04/29/2003 07:07 AM House W&M
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 29, 2003
7:07 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Jim Whitaker, Co-Chair
Representative Cheryll Heinze
Representative Vic Kohring
Representative Bruce Weyhrauch
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
Representative Norm Rokeberg
OTHER LEGISLATORS PRESENT
Representative Dan Ogg
Representative Ralph Samuels
Representative Paul Seaton
Representative Nancy Dahlstrom
COMMITTEE CALENDAR
COMMITTEE DISCUSSION: COMPONENTS NECESSARY FOR STATE FISCAL
STABILITY
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
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.
- 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
04/17/03 (H) Heard & Held
04/17/03 (H) MINUTE(W&M)
04/24/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
04/24/03 (H) Heard & Held
04/24/03 (H) MINUTE(W&M)
04/29/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
BILL: HJR 26
SHORT TITLE:CONST. AM: PF APPROPS/INFLATION-PROOFING
SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT BY REQUEST
Jrn-Date Jrn-Page Action
04/17/03 1025 (H) READ THE FIRST TIME -
REFERRALS
04/17/03 1025 (H) W&M, JUD, FIN
04/22/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
04/22/03 (H) Heard & Held
MINUTE
04/24/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
04/24/03 (H) Heard & Held
MINUTE
04/25/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
04/25/03 (H) Heard & Held
MINUTE
04/29/03 (H) W&M AT 7:00 AM HOUSE FINANCE
519
WITNESS REGISTER
TAMARA COOK, Director
Legislative Legal and Research Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26, and answered questions
from the members.
ROBERT BARTHOLOMEW, Chief Operating Officer
Alaska Permanent Fund Corporation
Juneau, Alaska
POSITION STATEMENT: Testified in support of HJR 26 and answered
questions from the members.
RON LORENSEN, Attorney at Law
Simpson, Tillinghast, Sorensen, and Longenbaugh
Juneau, Alaska
POSITION STATEMENT: As outside counsel to the Alaska Permanent
Fund Corporation, he testified in support of HJR 26 and answered
questions from the members.
JAY HOGAN, Deputy Director
Office of Management and Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26.
ACTION NARRATIVE
TAPE 03-16, SIDE A
Number 0001
CO-CHAIR JIM WHITAKER called the House Special Committee on Ways
and Means meeting to order at 7:07 a.m. Representatives Hawker,
Whitaker, Heinze, Kohring, Weyhrauch, Wilson, Gruenberg, and
Moses were present at the call to order. Representatives
Seaton, Samuels, Ogg, and Dahlstrom were also present.
The committee took an at-ease from 7:10 to 7:20 a.m.
COMMITTEE DISCUSSION: COMPONENTS NECESSARY FOR STATE FISCAL
STABILITY
Number 0235
CO-CHAIR HAWKER gave a presentation on the necessary components
of a long-range fiscal plan. He listed five major conceptual
components of a balanced and structured fiscal plan. He said
the first component, maintaining the cost and growth of public
services, included the following: a constitutional spending
limit in HJR 9, reducing nonessential programs, containing the
growth of formula programs, outsourcing state services, and
reducing statewide administration.
CO-CHAIR HAWKER explained that the second component involves
managing the permanent fund to protect its real value over time
while providing a substantial individual dividend and a
contribution to the cost of public services.
CO-CHAIR HAWKER noted that the third component of a general
revenue system minimizes the need for broad-based taxation of
individuals and accommodates local governments' revenue
structures. Details of the revenue system include oil and gas
resources; excise taxes on alcohol, tobacco, motor fuels, and
rental vehicles as well as user fees, licenses, and permits.
Publicly funded corporations are current or potential sources of
dividends. These include the Alaska Industrial Development and
Export Authority, the Alaska Housing Finance Corporation, the
Alaska Student Loan Corporation, the Alaska Mental Health Trust,
the Alaska Railroad Corporation, the Municipal Bond Bank, and
the International Airport Fund. Other sources of revenues are
insurance premium fees, seafood industry taxes and fees, and
gaming. Broad based taxes can take the form of either income or
consumption [sales] taxes.
CO-CHAIR HAWKER explained that real economic growth, the fourth
component, can occur in many sectors: oil and gas, technology,
fish, finance, manufacturing, transportation, construction,
executive services, tourism, the Alaska Native Claims Settlement
Act corporations, mining and minerals, and roads.
