Legislature(2021 - 2022)ANCH LIO DENALI Rm
09/08/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB3001|| HJR301 | |
| Overview(s): Appropriation Limits | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB3001 | TELECONFERENCED | |
| *+ | HJR301 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
Anchorage, Alaska
September 8, 2021
3:06 p.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool (via teleconference)
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story (via teleconference)
Representative Mike Prax (via teleconference)
Representative David Eastman (via teleconference)
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Dan Ortiz (via teleconference)
COMMITTEE CALENDAR
HOUSE BILL NO. 3001
"An Act relating to an appropriation limit; relating to the
budget responsibilities of the governor; and providing for an
effective date."
- HEARD & HELD
HOUSE JOINT RESOLUTION NO. 301
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit; and relating to the budget
reserve fund.
- HEARD & HELD
OVERVIEW(S): APPROPRIATION LIMITS
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 3001
SHORT TITLE: APPROPRIATION LIMIT; GOV BUDGET
SPONSOR(s): REPRESENTATIVE(s) KAUFMAN
08/16/21 (H) READ THE FIRST TIME - REFERRALS
08/16/21 (H) W&M, JUD, FIN
09/08/21 (H) W&M AT 10:00 AM ANCH LIO DENALI Rm
09/08/21 (H) W&M AT 1:00 PM DAVIS 106
BILL: HJR 301
SHORT TITLE: CONST. AM: APPROP LIMIT
SPONSOR(s): REPRESENTATIVE(s) KAUFMAN
08/16/21 (H) READ THE FIRST TIME - REFERRALS
08/16/21 (H) W&M, JUD, FIN
09/08/21 (H) W&M AT 10:00 AM ANCH LIO DENALI Rm
09/08/21 (H) W&M AT 1:00 PM DAVIS 106
WITNESS REGISTER
REPRESENTATIVE JAMES KAUFMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, introduced HB 3001 and
HJR 301.
MATTHEW HARVEY, Staff
Representative James Kaufman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Kaufman, prime
sponsor, presented a PowerPoint, titled HJR 301/HB 3001.
ALEXEI PAINTER, Director
Legislative Finance Division
Juneau, Alaska
POSITION STATEMENT: Provided information and answered questions
during the combined hearing on HB 3001 and HJR 301; gave an
overview on appropriation limits.
ACTION NARRATIVE
3:06:40 PM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at [3:06] p.m. Representatives
Eastman (via teleconference), Josephson, Schrage, Story (via
teleconference), Prax (via teleconference), and Spohnholz were
present at the call to order. Representative Wool arrived (via
teleconference) as the meeting was in progress. Representative
Ortiz was also in attendance (via teleconference).
HB 3001-APPROPRIATION LIMIT; GOV BUDGET
HJR 301-CONST. AM: APPROP LIMIT
3:08:02 PM
CHAIR SPOHNHOLZ announced that the first order of business would
be HOUSE BILL NO. 3001, "An Act relating to an appropriation
limit; relating to the budget responsibilities of the governor;
and providing for an effective date" and HOUSE JOINT RESOLUTION
NO. 301, Proposing amendments to the Constitution of the State
of Alaska relating to an appropriation limit; and relating to
the budget reserve fund.
3:09:12 PM
REPRESENTATIVE JAMES KAUFMAN, Alaska State Legislature, as prime
sponsor, introduced HB 3001. He presented the sponsor
statement, which read as follows [original punctuation
provided]:
HJR 301 and its companion bill HB 3001 work together
to create a constitutional and statutory framework for
how we limit appropriations. Spending limit reform is
one of very few subject matters in which the
Comprehensive Fiscal Plan Working Group unanimously
agreed to be necessary. This legislation can meet that
need.
Alaska has been operating without an effective
appropriation limit for nearly 40 years, resulting in
less than meaningful control of our state spending.
