Legislature(2003 - 2004)
04/05/2004 09:04 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 05, 2004
9:04 AM
TAPES
SFC-04 # 69, Side A
SFC 04 # 69, Side B
SFC 04 # 70, Side A
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 9:04
AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Lyman Hoffman
Senator Donny Olson
Senator Ben Stevens
Also Attending: JOEL GILBERTSON, Commissioner, Department of
Health and Social Services; DORIS ROBBINS, Volunteer, Juneau
Clean Air and Tobacco Free Kids; CHERYL FRESCA, Director, Office
of Management and Budget, Office of the Governor; BRUCE
TANGEMAN, Fiscal Analyst, Legislative Finance Division; LUCKY
SCHULTZ, Staff to Senator Fred Dyson
Attending via Teleconference: From an Offnet Sites: JOHANNA
BALES, Program Manager, Cigarette and Tobacco Excise Tax,
Department of Revenue; JENNFIER APP, Advocacy Director, American
Heart Association; From Fairbanks: RUTHAMAE KARR, Chair, Alaska
Tobacco Control Alliance; From Anchorage: PAT LUBY, AARP Alaska;
MICHELLE TOOHEY, Director of Public Advocacy, American Lung
Association of Alaska; EMILY NENON, Alaska Advocacy Manager,
American Cancer Society; PATRICIA SENNER, Family Nurse
Practitioner; JOELLE HALL, Parent; KATTARYNA STILES,
Representative, Alaska Native Health Board
SUMMARY INFORMATION
SB 368-TOBACCO TAX; LICENSING; PENALTIES
The Committee heard from the Department of Health and Social
Services, the Department of Revenue, and took public testimony.
The bill was held in Committee.
SJR 3-CONST AM: APPROPRIATION/SPENDING LIMIT
The Committee heard from the bill's sponsor, the Office of
Management and Budget, the Division of Legislative Finance,
adopted two conceptual amendments, and reported the bill from
Committee.
SB 351-APOC REPORTS BY NONELECTRONIC MEANS
This bill was scheduled but not heard.
HB 357-RESTITUTION
This bill was scheduled but not heard.
HB 513-CSED NAME CHANGE/DRIVER'S LIC.SUSPENSION
This bill was scheduled but not heard.
#sb368
SENATE BILL NO. 368
"An Act relating to taxes on cigarettes and tobacco
products; relating to tax stamps on cigarettes; relating to
forfeiture of cigarettes and of property used in the
manufacture, transportation, or sale of unstamped
cigarettes; relating to licenses and licensees under the
Cigarette Tax Act; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken informed the Committee that this legislation
would increase the cigarette tax from the current one-dollar per
20-cigarette pack to two dollars per pack and would increase the
Other Tobacco Products tax from 75-percent to 100-percent of the
wholesale cost. Furthermore, he specified that the legislation
would allow the Department of Public Safety "to seize and
dispose of assets used in cigarette smuggling and tax evasion
activities." Co-Chair Wilken identified the bill version before
the Committee as SB 368, Version 23-GS2116\A.
JOEL GILBERTSON, Commissioner, Department of Health and Social
Services, stated that this legislation would increase the
cigarette tax from one dollar to two dollars per pack. He
explained that this legislation is being introduced "because
tobacco is the number one public health threat" for the State in
that it is the State's "leading cause of death, disability and
chronic illness."
Commissioner Gilbertson avowed that increasing the tax levy
would continue to produce health benefits to Alaskans, as he
noted, that since 1997 when the current one dollar tax went into
effect, tobacco consumption in the State has declined 30-
percent. He informed that increasing this user tax would have
the most dramatic impact on young Alaskans, as increasing the
unit price on tobacco "is one of the most effective ways of
preventing that population from ever beginning a lifelong
addiction to smoking." He stated therefore that a substantial
increase in the tax would insure that Alaskans, particularly
young Alaskans, with limited resources would choose a more
healthy avenue in which to spend their money.
Commissioner Gilbertson declared that anti-smoking efforts have
been successful, as, he disclosed that statistics developed from
a recent youth behavior survey [copy not provided] indicate that
there has been a 50-percent decline in tobacco use in young
people. He declared that increasing the tax, as proposed in this
bill, would continue that trend.
Commissioner Gilbertson remarked that the State's tobacco
enforcement efforts have successfully lowered the number of
underage Alaskans illegally purchasing tobacco products in
retail establishments from 30.2 percent to ten percent in the
last year. This action, he shared, has brought the State into
compliance with federal mandates. He asserted that were tobacco
use to further decline by 15 percent as result of the proposed
tax, "1,800 lives would be saved from premature death due to
smoking."
