02/04/2004 08:00 AM House W&M
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
February 4, 2004
8:00 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Bruce Weyhrauch, Vice Chair
Representative Dan Ogg
Representative Norman Rokeberg
Representative Ralph Samuels
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
Representative Vic Kohring
OTHER LEGISLATORS PRESENT
Representative Paul Seaton
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 31
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund and to payments to certain
state residents from the Alaska permanent fund; and providing
for an effective date for the amendments.
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 31
SHORT TITLE: CONST AM: PERMANENT FUND
REPRESENTATIVE(S): HOLM
01/02/04 (H) PREFILE RELEASED 1/2/04
01/12/04 (H) READ THE FIRST TIME - REFERRALS
01/12/04 (H) W&M, STA, JUD, FIN
01/23/04 (H) W&M AT 8:00 AM HOUSE FINANCE 519
01/23/04 (H) Heard & Held
01/23/04 (H) MINUTE(W&M)
02/04/04 (H) W&M AT 8:00 AM HOUSE FINANCE 519
WITNESS REGISTER
REPRESENTATIVE JIM HOLM
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As sponsor, explained the committee
substitute (CS) for HJR 31 and answered questions.
ACTION NARRATIVE
TAPE 04-5, SIDE A
Number 0001
CHAIR MIKE HAWKER called the House Special Committee on Ways and
Means meeting to order at 8:00 a.m. Representatives Hawker,
Samuels, Weyhrauch, Wilson, Gruenberg, Moses, and Ogg were
present at the call to order. Representative Rokeberg arrived
as the meeting was in progress. Representative Seaton was also
present.
HJR 31-CONST AM: PERMANENT FUND
Number 0139
CHAIR HAWKER announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 31, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund and to payments to certain state residents from
the Alaska permanent fund; and providing for an effective date
for the amendments. He mentioned that the proposed committee
substitute, Version U, would be presented by the sponsor,
Representative Holm.
Number 0202
REPRESENTATIVE WEYHRAUCH moved to adopt proposed committee
substitute (CS) for HJR 31, Version 23-LS1282\U, for discussion
purposes. There being no objection, Version U was before the
committee.
CHAIR HAWKER welcomed Representative Holm and said there would
be neither public testimony nor amendment proposals today.
Number 0310
REPRESENTATIVE JIM HOLM, Alaska State Legislature, sponsor of
the bill, presented the changes made to HJR 31. He said in
Version U, $20,000 is the absolute number [of the payout], which
should simplify the bill.
CHAIR HAWKER asked if the $20,000 was just an estimate in the
prior version of the bill, but now is a sum certain.
REPRESENTATIVE HOLM said that it is. He mentioned a provision
in the bill that attaches a percent of market value (POMV)
approach to the balance of the permanent fund when the payment
has been made. He said he thinks the POMV is the appropriate
approach to balance out the fund forever.
REPRESENTATIVE HOLM said another addition to the bill was to
incorporate AS 43.23.075 and AS 43.23.085, which are the hold
harmless agreements in state law. He said if a person receives
[the $20,000 payment], and is taken off of a subsistence or
welfare program, the state is not liable.
CHAIR HAWKER announced the arrival of Representative Rokeberg,
and he explained, again, the purpose of today's hearing.
Number 0609
REPRESENTATIVE WILSON referred to Section 15, subsection (a)[of
the constitution], where it mentions that 25 percent [of the
earnings] are placed in the fund, and she asked if this
[process] is happening now.
REPRESENTATIVE HOLM said that it is. He pointed out that the
payment of $20,000 would be coming from the "top of the well."
He said [the payment] would come off of the reserve and the
permanent fund would be finished, leaving nothing in the reserve
account. The corpus of the fund would remain.
Number 0719
CHAIR HAWKER asked if the language on page 2, line 19 [Section
3, subsection (b)], triggers the mechanism whereby income in any
account of the permanent fund is used for the [$20,000] payments
[as mentioned in] Section 30. He asked if, when that fund is
depleted, any additional amounts needed would be withdrawn from
the existing principal.
REPRESENTATIVE HOLM said he believes so.
CHAIR HAWKER stated, "In theory, when the income of the sub
account is gone, and there remains a principal balance, it would
then be operated under the POMV concept for endowment
management."
REPRESENTATIVE HOLM said it would.
Number 0808
CHAIR HAWKER asked if Section 3, subsection (a), paragraph (2),
the two references to statutes, received Legislative Legal and
Research Services and were the only two hold harmless clauses
needing consideration.
REPRESENTATIVE HOLM said they were.
REPRESENTATIVE WILSON asked if whatever is left in the permanent
fund is set up and run under the POMV, what that amount might
be.
REPRESENTATIVE HOLM opined that [the amount] will vary because
the fund will change between now and when it is voted in, a year
from now. Whatever the amount of money left, say $15 billion to
$17 billion dollars, the projected return on investment is 7.6-
7.8 percent, he added. He said he uses 8 percent, an easy
number to work with; so then $1.2 billion is generated as the
return of the investment of the permanent fund. Of that number,
if a POMV approach is used, 5 percent of the 8 percent would be
used for government purposes and 3 percent would remain in the
fund. That leaves $800 million available for government
services, which would not all have to be spent. He said there
is a $400 million shortfall, which leaves $400 million, he
suggested, to be put in the Constitutional Budget Reserve (CBR)
to buffer the peaks and valleys of oil production.
REPRESENTATIVE WILSON said if that happens, deferred maintenance
items could be worked on.
REPRESENTATIVE HOLM agreed with Representative Wilson's idea.
He said money was also needed for Medicare, Teachers' Retirement
System (TRS), Public Employees' Retirement System (PERS), and
appropriately funding education. He said those are issues that
are difficult to solve under the current scenario.
Number 1121
CHAIR HAWKER asked about the intent of the language on page 2,
lines 3-5, [Section 2, subsection (b)] paraphrasing, "that an
appropriation from the fund may be made for any public purpose
except for future dividends." He said it would be a matter for
complete legislative judgment, as today, all of the [permanent
fund] earnings are subject to legislative judgment.
REPRESENTATIVE HOLM said that is correct.
REPRESENTATIVE ROKEBERG cautioned Representatives Wilson and
Holms that, even with up to $800 million [possible], [the
legislature] shouldn't be looking to spend that much, because,
depending on the price of oil, it may not be enough to fill the
gap.
CHAIR HAWKER concurred with Representative Rokeberg's comments.
Number 1238
REPRESENTATIVE ROKEBERG explained that, twice in the last
decade, there has been over $1 billion per fiscal year in
shortfall in the availability of funding. Under this bill,
under the 5 percent drawdown, there would be upwards to $800
million, which, obviously, would be short. So, he said, it
might not be feasible to meet revenue needs, and other methods
of revenue enhancements might be needed in order to meet the
gap, depending on the price of oil.
CHAIR HAWKER suggested, "Don't count your chickens before they
hatch."
REPRESENTATIVE HOLM said that is why he is presenting the bill.
He said it is the only program he has seen so far that allows
for flexibility without taxation or other form of revenue
enhancement. He opined it is the only inducement that people
would support that would allow the legislature to do its work.
This bill would provide a buffer zone, he said.
CHAIR HAWKER thanked Representative Holm and announced that
public testimony would be scheduled in the future.
Number 1503
REPRESENTATIVE HOLM thanked the committee. He said, "We are all
Alaskans, and we all have the opportunity now to make some
significant changes if we will do it."
[HJR 31 was heard and held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
8:20 a.m.
| Document Name | Date/Time | Subjects |
|---|