The current limit was enacted in 1982, when
approaching peak oil production. The timing of
instituting this cap, plus the population and
inflation adjustment, have made the cap so generous
that it is longer useful in controlling our
appropriations and spending.
Successful appropriation limits have boundaries that
meet the needs of the unique way that government
operates; the right mix of rigidity where it counts
and flexibility when and where it's absolutely needed.
Alaska's inflation rate often varies from national
inflation numbers, our tax structure is unique, and
our spending per capita is wildly different than most.
If Alaska follows suit in using these common factors,
we risk failure because we may use a formula that does
not meet our unique needs.
Considering what I have outlined above, and all the
other things that make our situation unique, I propose
a new, functional cap which uses a factor based upon a
five-year trailing average of our private sector
economic performance. Specifically, Real GDP less
government spending, which measures the value produced
within our borders.
The government must support policy that will enable
the growth of our private sector economy if they would
like to spend more. The five-year averaging will
moderate the effects of volatility, leading to
stability. This proposal would set a spending cap
roughly at current levels and would include a
constitutional provision allowing flexibility in the
case of unforeseen risks.
Our Permanent Fund is a tremendous asset, but it
creates a risk that Alaska will be destined to become
a "financialized" economy. Instead of maintaining our
status as Alaskans that build, add value, and produce,
we could become Alaskans that wait and passively watch
the market while hoping for the best. A financialized
government that is funded increasingly by some portion
of the permanent fund will grow to have little to no
interest in the private sector. A spending limit
tethered to GDP creates a constructive link to our
private sector and ensures that government does not
outgrow the private sector that it is meant to
support.
We need to create strong links between government and
our productive economy before it's too late. We have
immense opportunity to solve our structural issues and
deliver a better future centered around Alaska's
productive economy. Let's be productive and take this
opportunity.
3:12:48 PM
MATTHEW HARVEY, Staff, Representative James Kaufman, Alaska
State Legislature, on behalf of Representative Kaufman, prime
sponsor, presented a PowerPoint, titled HJR 301/HB 3001. He
began on slide 2, which read as follows [original punctuation
provided]:
Current Appropriation Limit
$2.5 B plus inflation and population growth since 1982
-Calculation for FY 21 would be about $10 billion
Current limit applies to all UGF, most statewide
items, and some DGF items
Excludes PFDs, bond proceeds, debt service payments,
non-State sources of revenue, public corporation
revenues, and disaster declarations
At least 1/3 of limit reserved for Capital Projects
and Loans
Can break the limit for capital projects, if approved
by the voters
MR. HARVEY described a graph of the proposed appropriation limit
pictured on slide 3. He reviewed the proposed appropriation
limit on slide 4, which read as follows [original punctuation
provided]:
Proposed Appropriation Limit
Calculated by subtracting government spending from
historical State GDP values and adjusting for
inflation
Stability is improved by averaging these values over
the previous full five fiscal years
Constitutional amendment, as drafted, caps the
statutory limit at 14% of the calculated value
Statutory limit, as drafted, caps appropriations at
11.5% of value
-FY22 appropriations were $15.9 Million below
11.5% of the calculated value
MR. HARVEY highlighted the proposed exemption list changes on
slide 5, which read as follows [original punctuation provided]:
Proposed Exemption List Changes
Adds payment of principal and interest on revenue
bonds to exceptions list
Adds "appropriations to a state account or fund that
requires a subsequent appropriation from that account
or fund as prescribed by law" to exceptions list
Removes Capital Project reservation and exemption
language
Current limit applies to all UGF, most statewide
items, and some DGF items
-Excludes PFDs, bond proceeds, debt service
payments, non-State sources of revenue, public
corporation revenues, and disaster declarations
CHAIR SPOHNHOLZ inquired about the meaning of capital project
reservation.
MR. HARVEY said it referred to the money reserved for capital
projects.
3:20:00 PM
REPRESENTATIVE JOSEPHSON, referring to slide 3, asked whether
moneys put into the constitutional budget reserve (CBR) was
reflected in the yellow bars on the graph.