Commissioner Gilbertson declared that, in addition to lowering
tobacco use in young Alaskans, the increased tax would be an
effective tool in changing behavioral patterns and improving the
health of adults in the State. He estimated that a tax increase
"would be the direct catalyst" in encouraging 3,500 Alaskan
adults to stop smoking, which he shared would save approximately
800 lives. He noted that in conjunction with other entities, the
Department provides opportunities for people to participate in
tobacco cessation programs.
Commissioner Gilbertson pointed out that included in the number
of individuals who would cease to smoke would be expectant
mothers. He stated that this would equate to assisting 850
babies from maternal tobacco exposure within the next five
years.
Commissioner Gilbertson reported that the Alaskan group having
the highest number of smokers, 44-percent verses the norm of 22-
percent, is Alaska Natives. He commented that while the number
of Alaska Natives who smoke continues, "to be disproportionately
higher" than other groups, there has been a decrease in the
number smoking since the one-dollar tobacco tax was implemented.
He additionally noted that Alaska Native high school youth are
four times more likely to smoke that the general youth
population.
Commissioner Gilbertson informed that the Campaign for Tobacco
Free Kids compiled an analysis of health costs that indicates
that an increased tobacco tax would assist in reducing smoking
related health expenses by $1.6 million over the next five years
as a result of fewer smoking related heart attacks and $1.8
million would be saved from expenses associated with stokes. He
shared that information garnered from a [unspecified] 1998
comprehensive study denoted that smoking related medical
expenses amounted to $133 million in the State with $137 million
in lost productivity due to tobacco related deaths. Additional
expenses, he shared, were incurred by smoking related work
absences and such things as smoking breaks. He stated that
smoking related expenses have an "unfortunate" and "huge
economic impact on this State."
Commissioner Gilbertson stated that "17 large econometric
studies" have been utilized by the Department in order to
determine how pricing would affect the consumption of tobacco
products. He shared that all 17 studies reflect that there is "a
direct correlation between increase in tobacco price and a
decline in smoking." He stated that he would provide the
Committee with a copy of a recently completed Department's
Division of Public Health report titled "Tobacco in the Great
Land: A Portrait of Alaska's Leading Cause of Death" [copy not
provided] which substantiates the Department's position that
"tobacco is the number one public health threat facing the
State" as it is, he reiterated, the leading cause of death,
disability and chronic illness in the State. He concluded that
increasing the tobacco tax by one dollar per pack would be a
"prudent" thing to do, as it would prevent people from starting
to smoke and would assist in getting other to stop.
JOHANNA BALES, Program Manager, Cigarette and Tobacco Products
Excise Tax, Department of Revenue, testified via teleconference
from an offnet site and presented a technical overview of the
legislation in that it, in addition to increasing the current
cigarette tax from one dollar per pack to two dollars, would
increase the Other Tobacco Products tax from 75 percent to 100
percent of the wholesale cost. She informed that New Jersey
currently has the highest cigarette tax in the nation at $2.05
per pack, and that Rhode Island would soon implement a $2.45
cent per pack tax. In addition, she communicated that the state
of Washington has the highest Other Tobacco Products tax at 129
percent of the wholesale cost.
Ms. Bales noted that other provisions in the bill would increase
the annual direct buying retail license fee from $25 to $50 in
order to align these license fees with those currently paid by
distributors, as, she contended, these two entities more often
than not, "operate in the same business." She also noted that
the bill includes technical corrections that would eliminate the
double-taxation issue that might arise were in-State dealers to
purchase from out-of-state dealers who are licensed by the
State.
Ms. Bales continued that the bill would also allow distributors
dealing with recent manufacturers' returned goods policy changes
to possess unstamped cigarettes and it would also provide them
with credits for stamped cigarettes sold out-of-State. She
clarified, however, that the distributor must prove they "are
properly licensed in the other state where the cigarettes were
sold" before the credit would be issued.
Ms. Bales noted that, as reviewed by Commissioner Gilbertson,
the seizure section in the bill would allow the State to seize
assets that are in violation of the State's cigarette stamp tax
laws. She stated that this enforcement tool would assist in
promoting compliance.
Ms. Bales noted that the bill also includes "a floor stock tax
provision" which would require all entities selling cigarettes
in the State to conduct an inventory upon the enactment of the
new tax, and remit the difference between the old and new stamp
tax rate to the State within 30 days. She informed the Members
that approximately 200-million cigarettes were stockpiled,
primarily by retailers and distributors, prior to the State's
last cigarette tax increase. She estimated that scenario to have
resulted in approximately $7 million dollars in lost revenue to
the State. She also noted that the State received numerous
consumer complaints stating that they were charged the new tax
rate on the first day it was enacted, "when in fact, none of the
distributors or retailers had actually paid that increase."