CO-CHAIR HAWKER identified that the fifth component of a long-
range fiscal plan is a balanced budget requirement that
incorporates a mechanism to mitigate the consequences of oil
price volatility on the general revenue system.
HJR 9-CONST AM: APPROPRIATION/SPENDING LIMIT
TAPE 03-16, SIDE B
Number 4625
CO-CHAIR WHITAKER announced that the next 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.
[CO-CHAIR WHITAKER determined earlier in the meeting that no one
wished to testify on HJR 9.]
Number 4505
CO-CHAIR WHITAKER reminded the committee that [Version D] of HJR
9 is before it and a proposed committee substitute (CS) will be
distributed tomorrow. He emphasized that every piece of
legislation before the committee falls in the context of an
overall financial plan. He reiterated that HJR 9 will be
discussed in greater length tomorrow.
Number 4422
REPRESENTATIVE OGG stated that he appreciates the triggering
mechanisms included for potential inflation, deflation, or
drastic economic growth. Alaska has been a boom-and-bust
society for many decades. He said he is concerned about [the
budget increase being dependent on] a three-quarters vote
because he is not sure that a 2 percent increase would
adequately cover instances of gross inflation or dramatic
economic growth. Representative Ogg suggested that a higher
number might be more appropriate. He didn't want to see the
legislature truncate its ability to respond to these
circumstances. He proposed a tentative 5 percent increase
[instead of the second 2 percent increase].
CO-CHAIR HAWKER stated that Representative Ogg has bracketed one
part of dialogue - the upper end, the most difficult [budget] to
achieve because a three-quarters vote is truly a significant
hurdle. In the current committee substitute, the very base
itself is flat; it does not have any level of incremental
spending that could be passed by a simple majority. As written,
a 2 percent increase would take a two-thirds vote; another 2
percent increase would require a three-quarters vote. He
proposed a limited increment for inflation and for the formula-
driven components of the budget such as education and Medicaid.
CO-CHAIR WHITAKER noted that Representative Ogg's concern is on
the high end of the budget while Co-Chair Hawker's point focuses
on the lower end of the budget.
Number 4041
REPRESENTATIVE WILSON said that sometimes a three-quarter vote
inadvertently causes more spending. Historically, an effort to
obtain a three-quarters vote required spending a lot more than
what was originally intended, she commented.
CO-CHAIR WHITAKER noted that tomorrow's proposed committee
substitute will have a balancing mechanism. A simple majority
can pass a budget that is flat or one that has a modest increase
of 2 percent. He said for those who want to leverage a three-
quarter vote, the message is, "Forget it, you have a flat
budget, and the majority will allow for that." It's a balancing
mechanism. He said that HJR 9 represents a major change in the
way the legislature produces a budget. The committee's decision
[on HJR 9] will not be final. Ultimately, the voters will
decide if the constitutional amendment is good enough.
Number 3814
REPRESENTATIVE HEINZE asked several questions about when the
committee will present its work product.
CO-CHAIR WHITAKER stated that the committee must have the votes
necessary to move legislation, and that's done one step at a
time, one committee at a time. The legislature must put a
constitutional amendment before voters in 2004 or the state will
face an economic crisis of the magnitude of the one experienced
in 1985 and 1986. He confirmed the committee's work must be
completed before adjournment this year.
REPRESENTATIVE OGG spoke about the three-quarters vote. He said
the present circumstances are different than the future that
this [constitutional amendment] will affect. The legislature is
trying to trim the budget, but cannot because of political
pressure; it's spending more money than it's actually making.
He said he believes this constitutional amendment is designed
for a time when the budget is balanced and the state has more
money than it's actually spending. He proposed the following
increments: flat or 1 percent, 2 percent, then 2 to 5 percent.
He asked if this would allow for fixed cost increases.
Number 3447
CO-CHAIR HAWKER agreed with Representative Ogg's ideas on
incremental increases. He suggested a base of 1 or 2 percent
that is compounded and becomes a new base. He said the specific
exemptions enable the state to respond to emergencies. He said
if there were an emergency that required a three-quarter vote to
spend some exorbitant amount, it would fit under a governor-
declared disaster, which is an allowable exemption.
REPRESENTATIVE OGG commented that there needs to be a [spending]
limit because without it, the legislature has not changed
anything.