MR. HARVEY was unsure of the answer. He deferred to Mr.
Painter.
ALEXEI PAINTER, Director, Legislative Finance Division, stated
that the limit excluded appropriations to funds that require
further appropriation to spend. He noted that the CBR fell into
that category and would be excluded from the limit.
REPRESENTATIVE JOSEPHSON sought to clarify whether the yellow
bars on slide 3 (reflecting appropriations subject to the limit)
included funds appropriated to the statutory budget reserve
(SBR) or CBR.
MR. PAINTER conveyed that the yellow bars did not include
appropriations to the CBR or SBR.
3:22:52 PM
REPRESENTATIVE KAUFMAN, in response to Representative Schrage,
explained that the intent of the legislation was to link public
spending with the success of the private sector economy. He
suggested that the bill would implement a smoothing mechanism
to tame the volatility in economic performance.
REPRESENTATIVE SCHRAGE pondered whether this proposal offered an
appropriate basis for a spending cap.
3:26:32 PM
REPRESENTATIVE WOOL pointed out that most of Alaska's GDP was in
the oil industry; therefore, if oil GDP were to increase, Alaska
could theoretically spend more money. However, he noted that
oil production on state land was different than oil production
on federal land, suggesting that even if the spending limit
increased, there wouldn't necessarily be more money to spend.
Additionally, if Amazon were to bring in 10,000 employees to
Anchorage, GDP would increase thus increasing the spending limit
according to this proposal; however, the new Amazon employees
would use state services, such as schools and roads, thereby
costing the government more money without bringing in additional
revenue.
REPRESENTATIVE KAUFMAN pointed out that the Amazon employees
would become part of the "economic fabric" of the community by
buying houses, purchasing vehicles, paying taxes, eating in
restaurants, etcetera; consequently, their presence would feed
into the GDP.
REPRESENTATIVE WOOL pointed out that those employees wouldn't
pay taxes. He reiterated that although the spending limit would
go up due to the increased GDP, there wouldnt be additional
revenue to match. He asked if that was correct.
REPRESENTATIVE KAUFMAN maintained his belief that there would be
a stimulative effect on the local economy. He discussed
inflation targeting.
3:31:31 PM
REPRESENTATIVE STORY questioned how an increased GDP would
increase state revenue without an income tax or sales tax.
REPRESENTATIVE KAUFMAN remarked, I believe we could find other
ways for it to link back in so that what we're spending is in
relation to what we're receiving.
3:32:41 PM
CHAIR SPOHNHOLZ, referring to slide 3, observed eight or nine
years where state spending would have surpassed the proposed
appropriation limit. She asked Representative Kaufman to
explain why he had proposed a spending cap that would be lower
than historically low levels of spending.
REPRESENTATIVE KAUFMAN believed that smoothing the capital
projects would smooth the ensuing maintenance projects.
CHAIR SPOHNHOLZ maintained her belief that the proposed spending
cap was too low. She asked the bill sponsor why he chose 14
percent and 11.5 percent as the benchmarks for the appropriation
limit.
REPRESENTATIVE KAUFMAN pointed out that the Fiscal Policy
Working Group had recommended that the legislature seek
reductions in spending. Further, he indicated that this
proposal was just a starting point. He deferred to Mr. Harvey.
MR. HARVEY stated that the statutory limit assumed a market
price was set at current spending levels, whereas the
constitutional limit provided enough headroom, as well as a
level of savings while exhibiting a contracyclical effect with
GDP.
3:38:50 PM
REPRESENTATIVE JOSEPHSON sought to confirm that capital
expenditures would be subject to the spending cap.
MR. HARVEY answered yes, as long as they're not subject to any
other exemptions. For example, federal spend on a capital
project would not be subject to the cap.
REPRESENTATIVE JOSEPHSON pointed out that the Republican Party
had supported large capital budgets to improve private sector
opportunities. He wondered whether a miner or a timber
operator, for example, would oppose putting their share of
capital spending under the limit.