Ms. Bales shared that the federal government and other states
commonly institute similar floor stock taxes.
Co-Chair Wilken noted that Ms. Bales' written testimony [copy
provided] is in the Members' packets.
Senator Bunde asked the Departments' positions on including
tobacco products such as smokeless tobacco in this bill.
Ms. Bales reminded that the tax on Other Tobacco Products was
increased in 1997 from 25 percent to 75 percent of the wholesale
cost. She noted that this bill would increase that level to 100
percent. However, she continued, when the Department conducted a
study specifically addressing chewing tobacco products such as
Copenhagen, for the Department of Health and Social Services, it
was determined that despite the tax increase implemented in
1997, there has been "a fairly significant increase in the use
of that product in the State." One of the problems, she pointed
out, is that, currently, Other Tobacco Products are not subject
to tax if an individual imports that product for personal
consumption. She stated that, even with the tax increase as
proposed in this legislation, individuals purchasing and
importing other tobacco products into the State through such
avenues as the Internet or other out-of-State purchases "would
not be subject to any of the tax, period."
Senator Bunde ascertained that this is good reason to include
those who import for personal consumption into this bill, as he
contended, not including them "would drive business out of
Alaska and puts retailers at a disadvantage."
Ms. Bales stated that the Department of Revenue would support
Senator Bunde's suggestion for two reasons: one, it would
support local business; and two, an increase in price might
curtail use of the product.
Senator Dyson understood that "the demonstrable health risks" of
non-smoked products "are significantly less" than the risks
associated with those that are inhaled.
Commissioner Gilbertson responded that, "it would be correct to
say that the health risks are not identical"; however, he stated
that, "the Department would not support a statement that the
health risks are so reduced as to be one that is diminished." He
shared that the Department could provide material attesting to
the health risks associated with both smokeless and smoked
tobacco products.
Senator Dyson agreed; however, he commented that smokeless
products pose "no risk to others from secondhand smoke and no
risk to a fetus from oxygen deprivation that happens with a
smoking mother." In addition to stating that its addiction rate
might be similar to that of cigarettes, he acknowledged that
chewing tobacco products does incur such things as gum and
throat cancer. However, he continued, its contribution to lung
cancer is minimal.
Senator Dyson asked how the legislation would affect those who
roll their own product from loose tobacco. He also noted that a
Surgeon General report, issued approximately 15 years earlier,
stated that pipe tobacco health risks are significantly less
than manufactured cigarettes. He pointed out that not all
tobacco products have the same cost impact and health risk and,
therefore, he attested they should not be treated the same.
Commissioner Gilbertson declared that, "varying tobacco products
have varying risks." He reiterated that the Department could
provide scientific study information to the Members. He noted
that, while he was unfamiliar with the pipe tobacco research
referred to, studies support the position that all tobacco
products "carry some health risks." Furthermore, he voiced that
the Department views all those health risks as negative health
risks, of which the State should discourage.
Senator Dyson asked whether the aforementioned impacts of the
tobacco tax increase on such things as mortality rates, were
annual projections.
Commissioner Gilbertson clarified that the aforementioned
results would be the accumulative affect of this tax increase.
Senator Dyson asked whether information could be provided
regarding annual death rates and usage effects of the tax.
Commissioner Gilbertson replied that the most noticeable long-
term health benefit that would result from the tax increase
would be a reduction in the number of young Alaskans who would
choose not to smoke. He informed the Committee that the majority
of long-term tobacco addicts partake of their first tobacco
product before the age of 18.
Senator Dyson voiced that there is public discontentment
regarding how the money raised from this tax has been allocated,
as there is general perception that it should be used to promote
cessation and prevention programs. He asked for a recap of how
the current tobacco tax revenue is allocated; specifically the
amount spent on cessation and prevention programs, and whether
this legislation would alter the current scenario.
Commissioner Gilbertson stated that this legislation would not
dedicate its revenues for tobacco control programs. Continuing,
he informed that the Department, individually and in conjunction
with the Tobacco Control Alliance partners, manages a tobacco
control program. Furthermore, he explained that the majority of
the monetary support for these programs is supported by Tobacco
Master Settlement money with additional funding generated from
licensure fees. He noted that approximately $5 million would be
spent on these programs in FY 05.
Ms. Bales disclosed that currently 76-percent of the revenue
generated from the tobacco tax is distributed to the State's
School Fund and 24 percent is deposited into the general fund.
She explained that increasing the per pack tobacco tax from one
dollar to two dollars would generate double the revenue; and,
she attested that even though this legislation would reduce the
percentage allocation for the School Fund to 38 percent, the
money generated would remain constant. Continuing, she stated
that the amount allocated to the general fund would increase to
62 percent.