Number 3251
REPRESENTATIVE MOSES observed that a two-thirds vote is hard
enough to get. He said the longer the legislature delays, the
more problems accelerate. He said he's concerned with a
spending limit because the state's deferred maintenance exceeds
the state's annual budget, which is a terrible situation. In
the rural areas, public safety, education, and the correctional
systems are substandard. It's time to do something, he stated.
REPRESENTATIVE WILSON told the members that when looking at
limiting growth, it's important to be realistic. If the budget
is ratcheted down too tightly, if there's only flat funding, the
state will fall behind. The state needs a mechanism in place so
inflation does not [eat into state programs]. She agreed that
deferred maintenance needs to be looked at, and that economic
growth will create additional expenses.
Number 2904
CO-CHAIR HAWKER concurred that the state has huge amounts of
deferred maintenance on public facilities, particularly schools,
public safety facilities, ports, and harbors. This will require
a significant investment. He pointed out that the mechanism [in
HJR 9] assures the public that the legislature won't take all
the new money [from permanent fund earnings and taxes] and
funnel it to rural Alaska to rebuild its infrastructure and
leave the large population areas such as Anchorage with nothing.
This measure says the legislature will deal with the problems in
the Bush, but within the constraints of a balanced budget, not
an excessive spending program.
CO-CHAIR HAWKER continued by saying that one of the exemptions
from the spending cap in HJR 9 is the appropriation of the
proceeds from general obligation and revenue bonds. He said the
legislature does use leveraging or debt financing wisely. The
legislature is issuing general obligation bonds this year,
putting the money into schools and facilities across the state.
The debt service must still come in under the cap, but the
initial appropriation does not. He said he believes the
legislature can manage within the budget in a responsible way
and not spend more than is necessary to pay the debt service.
It is possible to accomplish these needed projects. There's a
"synergistic" mechanism within HJR 9 that accommodates both
concerns.
Number 2629
CO-CHAIR HAWKER said that as the state uses the last of its cash
reserves, it must develop a new fiscal structure. He supported
the idea of maintaining the sunset clause in HJR 9. After the
passage of the constitutional amendment, the state has a window
that extends through 2010, after which this limitation would go
away. Hopefully, he said, the legislature will balance the
budget for six years, and then the state could look at more
significant public infrastructure development across the state.
This would demonstrate that the legislature can manage the
resources well and get [the state] back on the right track, he
said.
[HJR 9 was held in committee.]
HJR 26-CONST. AM: PF APPROPS/INFLATION-PROOFING
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 told the members that that HJR 26, 23-LS1006\H, Cook,
4/23/03, is before the committee as a working document.
Number 2446
TAMARA COOK, Director, Legislative Legal and Research Services,
Legislative Affairs Agency, testified on HJR 26, and answered
questions from the members. Ms. Cook explained that she was
provided language to work from and proceeded from a policy
neutral view, but also from the point of view of a technician.
She said the change in language on page 2, subsection (b) is
framed as a structure within the constitution that is
susceptible to being enforced in the courts. Ms. Cook told the
members that her concern was how the first sentence [would
impact] the second sentence in the original version [of HJR 26].
The second sentence is reasonably specific as it provides a
formula that is capable of being ascertained to the extent that
one [believes] accounting is a concrete science; however, it
actually is not, she commented. Assuming that accounting is a
concrete science, the second sentence says how much can be
appropriated from the permanent fund every year in terms that
should generate a specific number. Ms. Cook pointed out that
the first sentence seems to make a statement of policy. She
said in looking at the [language in] the original bill [it
appears] the legislature wants to achieve something that is
predictable so that the real value of the permanent fund is
preserved over time. However, the term "over time" is not
defined, so it is unclear if it is ten years, five years, or
what. Ms. Cook expressed concern about [the outcome] if there
is a challenge as to the validity of a specific appropriation
[under] the language in the original version. Does the first
sentence give the court the authority to use its own judgment
[to determine] the real value is not being [maintained] over
time, she asked. It may mean that the courts get to decide what
real value equals and what period of time ["over time" means].
[If using the original language], she said she believes the
courts would have the power to invalidate any specific
appropriation, even one that clearly complies with the second
sentence. If the language in the first sentence remains
somewhat vague, the legislature will have essentially left [the
interpretation] up to the courts to enforce a concept which
could make it very difficult for the legislature or anyone else
to build a budget, she explained.