MR. HARVEY indicated that it would be a policy call.
3:41:04 PM
CHAIR SPOHNHOLZ asked how GDP [as the measure of spending] would
be impacted by changes in oil development. She considered a
scenario in which the population stayed the same while inflation
continued to grow, and GDP were to decline.
REPRESENTATIVE KAUFMAN acknowledged that there would be
challenges without finding a way to preserve the local economy.
CHAIR SPOHNHOLZ considered a scenario in which oil development
was declining while a new Amazon fulfillment center in Alaska
brought a surge in new jobs without an effect on the GDP. She
asked how the public safety, health, and education for the new
workers would be provided for under the proposed legislation.
REPRESENTATIVE KAUFMAN suggested that the statutory limit could
be changed. He offered to follow up with a response.
3:45:21 PM
REPRESENTATIVE JOSEPHSON inquired about the absence of
expenditures that exceed the limit.
REPRESENTATIVE KAUFMAN remarked, There could be mechanisms that
address space for capital projects within the limit.
Additionally, he suggested that the statutory language could
allow for a rapid response. He reiterated the importance of the
smoothing effect.
3:49:12 PM
REPRESENTATIVE PRAX shared his understanding that capital
spending was included in the limit. If there were a need for
capital spending above the limit, he asked whether the option to
issue a [general obligation] bond would be available.
REPRESENTATIVE KAUFMAN answered yes.
REPRESENTATIVE PRAX asked whether Wielechowski v. State of
Alaska had any legal impact on this proposal.
REPRESENTATIVE KAUFMAN answered no. He noted that there had
been some discussion of amendments on that topic in the Senate.
MR. HARVEY explained that a legal interpretation had suggested
that the statutory limit in the bill may not be enforceable. He
added that the Senate was working on an amendment to address
that issue.
CHAIR SPOHNHOLZ asked what language would be used enforce the
statutory limit.
MR. HARVEY said currently, the language "as provided by law"
would apply to appropriation bills; therefore, exempting
appropriation bills would tighten up the language.
3:52:22 PM
REPRESENTATIVE KAUFMAN, in response to Representative Eastman,
maintained that the purpose of the proposed legislation was to
increase stability in state spending, as opposed to direct state
spending.
REPRESENTATIVE EASTMAN sought to confirm that the intent was to
produce higher lows and lower highs, as opposed to the current
volatility.
REPRESENTATIVE KAUFMAN confirmed.
3:56:59 PM
CHAIR SPOHNHOLZ reminded listeners that in addition to the
constitutional spending cap, a statutory spending cap already
existed. Additionally, she pointed out that a committee
appropriations cap had been drafted. She announced that HB 3001
and HJR 301 were held over.
^OVERVIEW(S): Appropriation Limits
OVERVIEW(S): Appropriation Limits
3:57:53 PM
CHAIR SPOHNHOLZ announced that the final order of business would
be an overview on appropriation limits by the Director of the
Legislative Finance Division (LFD), Alexei Painter.
3:58:20 PM
ALEXEI PAINTER, Director, LFD, provided a PowerPoint
presentation, titled Appropriation Limits Overview. He
reviewed the presentation outline on side 2. He continued to
slide 3, which read as follows [original punctuation provided]:
Current Constitutional Appropriation Limit
? Established in Article IX, ?16 of the Alaska
Constitution, effective starting in 1982
"Except for appropriations for Alaska permanent fund
dividends, appropriations of revenue bond proceeds,
appropriations required to pay the principal and
interest on general obligation bonds, and
appropriations of money received from a non-State
source in trust for a specific purpose, including
revenues of a public enterprise or public corporation
of the State that issues revenue bonds, appropriations
from the treasury made for a fiscal year shall not
exceed $2,500,000,000 by more than the cumulative
change, derived from federal indices as prescribed by
law, in population and inflation since July 1, 1981.