Ms. Bales noted that 100 percent of the revenue generated from
the tax on Other Tobacco Products is currently, and would
continue to be, deposited into the general fund.
Ms. Bales clarified that there is no language in the Master
Tobacco Settlement agreement specifying that it be used to fund
such things as tobacco cessation and education programs. She
voiced the understanding that the money could be used to
reimburse the State's general fund for such things as Medicaid
expenses. She concluded that it is the Legislature's decision as
to how to spend that money.
Senator Olson asked for assurance that language in the bill
pertaining to the seizure of assets as specified on page five,
line three and page six, line eight would not jeopardize such
things as aircraft and vehicles owned by common carriers who
might unknowingly transport cigarettes.
Ms. Bales understood that the forfeiture provisions which were
drafted by the Department of Law, would provide "innocent person
relief" in the case that their property were unknowingly used by
a cigarette tax violator. She assured that provisions are also
included to address situations, for example, in a village
wherein "a family's sole source of transportation would be
protected from seizure."
Ms. Bales reminded that violations of the tobacco tax would not
apply to personal cigarette consumption.
Senator Olson asked regarding the scenario in which a common
carrier who, as a means of business, transports cigarettes.
Ms. Bales clarified that a violation would not occur unless the
common carrier knowingly transported illegal cigarettes. She
noted that she would confirm this interpretation of the language
with the Department of Law.
Co-Chair Wilken asked Ms. Bales to review comments included in
an April 4, 2004 letter [copy on file] he had received from
wholesale distributor, Mike Elerding of Northern Sales, as well
as two proposed amendments that pertain to comments in that
letter.
Ms. Bales stated that she would review that information and
provide a response at the next hearing on this bill.
Senator Hoffman asked whether a portion of the revenue generated
from this tax increase would be used to support anti-smoking
advertising campaigns.
Commissioner Gilbertson responded that this bill specifies that
the revenue generated by this legislation would be deposited
into the general fund. He reiterated that the Department
operates a tobacco cessation and education program in
conjunction with the Tobacco Alliance.
Senator Hoffman reminded that the previous tobacco tax
legislation required funds to be spent on anti-smoking
advertisements, and he attested that that effort was responsible
for a downturn in cigarette consumption. Therefore, he
questioned the reason that a similar effort is not included in
this legislation.
Commissioner Gilbertson replied that a price increase is a
"tremendous deterrent" in that studies indicate that for every
ten percent price increase in the cost of a cigarette product,
there is a corresponding three-point-seven (3.7) percent
decrease in consumption. He concurred that the media campaign
was successful and would continue to be effective in reducing
general tobacco consumption; however, he stated that this
legislation does not allocate funds toward that effort. He
stated that the Governor could propose and the Legislature could
fund those efforts.
Senator Hoffman, referring to the high number of Native smokers,
asked what efforts would be exerted to reduce tobacco usage in
this group.
Commissioner Gilbertson responded that while there is a large
variety of health disparities in this State, the disparity
between cigarette consumption between Native and non-Native
populations is an important issue. He specified that the Tobacco
Control program has dedicated funds to target tobacco usage in
Natives via outreach efforts in conjunction with such groups as
the Alaska Native Tribal Health Consortium. Furthermore, he
stated, the Native Health Board, the Alaska Native Tribal Health
Consortium and other public health consortiums have been
supportive of this legislation and have agreed that increasing
the cost of tobacco products would be an effective public health
tool. He also noted that they have testified in support of this
legislation. He declared that while stronger efforts could be
exerted, efforts have been made in this regard.
Senator Hoffman understood therefore that this legislation does
not contain specific measures to address the Native tobacco use
issue.
Co-Chair Green communicated that dedicated funds should not be
an issue "at this table." On another note, she asked regarding
the success of "sting operation" efforts in urban and rural
areas.
Commissioner Gilbertson stated that tobacco enforcement efforts
have been successful throughout the State. He explained that
each state receives federal alcohol and mental health block
grant funds, the amount of which is contingent on the State's
successful implementation of a tobacco enforcement program. He
defined success "as a lower than 20 percent sales rate to
underage minors who attempt to purchase tobacco products." Were
this level of enforcement not obtained, he continued, the State
could loose up to 40-percent of its block grant funding. He
shared that the State has been non-compliant for last five years
in that its compliant rate has exceeded 30 percent per year. He
stated that this is unacceptably high and that as a result the
State has had to dedicate funds in the form of a cumulative
penalty, reaching approximately one million dollars in recent
years, so as not to loose the block grants in their entirety. In
the meantime, he communicated, the Department has worked with
retailers and others to raise awareness, improve training, and
improve enforcement efforts in this regard. He noted that, as a
result of these efforts, the illegal sales rate has recently
declined to ten percent.