MS. COOK noted that another path the court could take is to look
at the language that was originally composed in this bill and
say that the first sentence's reference preserving the fund is
just too vague to apply. [In this case], the courts would never
overturn an appropriation that meets the criteria of the second
sentence. The courts would not want to substitute their
judgment that this particular appropriation is no good. There
is either a sentence that can be enforced in a draconian way or
a sentence that cannot be enforced at all, Ms. Cook commented.
What was not present was a system where the outcome would be
certain and she told the members that alarmed her.
Number 2053
MS. COOK explained that she took the language and tried to
structure the wording so it would work. She said she was not
sure of the policy result that the legislature [was trying to
achieve] because the second sentence was understandable to her,
whereas the first sentence was difficult to understand. She
said she tried to reduce the first statement to a statement of
policy, but not an enforceable statement of policy. Ms. Cook
explained that she then tried to reword the second sentence in
an effort to make it say this is the way the policy will be
accomplished. It was her hope that the second sentence would
prevail over the first in any litigation, she said. For that
reason the word "shall" became "should", which is never seen in
a constitution, and that is why the word "therefore" is added on
line 5. She said what she was trying to do in this draft is
point out the tension between these two sentences. Ms. Cook
told the members that she will try to resolve the tension so if
there is an appropriation that is enacted that complies with the
second sentence formula, a court will be reluctant to overturn
it based on the strength of the first sentence. She
acknowledged that this may not be where the members want to go
with this legislation.
MS. COOK told the members if they wish to trump the second
sentence, by the first sentence, then there are two things that
need to be kept in mind. One, the first sentence is not very
concrete, so the members need to be [cognizant of the fact that]
the courts will ultimately be making decisions based on the
facts that are presented in litigation. Those decisions will be
what ["over time" means] and what the "real value" is so that
the courts can judge a specific budget. She pointed out that
this could result in a budget failing. Ms. Cook told the
members that she could easily redraft the bill to strengthen the
first sentence and have the language point to the formula, but
always subject to a determination of what the real value of the
fund is protected over time. Ms. Cook reiterated her concern
that the first sentence is not very concrete and the legislature
will be leaving it up to the court to decide whether there
should be litigation on a case-by-case basis.
Number 1816
CO-CHAIR WHITAKER commented that this was the subject of
discussion at the last meeting and that is the reason why Ms.
Cook provided the committee with an explanation of the change.
He noted that Representative Rokeberg was the person who had a
significant concern with the change; however, he is not present
today.
Number 1750
CO-CHAIR HAWKER told the members that he is not speaking for
Representative Rokeberg; however, he has discussed this subject
with him. He said he concurs with the explanation of the
predicate clause in this [subsection] which is vague in the
statement of policy and direction. Co-Chair Hawker said that he
believes the committee intends to very clearly state the
conclusive clause. It should be unequivocal, no shading or gray
[area] and [nothing left] for legal interpretation. [The
language] should say that appropriations from the permanent fund
may not exceed, et cetera. He told the members that he is
leaning toward recommending that the predicate clause be
eliminated from this draft for all the reasons stated. Co-Chair
Hawker agreed that this legislation should not be left open for
interpretation by the courts. He said he does not want this to
be removed from the land of legislative intent and into the
vague land of court decisions.
CO CHAIR WHITAKER asked if the concern was that if there was not
language that related to a series of down years a 5 percent
allocation from the value of the permanent fund could
potentially lead to the erosion of the principal. He asked Ms.
Cook if he is correct in his conclusion that this is the reason
for the inclusion of this language.
MS. COOK replied that is the reason for the inclusion of the
language; however, she pointed out that she did not participate
in the policy decision.
Number 1518
RON LORENSEN, Attorney, Simpson, Tillinghast, Sorensen, and
Longenbaugh, testifying as outside counsel to the Alaska
Permanent Fund Corporation, testified in support of HJR 26 and
answered questions from the members. He pointed out that what
is before the committee is the original version of HJR 26 which
represents the board's recommended language. That language was
discussed by the board and adopted. He told the members that
when discussing this language, he alerted them to the
possibility that the two sentences could be interpreted as
creating two separate standards that would then have to be met
with respect to an expenditure from the Alaska Permanent Fund
Corporation. It was clear that the board accepted the fact that
there would be two separate standards, and he said he believes
it is the board's desire that the two standards [be enforced].
