; his
idea of a sunset is a provision that goes away.
REPRESENTATIVE STOLTZE replied that this is a modified sunset,
modeled after the constitutional convention provision.
Number 4157
REPRESENTATIVE WILSON expressed concern because there is a
disconnect between the larger and smaller population areas over
budget cuts. She mentioned that some communities have a 27
percent cut in teachers this year due to [last year's] budget
cuts.
REPRESENTATIVE STOLTZE said he rejects the characterization that
these cuts are a result of this year's legislature; there are
also local factors that have caused those reductions. The
public does enough blaming the legislature, he said.
Number 4316
REPRESENTATIVE WILSON noted that Wrangell has a sales tax, a
property tax, and it pays for the school system up to the state
cap in most years. If she applied that same percent to
Anchorage, it would have to lay off 971 teachers, and that might
put these cuts in perspective, she said. She said she is very
uncomfortable with a modified sunset provision. Some small
communities carry their weight as well as larger communities.
She said the committee needs to think about what this provision
really means.
REPRESENTATIVE SEATON stated that the cap on the appropriation
does not apply to the exemptions, for example, the Alaska
Railroad. If the state appropriates $700 million one year to
the Alaska Railroad or money to cover a state disaster, he
confirmed that those expenditures do not become part of the base
budget two years later.
TAPE 03-9, SIDE B
Number 4644
REPRESENTATIVE SEATON noted that exemption (10) excludes both of
the 2 percent increases made under subsections (b) or (c). He
said some of the committee's budget projections show a 2 percent
growth or some growth but those are specifically excluded from
being considered in the base year. He said the increased
appropriations under (b) and (c) do not count as increases in
the previous years' budgets. He noted a spending limit that is
totally flat related to any of these 10 [exemptions]. Under HJR
9, the budget cannot grow; he asked for clarification on this
point.
REPRESENTATIVE STOLTZE said Representative Seaton has
characterized HJR 9 accurately. He explained that his intent
was a flat government budget. He said some people may say he is
not taking a conservative enough approach to the spending limit.
Number 4451
REPRESENTATIVE SEATON noted, that given Representative Stoltze's
clarification, the graphs [handed out to the committee] are
incorrect because they include 2 percent budget increases.
MS. BLAISDELL replied that Legislative Legal and Research
Services helped draft the [proposed CS]. Their interpretation
was that this one statement [about a 2 percent increase] was
required [in the graphs]. She said she will ask why it was
required. The language in subsection (b) of the original draft
is slightly different from subsection (b) in the proposed CS.
On page 2, line 15, of the CS, the resolution reads,
"appropriations are made." In the original version, on page 2,
line 16, the language reads, "excluding appropriations listed in
(a)(1)-(10) of this section." That double exclusion may put the
growth factor back in [the base], she stated.
Number 4302
CO-CHAIR WHITAKER stated that this point needs to be clarified.
CO-CHAIR HAWKER said that he concurs with [Representative
Stoltze's] understanding of the intent of the language. He
suggested clarifying the language for paragraph (10) [on page 2,
line 9], so it eliminates the ambiguity.
REPRESENTATIVE STOLTZE apologized for not being able to answer
questions about the detail of HJR 9 with more clarity and
certainty.
Number 4204
REPRESENTATIVE GARA observed that the general fund is just a
portion of budget; he said he believes the reason why the
deficit is not bigger is the amount of federal money in the
budget. Per capita, Alaskans draw more money than people from
any other state, he said, but Alaska will be receiving less
money from the federal government. He said Alaska now receives
$3 billion in federal money, which is bigger than the state's
general fund expenditures. One example of decreasing federal
money is the $20 million reduction to education, he said.
Representative Gara asked if it would it be appropriate to
consider [an amendment to the resolution] that would make up for
losses in federal money in order to keep services flat.
REPRESENTATIVE STOLTZE replied that such an allowance could be
added, but asked where the legislature would get the money [to
replace the lost federal funds]. He asked rhetorically how
great an income tax would have to be implemented to make up for
the $20 million loss in revenue.
REPRESENTATIVE GARA admitted that if there were a one-third
reduction in [federal funds], the state could never make up the
difference; however, he asked about a provision that would allow
legislators to make up a reasonable amount.
Number 3929
REPRESENTATIVE STOLTZE said these are all valid discussion
points. He acknowledged that the resolution is in the hands of
the committee, and he is commenting on suggestions.
REPRESENTATIVE OGG explained how the Alutiiq, [the Native
people] of Kodiak, went through times of beneficial growth and
times of "dis-growth." February was the longest month of their
year, he related. One anthropologist said they called it the
month of dried fish; they also called it the month of lesser or
greater want. Transferring that to Alaska today, the state is
in a period of greater want, he said. The resolution tries to
correct a [constitutional provision] that was put in place 20
years ago in a time of lesser want. He said it is odd that in a
period of greater want, the legislature is trying to cut the
budget in order to live within its means. He said now, in a
time of greater want, its difficult to correct an action made
during a period of lesser want. He said the resolution needs a
provision that addresses fixed cost increases that nobody has
control over. He said everyone would like to see spring come
again and the economy grow rapidly. He said these two issues
need to be addressed so that when Alaska moves into a period of
lesser want, government doesn't blossom unrealistically as it
did in the 1980s.
Number 3700
REPRESENTATIVE STOLTZE admitted that passing a constitutional
amendment is appropriately an arduous task. He pointed out that
there are three more committees to go and another body [before
it goes to the voters].
[HJR 9 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
8:10 a.m.
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