Within this limit, at least one-third shall be
reserved for capital projects and loan appropriations.
The legislature may exceed this limit in bills for
appropriations to the Alaska permanent fund and in
bills for appropriations for capital projects, whether
of bond proceeds or otherwise, if each bill is
approved by the governor, or passed by affirmative
vote of three-fourths of the membership of the
legislature over a veto or item veto, or becomes law
without signature, and is also approved by the voters
as prescribed by law. Each bill for appropriations for
capital projects in excess of the limit shall be
confined to capital projects of the same type, and the
voters shall, as provided by law, be informed of the
cost of operations and maintenance of the capital
projects. No other appropriation in excess of this
limit may be made except to meet a state of disaster
declared by the governor as prescribed by law. The
governor shall cause any unexpended and unappropriated
balance to be invested so as to yield competitive
market rates to the treasury.
MR. PAINTER turned to slide 4, which read as follows [original
punctuation provided]:
Appropriations Subject to Current Constitutional Limit
? Sets out exceptions to the limit as follows:
"Except for appropriations for Alaska permanent fund
dividends, appropriations of revenue bond proceeds,
appropriations required to pay the principal and
interest on general obligation bonds, and
appropriations of money received from a non- State
source in trust for a specific purpose, including
revenues of a public enterprise or public corporation
of the State that issues revenue bonds?No other
appropriation in excess of this limit may be made
except to meet a state of disaster declared by the
governor as prescribed by law.
? This creates exclusions of both fund sources
(revenue bonds, corporate revenues, funds from a non-
State source) and purposes (PFDs, bond interest)
? The clause "appropriations of money received from a
non-State source in trust for a specific purpose"
captures federal revenue and most fund sources
categorized as "Other State Funds"
? The legislature may also exceed the limit for
appropriations to the Permanent Fund
? An Attorney General's opinion from 1983 indicates
that school debt reimbursement is excluded from the
limit
4:04:57 PM
REPRESENTATIVE PRAX asked why the repayment of revenue bonds was
excluded from the current constitutional limit.
MR. PAINTER did not know why it was drafted that way. He noted
that the governors proposal, as well as the other
constitutional amendments in front of the legislature, would
amend that language to make it so both the proceeds and the
repayments from revenue bonds were excluded from the limit, as
opposed to just the repayment.
REPRESENTATIVE PRAX asked for the citation on the court case
from which school bond debt was excluded from the limit
MR. PAINTER said that case did not reach litigation; however, he
offered to follow up with the attorney general opinion that
addressed that issue.
4:06:51 PM
MR. PAINTER, in response to Representative Eastman, explained
that if a bill passed without the governors signature, it could
also be enacted by a three-quarter vote, which would override
the veto. Alternatively, a [general obligation] bond or an
appropriation from the permanent fund would be assigned by the
governor and then sent to a vote of the people. He added that
the [general obligation] bond would not require a three-quarter
vote. He acknowledged that it was a confusing section of the
constitution.
MR. PAINTER, in response to Representative Eastman, stated that
appropriations for capital projects that are in excess of the
limit would have to go to a vote of the people.
REPRESENTATIVE EASTMAN asked whether the Alaska Permanent Fund
was included in that.
MR. PAINTER answered no.
4:09:14 PM
MR. PAINTER, in response to Representative Josephson, clarified
that on slide 5, only the purple segment of the pie chart
reflected appropriations subject to the constitutional limit.
He resumed the presentation on slide 5, which provided a graph
of total appropriations made in FY 21 and indicated which were
subject to the constitutional limit. He pointed out that
roughly $5.051 billion of appropriations were subject to the
limit.
CHAIR SPOHNHOLZ noted that in FY 21, a high number of
appropriations came from non-state sources due to COVID-19
funding. She characterized FY 21 as an extraordinary year,
adding that it should not be considered a benchmark for a
standard year.