Senator Olson noted that the graph titled "Cigarette
Importations FY 1996 - FY 2002 and Cigarette Stockpiling in FY
1998" [copy on file] reflects a dramatic decease in 1997 when
the cigarette tax was increased to one dollar per pack. However,
he noted that since 1997, the volume of cigarettes being
purchased has continued to increase. He questioned whether the
slope of the increase would indicate that over time, any
positive impact of the proposed two-dollar a pack tax would
diminish.
Commissioner Gilbertson responded that he could not adequately
provide a statistical answer; however, he noted that while the
number of cigarettes being imported into the State is
increasing, overall it is a minor issue as 95 percent of the
tobacco products consumed in the State are bought through local
licensed retailers in the State.
DORIS ROBBINS, Volunteer, Juneau Clean Air and Alaskans for
Tobacco Free Kids, noted that the Governor has requested that 20
percent of the Master Tobacco Settlement fund be spent on
education and cessation efforts in FY 05. On behalf of the
organizations she represents, she voiced support for the
proposed tobacco tax increase, as, she declared, it would assist
in stopping a large number of people, primarily youth, from
smoking. Were the legislation passed, she approximated that
9,100 kids would not start smoking. She stated that the majority
of smokers begin to smoke when they were children, and she
continued, were the price to deter youth from smoking, it would
serve to reduce the number of "next generation smokers." She
stated that other benefits would include a reduction in smoking
affected births; would save lives of numerous adults who
currently smoke; and would result in lowering long term medical
expenses. She noted that in order to adequately cover today's
medical expenses, the tax level should be $6.38 per pack, as she
shared that $60 million is required annually by Medicaid to
provide for tobacco related illness care. She stated that
efforts are being developed to educate children at an early age
of the health dangers associated with tobacco use. She also
stated that it is "a myth" that crewing tobacco would not affect
a baby. She recounted Doctor Robert Urata's testimony to a House
of Representatives committee in which he declared that tobacco
products are "so poisonous" that were they would fail to receive
federal Food and Drug Administration approval were they to apply
for authorization today. She stated that 82 percent of Alaskan
voters are very concerned about the use of tobacco products by
young people. She urged the Committee to pass this legislation
and also consider supporting the Governor's proposal to spend 20
percent of the Tobacco Settlement money on tobacco education
programs. In summary, she noted that the state of Mississippi
spends more on tobacco prevention that the State of Alaska does.
JENNFIER APP, Advocacy Director, American Heart Association,
testified via teleconference from an offnet site, and shared
that the American Heart Association's mission is to reduce
disabilities, cardiovascular disease and stokes. She reiterated
that tobacco use is the number one preventable cause of death in
the State, and she stated that it is also the number one
preventable cause of cardiovascular disease in the State. She
stated that the Association is in "very strong support" of an
increase in the tobacco tax because, she attested, as the price
increases, more adults attempt to quit.
SFC 04 # 69, Side B 09:51 AM
Ms. App continued that most smokers begin smoking between the
ages of ten and twenty, and she noted that the average smoker in
Alaska began at the age of 14.5 years. She attested that "this
is also the age group that is most sensitive to price
increases." Therefore, she stated that this price increase would
result, over the long-term, in a decline in smokers in the
State. Furthermore, she attested that the tax would also assist
in reducing the approximate $130 million a year the State spends
on direct costs associated with smoking, including approximately
$60 million the State pays in support of the Medicaid program.
She affirmed that Alaskan businesses are losing approximately
$130 million annually in lost productivity related to smoking.
She calculated that to cover these expenses, the tax should be
$6.38 per pack; therefore, she concluded that even with the
implementation of a two-dollar per pack tax, the State would
continue "to be subsidizing these costs." However, she stressed
that the proposed tax would be an improvement over the current
situation and would result "in a win/win situation" as it would
assist in saving lives by deterring youth from smoking and the
State would also save money through the reduction of smoking
related expenses.
RUTHAMAE KARR, Chair, Alaska Tobacco Control Alliance (ATCA),
testified via teleconference from Fairbanks and shared that
while more funding would be appreciated, the ATCA has
experienced success in the State in its efforts, via a good
media campaign, to publicize the negative affects of smoking
such as second hand smoke. She affirmed that Alaska is ranked
"very high" in its number of tobacco users, and she voiced
additional concern that even with the educational efforts,
smokeless tobacco rates are increasing because people believe
smokeless alternatives are safer than cigarettes. She agreed
that an increase in the Other Tobacco Products prices would also
result in a decrease in young smoker use and would assist
people's efforts to quit smoking. She also stated that this
would result in a win/win situation, as it would assist the
State in reducing smoking related health expenses and increase
revenues for the State. She expressed support for the
legislation.