MR. LORENSEN explained that the 5 percent standard, as Ms. Cook
has stated, is the easily determinable standard. The board had
a general concern that at some future time there may be a major
shift in the capital markets and that the shift could be so
substantial that the 5 percent [payout] could no longer be
supported by a prudent investment policy on the part of the
permanent fund corporation. Because of this concern, he said,
it was felt that there should be an overlay that would protect
against the possibility of this substantial shift in capital
markets. He identified that as the reason the board felt it was
appropriate and necessary to have [two] separate standards which
could ultimately lead to litigation. [Litigation] would involve
the presentation of experts and ultimately the legislature would
be looked to for a determination, probably not every year, but
from time to time. The presentation would be based on the
presentation to the legislature by experts that could say the
fund can support a 5 percent payout [or not]. Those initial
steps would be necessary under the two-tiered approach, but he
said that is what the board was looking at and what is still the
[board's] preference. He said that the board has not convened
to get a determination as to how it would respond to the
suggested revisions. Mr. Lorensen told the members he can
understand Ms. Cook's thinking and her efforts in making
adjustments to the legislation. The full body has not weighed
in, but some individual members have indicated their continuing
preference for the two standard approach, he added.
Number 1152
CO-CHAIR HAWKER commented that he finds the first standard
troublesome by its vagueness. He asked if real value is defined
in legal statute or is it a term defined in generally accepted
accounting principles. What does "over time" mean, he asked.
MR. LORENSEN replied that real value is an economic concept
which has fundamental grounding. It is not an accounting
concept or a legal question, except that the legislature might
say that real value, as provided for in the constitution, means
value as an economist [would interpret it]. He said he believes
a definition could be fleshed out in the legislation. There is
an economic concept of what real value is that would be viewed
as part of the question regarding whether or not that first
sentence was complied with. He turned to Ms. Cook's point that
there is no indication what "over time" meant and told the
members that this is very common economic language. The
language "over time" means over the long term, which was what
was intended by the board. Mr. Lorensen agreed that there may
be a better way to express that. Since the fund is permanent
and is going to be in existence in infinitude in theory, what
"over time" really means is over the time of the fund's
existence.
Number 0937
CO-CHAIR HAWKER commented that "real value" and "over time" are
economic concepts. He expressed concern that this language
promotes concepts, not empirical benchmarks and measures. He
pointed out that there are a lot of really bright lawyers out
there that can run concepts in all directions.
MR. LORENSEN commented that this might [create the need] from
time to time for a review with financial experts as to whether
the standard had been met. Although experts can have different
opinions, he hoped that with a solid record of the
[legislature's intent] the courts would accept the legislature's
[intent]. That should be the way it goes, he remarked.
Number 0758
MS. COOK reminded the members of the committee what subsection
(b) means as a matter of constitutional law if the second
sentence was not there. She explained that it means the
legislature has given its control over the budget to the experts
in the courts. Ms. Cook warned that the aforementioned is
questionable public policy when talking about a constitutional
document. The court is going to try to give some kind of
meaning to every word that appears in the constitution. The
court will not ignore language. If the court does not know what
it means, it will invent a meaning for it. That is the way it
is, she stated.
MS. COOK used the example of the [constitutional] budget reserve
fund language, which has been a source of some litigation. It
is a constitutional provision that the legislature considered
for many years before presenting it to the voters. The
legislature apparently knew what the words used meant.
Subsection (d), the notorious sweep language, was passed by the
legislature with the understanding that a limited amount of
state funds would be susceptible to the sweep language; the
legislature very swiftly passed a statute fleshing it out. Ms.
Cook read the last sentence of the sweep language which says:
The legislature shall implement this subsection by law
MS. COOK said that the legislature specified that amounts left
over in the general fund that are not going to be appropriated
are going to be used to repay the constitutional budget reserve
fund. Furthermore, the legislature was clever enough to point
out to the court that it was retaining the power to define it by
law. The legislature passed the law, and the court looked at it
and said no, the court knows what the general fund consists of
because that is language with ordinary meaning. Essentially,
the court said it consists of everything in the treasury except
the permanent fund and maybe the budget reserve fund. The
statute which would have limited the sweep and would have
protected some of the restricted general fund [dollars] was
thrown out by the court despite the fact that the legislature
preserved to itself the right to implement it by law. The law
was invalidated. Ms. Cook said that there is not a valid law
that implements subsection (d) anymore. She told the members
she shared this information as a warning that the state has a
court that may decide that it understands what real value is and
it understands that as lawyers not as economists. The courts
tend to [interpret] language as lawyers do rather than as
economists do. Ms. Cook said that there were a lot of
economists trying to defend subsection (d), but the court
essentially said that it did not care how the state accounts for
general fund money or what satisfies acceptable accounting
practices. When the constitution says general fund, the
[courts] gave it a very broad meaning. Ms. Cook summarized her
comments by saying that is why as a technician she is concerned
[with the language in HJR 26].