MR. PAINTER continued to slide 6, which read as follows
[original punctuation provided]:
Starting Point and Growth Rate of Current
Constitutional Limit
"Appropriations from the treasury made for a fiscal
year shall not exceed $2,500,000,000 by more than the
cumulative change, derived from federal indices as
prescribed by law, in population and inflation since
July 1, 1981."
? This was slightly below the appropriation level when
the limit was adopted in FY82. In FY21, the limit is
about $9.8 billion.
4:14:16 PM
MR. PAINTER, in response to Representative Eastman, clarified
that the amount of appropriations subject to the limit were
slightly higher than the limit when it was adopted. He
explained that the intent of adopting the limit was to force a
reduction in expenditures.
4:15:02 PM
CO-CHAIR SPOHNHOLZ recalled that Mr. Painter had stated that
Anchorages cap and the states appropriation limit were defined
the same but implemented differently, which resulted in a more
generous interpretation at the state level. She asked how they
were calculated differently.
MR. PAINTER indicated that the state limit was calculated by
multiplying the prior year limit by the change in population;
then multiplying that number by the change in inflation. In
contrast, Anchorage added the sum of the change in population to
the sum of the change in inflation. He resumed the presentation
on slide 7, which displayed a graph of the current
constitutional appropriation limit from FY 83 to FY 21. He
noted that the graph used the current understanding of how
appropriations should be counted, as opposed to the contemporary
understanding.
4:18:52 PM
MR. PAINTER, in response to Representative Josephson, addressed
the structural flaw in the calculation of the constitutional
appropriation limit, as the limit could not be calculated until
after the fact. He pointed out that the official calculation of
the current limit was included in the states annual
comprehensive financial report, which occurred after the fiscal
year closed. Therefore, violations of the limit could not be
identified until after the year ends.
4:20:32 PM
REPRESENTATIVE EASTMAN inquired about the enforcement mechanism
for exceeding the limit.
MR. PAINTER did not know, as there were no existing cases that
tested that.
4:21:14 PM
CO-CHAIR SPOHNHOLZ stated her understanding that the issue was
around supplemental budgets, as they were sometimes appropriated
outside the limit. She asked if that was correct.
MR. PAINTER agreed. Another factor, he said, was the difficulty
in estimating the limit, along with all the other estimated
items in the budget. He reiterated that for practical purposes,
the legislature had not factored the limit into appropriation
decisions. He resumed the presentation on slide 8, which read
as follows [original punctuation provided]:
Current Statutory Appropriation Limit
? Established in AS 37.05.540 (b), enacted in 1986
? Based on appropriations made in a fiscal year, not
for a fiscal year counts supplementals in the year
they are appropriated, not the year they are effective
? Using similar exclusions as the Constitutional
limit, limits spending growth to population plus
inflation plus 5%
? Since it is in statute, it can be ignored and has
been broken repeatedly
MR. PAINTER continued to slide 9, which provided a graph of
current statutory appropriation limits from FY 01 to FY 21. He
noted that the limit had been violated in FY 05, FY 08, FY 10,
FY 11, FY 12, FY 18, and FY 20.
4:26:48 PM
REPRESENTATIVE EASTMAN inquired about the rationale for ignoring
the statute.
MR. PAINTER conveyed that the legislatures constitutional power
of appropriation trumped any other statute.
REPRESENTATIVE EASTMAN asked whether the legislatures right to
appropriate would change with a constitutional amendment.
MR. PAINTER indicated that the legislature would have to balance
competing constitutional responsibilities; however, it would be
binding. He expounded that if it came to a point where
education, for example, could not be funded adequately without
breaking the limit, constitutional responsibilities would be
pitted against each other. Nonetheless, he stated that a
constitutional limit would be effective and could not be
ignored.
REPRESENTATIVE PRAX inquired about declines in the spending
limit curve on slide 9. He asked whether that was due to
declines in population.
MR. PAINTER clarified that it was due to declines in
appropriations.