PAT LUBY, AARP Alaska, testified via teleconference from
Anchorage and stated that this legislation is favored by AARP.
He shared that research supports the position that a higher tax
would assist in curbing youth from smoking and would encourage
existing smokers to stop. He shared that grandparents love,
support, and enjoy their grandchildren and are saddened to see
them smoke. Therefore, he stressed that any program that would
assist in preventing kids from smoking would be supported by
AARP. He voiced concern regarding the information in the
Governor's transmittal letter that denotes that Alaska Natives,
and particularly Alaska Native youth, are smoking in numbers
higher than the State's norm, and he urged that some of the
anticipated revenue from this tax be used to address this issue.
He shared that a recent Medicare Trustees annual report stated
that the State's health care costs rose "significantly beyond
expectations," primarily as a result of smoking related
illnesses. Therefore, he surmised, that were fewer kids to
smoke, the long-term affect on lowering Medicare and Medicaid
expenses "would be significant." He stated that this legislation
is both "good economic policy and good health policy, it makes
sense and it's fair." On behalf of AARP, he urged passage of the
bill.
Co-Chair Wilken noted that the April 4, 2004 letter [copy on
file] from AARP is included in Members' packets.
MICHELLE TOOHEY, Director of Public Advocacy, American Lung
Association of Alaska, testified via teleconference from
Anchorage and addressed Ms. Bales' comments regarding the
Tobacco Master Settlement Agreement (MSA) by stating that "it is
true" that the agreement does not require that money be
allocated toward tobacco prevention "because Attorneys General
have no power of appropriation; however, there was absolutely an
intent in the settlement for these dollars to go to programs to
prevent kids from smoking and to help adults quit." Furthermore,
she attested that "this commitment was stated publicly when
Alaska settled, in fact, Alaska's Attorney General was
successful in negotiating an extra $200 million for our State in
consideration of the vastness of Alaska and the logistic
complications associated with administering tobacco prevention
programs in Rural Alaska. Further, in 2001, the Legislature
created the Tobacco Use Education and Cessation Fund to set
aside the remaining non-securitized 20-percent of the MSA funds
to provide a source to finance comprehensive smoking education,
tobacco use prevention, and tobacco control programs."
Therefore, she concluded that while the agreement does not
specify a requirement to fund prevention programs, "public
commitment has been made from the beginning to use these funds
in this manner."
Senator Hoffman commented that while there might have been
"public commitment to spend those dollars," the Commissioner of
the Department of Health and Social Services has communicated
that, "there are no additional dollars in the budget for that
effort." Continuing, he calculated that 20-percent of $40
million would amount to $8 million in additional funding that
should be specified for cessation efforts.
EMILY NENON, Alaska Advocacy Manager, American Cancer Society,
testified via teleconference from Anchorage that the American
Cancer Society (ACS) "recognizes tobacco taxes as one of the
most effective ways to reduce youth smoking and save lives." She
stressed that both State and national studies support this
claim. She stated that the mission of ACS "is to eliminate
cancer as the major health problem by preventing cancers, saving
lives, and diminishing suffering from cancer." She noted that
cancer is the second leading cause of death for Alaskans and the
leading cause of death for Alaska Natives, and she attested that
one-third of all cancers are tobacco related. She affirmed that
the majority of tobacco users become addicted as children.
Therefore, she supported testimony that increased taxes would
discourage youth from smoking. She stressed that this bill is
unique in that, in addition to having a tremendous health
impact, it has large public support throughout the State. She
urged the Committee to support this bill.
PATRICIA SENNER, Family Nurse Practitioner, testified via
teleconference from Anchorage in support of increasing the
tobacco tax in order to discourage youth from smoking. She
agreed with Senator Hoffman's comments that money be specified
for an anti-smoking advertising campaign as she attested that a
"two-pronged approach" must be taken to address the issue.
Furthermore, she informed that Committee that one of the most
common requests she experiences when working with homeless youth
is the request for assistance in stopping smoking. She noted
that Medicaid does not provide funding to assist people with
such cessation aides as nicotine patches. Therefore, she voiced
that access to such things would be helpful in this endeavor.
She also encouraged the Committee to address the illegal
bootlegging and importation of tobacco products.