REPRESENTATIVE WILSON commented that [vague language] really
concerns her too. For that reason the committee must be very
careful that the unintended does not happen again.
Number 0318
CO-CHAIR WHITAKER said he interprets Ms. Cook's comments as
saying that no matter how definitive the legislature attempts to
be, it may be interpreted otherwise. He asked if he is correct
in that assertion.
MS. COOK responded that the court will strive to give a
reasonable interpretation of the language placed before it.
However, the court's reasonable interpretation may not be the
same reasonable interpretation as that envisioned by the people
who are working with the language.
Number 0235
CO-CHAIR WHITAKER asked if it is possible to be more definitive
with this language than is currently written.
MS. COOK responded that it is possible [to have more definitive
language] and to the extent that there is not definitive
language, she said, it is because the people who are thinking
about it, do not really know what the members mean to say yet.
That is why the language is inaccurate. There are two possible
solutions to the concerns of the permanent fund, the first is to
decrease the 5 percent and take the risk that the fund will
grow, rather than risk that the fund will drop. The other
observation is that this is a constitutional provision that
limits the amount that the legislature may appropriate from the
fund. It does not say that the legislature has to appropriate
all that money every year. If there is a fiscal crisis with the
fund, the permanent fund corporation should be able to
demonstrate that fact to the legislature in a convincing fashion
so that it does not appropriate the full amount over those
periods of severe decline.
CO-CHAIR WHITAKER asked if language could be crafted to bring
the legislation to that end.
MS. COOK replied no. The second point Ms. Cook made is that
perhaps it is not necessary to address [the issues in the first
sentence]. Perhaps the legislature needs to have faith in
future generations to do the right thing. She said perhaps
there is only so much control that can be made with the limited
knowledge [the legislature] has about what people in the future
will have to deal with, which cannot be conceived of now.
Maybe, she suggested, just the second sentence is all the
control that should be expected to be imposed on those future
generations.
Number 0029
MR. LORENSEN told the members that his responsibility is to
ensure that the board's point of view with regard to this matter
is presented. He said he does not believe he can make any
further recommendations beyond what Ms. Cook has stated.
TAPE 03-17, SIDE A
CO-CHAIR WHITAKER asked for Mr. Hogan's thoughts on Co-Chair
Hawker's point.
Number 0038
JAY HOGAN, Deputy Director, Office of Management & Budget,
Office of the Governor, testified on HJR 26. He told the
members that his major concern regarding the first sentence [in
subsection (b)] is that there will be objections raised to any
use of the permanent fund other than the way it has been used
for the last 20 years. Other states, he said, who have
permanent funds and used them [to fund] various state purposes,
had this kind of language explaining what was trying to be done.
He said they were trying to guarantee stability of the fund, and
availability year in and year out. This [sentence falls] short
in trying to get that point across. The real purpose is to
protect the permanent fund over the long haul to make the
resource predictable as far as value used. That was the thrust
behind the first sentence. It may very well lend itself to
further discussion and explicit discussion in accompanying
statute relating to this bill, he noted.
Number 0310
REPRESENTATIVE WILSON pointed out that the legislature is using
financial language and there is concern that a court might
interpret the language differently than what is meant by the
legislature. She asked why the resolution could not just use
plain English.
CO-CHAIR WHITAKER agreed that is what the committee is trying to
do. He said the effort has been to make the language as
understandable and clear as possible with the intent. He
commented that the discussion has led the committee to the
belief that no matter how much effort is expended to make the
intent clear, it might not be possible.
CO-CHAIR WHITAKER asked committee members to work on putting
together clarifying language before tomorrow. He said it is his
intent to move this resolution from committee in the next day or
two.
Number 0454
REPRESENTATIVE HEINZE asked why the language could not just
start out by saying that it is the legislature's intent [to
preserve the fund] for future generations.
MR. LORENSEN commented that is something that could be
discussed, although statements of intent are unusual in a
constitution.
CO-CHAIR WHITAKER replied that the members need to contemplate
that issue before the meeting.
[HJR 26 was held in committee.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned 9:00
a.m.
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