4:27:42 PM
MR. PAINTER presented slide 10, which read as follows [original
punctuation provided]:
nd
Appropriation Limit Proposals in 32 State Legislature
Constitutional Amendments
? SJR 5/HJR 6 (Governor)
? HJR 301/SJR 301 (Rep. Kaufman/Sen. Myers)
Statutory Amendments
SB 75 (Sen. von Imhof)
? HB 141 (Rep. Spohnholz)
? HB 3001 (Rep. Kaufman)
MR. PAINTER moved immediately to slide 11, which showed a graph
of the proposed constitutional and statutory limits listed on
slide 10.
4:32:40 PM
MR. PAINTER presented slide 12, which displayed a chart
comparing the starting point and growth rate of the current
constitutional limit, current statutory limit, and each of the
proposed amendments listed on slide 10.
4:35:40 PM
MR. PAINTER moved on to slide 13, which read as follows
[original punctuation provided]:
Comparing Impact of Proposed Limits
Projecting limits forward is challenging and highly
dependent on assumptions. Applying proposed limits
historically gives a clearer view of how they may
operate
? Appropriations data prior to FY00 is less reliable,
so these focus on implementation after that
? We provide three scenarios: implementation in Fiscal
Years 2003, 2008, and 2013. This gives a variety of
spending levels for a starting point.
MR. PAINTER presented slide 14, "HJR 6 (Governor) if Enacted
Historically," which displayed a bar graph showing the actual
appropriations subject to limit, a red line showing if the limit
had been enacted in FY 03, a green line showing if the limit had
been enacted in FY 08, and a purple line showing FY 13 which, he
noted, was at the peak of the appropriations.
MR. PAINTER presented slide 15, "CSSJR 5 (Governor/Senate
Judiciary) if Enacted Historically," which displayed a similar
map showing different values. He said that the appropriations
under this amendment would grow more slowly than the governor's
proposal.
MR. PAINTER presented slide 16, "HB 141 (Rep. Spohnholz) if
Enacted Historically," which displayed a graph showing very
similar values to the graph of HJR 6 on slide 14.
MR. PAINTER presented slide 17, "HB 3001 and HJR 301 (Rep.
Kaufman) if Enacted Historically," which indicated that the
limit would not change if enacted historically because it was
not based on prior year appropriations.
4:41:40 PM
REPRESENTATIVE PRAX asked whether there was a way to speculate
on how a spending limit based on GDP could inhibit growth of GDP
if it were to grow rapidly.
MR. PAINTER reported that oil was around 10 percent of GDP,
whereas in the 1980s, it was a much higher portion. Therefore,
he said, it was difficult to go back to the 1980s. He pointed
out that whether expenditure reduction was a drag on the economy
was a policy question.
REPRESENTATIVE PRAX asked whether permanent fund earnings were
included in state GDP.
MR. PAINTER replied, "No.
REPRESENTATIVE PRAX commented that tethering government spending
to GDP was attractive but recalled the explosion in GDP in the
1970s and the state spending that would be done [if that were to
occur again].
4:46:04 PM
REPRESENTATIVE EASTMAN noted that Kaufman's proposal was
designed to reduce impacts on the broader economy
MR. PAINTER replied that this was historical data and
appropriations that were actually made. He presented slide 18,
"SB 75 (SENATOR. Von Imhof) adjusted Backwards."
4:48:53 PM
CO-CHAIR SPOHNHOLZ asked why the scale on this chart was
different than the others.
MR. PAINTER said that SB 75 had different exclusions than the
others, which affected the scale.
4:50:26 PM
MR. PAINTER concluded his presentation on slide 19, which read
as follows [original punctuation provided]:
Other Considerations
? Who calculates the limit?