JOELLE HALL, Parent, testified via teleconference from Anchorage
in support of the tax. She stressed that no one has more need
for this bill than "our children." She charged that parents'
role is to teach their children the dangers of smoking and that
the Legislature's role is to promote legislation such as this
tobacco tax increase in order to assist efforts to halting youth
from smoking. She voiced that while she is glad to have smokers
contribute via paying a tax toward the expenses incurred from
tobacco related expenses, her primary reason for support was to
discourage use. She urged the Committee to report the bill from
Committee.
KATTARYNA STILES, Representative, Alaska Native Health Board,
testified via teleconference from Anchorage in support of the
bill, as she attested, it "would save lives by reducing and
preventing tobacco use." Echoing Senator Hoffman's concerns, she
stated that the high percent of Native youth who smoke is
unacceptable. She stated that raising the price of tobacco
products would assist in the endeavor of discouraging youth to
smoke. She noted Commissioner Gilbertson's comments that the tax
would also alter smoking behaviors of adults. She stressed that
efforts to discourage pregnant women from smoking would be
important, as she noted that in western Alaska, there is an
"unacceptable" smoking rate of up to 67-percent among pregnant
women. She stated that by using Tobacco Master Settlement
Agreement Funds, grants, and other funds, a multitude of
agencies are working together to educate Native Alaskans to the
dangers of smoking. She stated that adoption of this legislation
would only increase the success of the efforts that are
currently in place to prevent use of tobacco in Native Youth.
Senator Hoffman asked whether the Alaska Native Health Board
could utilize additional dollars to assist in prevention
efforts.
Ms. Stiles replied in the affirmative; however, she clarified
that the purpose of her testimony today is to support this bill,
"not for the money, its because the goal of the tobacco tax
itself is to prevent use."
Senator Bunde questioned whether any polls have been conducted
to gauge public support for this tobacco tax; and if so, he
asked whether a one-dollar or a $1.50 tax increase was
preferred.
Ms. Nenon responded that the American Cancer Society conducted a
poll with the result being equal support for either a $1.00 or
$1.50 increase.
Senator Bunde asked the level of support favoring an increase.
Ms. Nenon relied that 67-percent of those polled supported a tax
increase.
Senator Bunde reiterated that an amendment should be considered
to incorporate all tobacco products into the bill.
Co-Chair Wilken suggested that Senator Bunde develop an
amendment and present it at the bill's next Committee hearing.
There being no further testimony, Co-Chair Wilken ordered the
bill HELD in Committee.
AT EASE 10:14 AM / 10:16 AM
#sjr3
CS FOR SENATE JOINT RESOLUTION NO. 3(JUD)
Proposing an amendment to the Constitution of the State of
Alaska relating to an appropriation limit and a spending
limit.
This was the tenth hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken specified that this legislation would implement
a Constitutional spending limit.
Senator Dyson moved to adopt the committee substitute, Version
23-LS0296\Z as the working document.
Senator Hoffman asked for confirmation that the Version "Z"
committee substitute encompasses previously adopted amendments.
Senator Dyson responded affirmatively.
There being no objection, the Version "Z" committee substitute
was adopted as the working document.
Senator Dyson, the bill's sponsor, noted that the Administration
has explained that due to four years of "budget restraints,"
there is "an artificial distortion in the application of the
formula in the out years." Therefore, he continued, the
Administration had requested that the base years' numbers be
adjusted "in order to make the formulas smooth and work for the
expected and reasonable expansion of the budget." He attested
that this had been done. Subsequent to that, he continued, the
adoption of Amendment #12 at the previous meeting, "distorted
how the formula works" in that it exempted all University
receipts from the appropriations calculation.
CHERYL FRASCA, Director, Office of Management and Budget, Office
of the Governor, noted that the action of "amending out the
University of Alaska's receipts had the affect of removing" $150
million of spending from the total amounts available for
appropriation for FY 04 and FY 05. Therefore, she recommended
that $150 million be removed from the appropriation calculation
formula base years of FY 2004 and FY 2005 as specified in Sec.
2, subsection Section 30 (1) and (2) on page three, lines 21 and
22 in Version "Z". She specified that this would reduce these
numbers to $3,150,000,000 and $3,250,000,000, respectfully.
Ms. Frasca also noted that a grammatical correction should occur
in Section 1, subsections Section 16 (1) on page one, lines 13
and 15, and Section 16 (2) on page two, line 3, in which the
words "second" and "third" should be replaced with the word
"two." This language currently reads as follows.
(1) the percentage rate of change in the Consumer
Price Index for all urban consumers for the Anchorage
metropolitan area compiled by a federal agency during the
second and third calendar years preceding the calendar year
during which the immediately preceding fiscal year began,
but not to exceed the percentage change in personal income
of State residents during the second and third calendar
years preceding the calendar year during which the
immediately preceding fiscal year begins; plus
(2) the percentage rate of change in the State
population during the second and third calendar years
preceding the calendar year during which the immediately
preceding fiscal year began compiled by a State department.