Current constitutional limit is calculated in the
ACFR after the close of the fiscal year by Division of
Finance
Statutory limit is not formally calculated by any
entity (though Legislative Finance does calculate it
each year)
HB 3001, HB 141, and SB 75 require the Governor to
calculate it as part of the 10-year plan. SB 75 also
requires the Legislative Finance Division to review
the limit every three years
? Should there be special treatment of capital
projects?
The current constitutional limit sets aside 1/3 of
the limit for capital. In practice, this has not been
followed. An AG opinion indicated that this provision
could be ignored in times of constrained revenue, but
even in the oil boom years in the 2000s this was not
followed.
4:52:38 PM
REPRESENTATIVE EASTMAN asked how the limit for capital projects
hadn't been followed.
MR. PAINTER explained that the legislature had not appropriated
one-third of the limit towards capital projects; additionally,
during the years in which the state could have afforded to do
so, operating expenditures exceeded the allowable ratio.
4:53:33 PM
REPRESENTATIVE JOSEPHSON asked whether other states tethered
government spending to GDP. He pointed out that Hawaii tethered
government spending to personal income growth and asked whether
that was the same as GDP.
MR. PAINTER stated that personal income was related to, but not
the same as, GDP. He added that he was not aware of any other
state that tied GDP to government spending.
REPRESENTATIVE JOSEPHSON said he was not a fan of spending caps
because he viewed it as "self-correcting."
CO-CHAIR SPOHNHOLZ referred to slide 7 and sought to confirm
that if two-thirds of the spending cap had been applied to
operational spending and one-third to capital, the state would
have been overspending in some years between FY 08 and FY 15.
She asked if that was accurate.
MR. PAINTER answered yes, when considering the threshold to be
two-thirds of the appropriation limit. He noted that according
to the attorney general opinion, that guideline did not need to
be followed in times of constrained revenue.
CO-CHAIR SPOHNHOLZ pointed out that if the two-thirds guideline
had been applied to the FY 21 budget, the limit would have been
nearly exceeded again.
4:59:45 PM
REPRESENTATIVE EASTMAN asked whether any of the proposed
legislation included an enforcement mechanism for exceeding the
cap.
MR. PAINTER explained that all the proposed spending caps could
be calculated in advance and evaluated for constitutional
compliance by the governor before signing off on them. If the
legislature forwarded appropriations that violated the cap, he
said, the governor would have to veto the appropriations down to
the cap to avoid violating his oath of office by violating
constitutional obligations.
MR. PAINTER, in response to Representative Eastman, said that he
hadn't seen any enforcement mechanisms in any of the proposed
legislation.
5:03:28 PM
MR. PAINTER, in response to Representative Story, clarified that
the true limit had not been exceeded. The question, he said,
was whether the two-thirds guideline had been violated during
high revenue years.
5:04:58 PM
REPRESENTATIVE PRAX asked whether LFD could provide forecasts of
the spending caps proposals.
MR. PAINTER said it could be done.
REPRESENTATIVE PRAX speculated that future trends in volatility
would not be as great as they had been due to overall growth in
GDP.
CO-CHAIR SPOHNHOLZ acknowledged that the present economy was
much more diverse than it was in the 1980s.
5:07:50 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
5:08 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Leg Finance Appropriation Limits Presentation 9.8.21.pdf |
HW&M 9/8/2021 10:00:00 AM |
|
| HJR 301_HB 3001 Sponsor Statement.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB3001 HJR301 |
| HB 3001 Sectional Analysis.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB3001 |
| HJR 301 Sectional Analysis.pdf |
HW&M 9/8/2021 10:00:00 AM |
HJR301 |
| HJR 301_HB 3001 Presentation.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB3001 HJR301 |
| HJR 301_HB 3001 Supporting Documents.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB3001 HJR301 |
| HB 3001 Fiscal Note.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB3001 |
| HJR 301 Fiscal Note.pdf |
HW&M 9/8/2021 10:00:00 AM |
HJR301 |
| Workdraft version N 9.8.21.pdf |
HW&M 9/8/2021 10:00:00 AM |
HB 141 |