Co-Chair Green asked whether changing this language would have
an affect on the calculation formula.
Ms. Frasca responded that it would not.
Amendment #13: As a result of exempting University of Alaska
receipts from the appropriations calculation, this amendment
reduces the total FY 04 and FY 05 appropriation amounts
reflected on page three, lines 21 and 22 from $3,300,000,000 to
$3,150,000,000 and from $3,400,000,000 to $3,250,000,000,
respectfully.
Co-Chair Green moved for the adoption of Amendment #13 and
objected for discussion.
Co-Chair Green asked for a review of the calculation formula
from which the original FY 04 and FY 05 base year levels of
$3,300,000,000 and $3,400,000,000 were derived.
BRUCE TANGEMAN, Fiscal Analyst, Legislative Finance Division,
informed the Committee that these amounts were determined by
reviewing the appropriation amounts for several years prior to
FY 2004, as he informed, the FY 2004 and FY 2005 amounts were
unavailable. He stated that the resulting calculation provided a
base to which a growth factor was applied. Therefore, he
concluded that the formula provided "a safe, fairly known
calculation for what's going to happen in 06."
Co-Chair Green understood therefore, that this methodology
provided a "floor" from which to determine future calculations.
Senator Dyson stated that Co-Chair Green's comment is correct.
Continuing, he clarified that this legislation would establish a
"floor on the spending limit, not on our spending."
LUCKY SCHULTZ, Staff to Senator Fred Dyson, noted that another
consideration in the "adjusted base year" calculation was to
determine an amount that would provide adequate growth,
respectful of the funding reductions that occurred over the past
several fiscal years and of how the "no ratchet down provision
is written." He continued that were these adjustments not
incorporated, the end result would have been a "no-growth limit"
for the first several years after the legislation's enactment,
which, he attested, would have resulted in a difficult situation
under which to operate.
Co-Chair Green ascertained therefore, that, rather than
incorporating two formulas, the calculation was adjusted to
provide for FY 04 and FY 05.
Senator Dyson agreed and noted that this is addressed in the
bill via the term "transition."
Senator Hoffman asked whether a chart has been provided to
reflect the funding reductions proposed in this amendment.
Mr. Tangeman responded that a corresponding chart has not, of
yet, been provided.
Senator Dyson pointed out that the slope of line would be the
identical to that depicted in the CS SJR 3 chart [copy on file]
except that the line would be positioned approximately $150
million lower on the graph. He noted that an updated chart would
be provided.
Senator B. Stevens asked what constitutes the $150 million in
University receipts.
Ms. Frasca responded that, originally, the University receipts
category amounted to approximately $200 million. She reminded
that earlier Committee action exempted the University's tuition
revenue, amounting to approximately $50 million, from the
calculation. Therefore, she stated, Amendment #12 served to
exclude the remaining $150 million balance.
Senator Hoffman inquired whether inflation-proofing and
population projections attributed to the decision to exempt
University receipts from the calculation.
Ms. Frasca responded that she could not provide an answer, as
rather than being an amendment proposed by the Administration,
the amendment was proposed by a Committee member.
Co-Chair Green asked for confirmation that the University's
previous years' receipt revenues had been excluded from the
calculation used to determine the adjusted base year levels.
Mr. Tangeman assured that they had been.
Senator Dyson, responding to Senator Hoffman's question,
characterized the University receipts being excluded as
"enterprise activity" receipts generated from such things as
ticket proceeds from hockey programs or book sales. He viewed
these activities as having "no impact on the general fund," and
furthermore, he stated, were the University's economic analysis
to reflect that they should or could charge more for activities,
the Legislature should not restrict them from doing so.
Co-Chair Green asked whether other State entities might request
similar exemptions.
Ms. Frasca responded that no others had opted to make a request
of this nature to the Administration. Furthermore, she stated
that the Administration's "challenge" is to provide sufficient
"general fund dollars to support core responsibilities of
government." Continuing, she noted that several State programs,
such as the Division of Motor Vehicles, generate receipts in
excess of "what it costs to perform their functions." Therefore,
she continued, it would be expected that were excess receipts
generated by a program, that program would not be entitled to
spending the excess funds as some contribution to core
government services, such as the Department of Corrections which
does not generate receipts, should be expected. She stated that
a program's ability to generate revenues does not signify that
the program has "first claim," to spending them. Therefore, she
concluded that every program "should compete to the degree
that's appropriate" for general fund dollars.
Co-Chair Green commented that general fund monies are annually
distributed based on competing needs via the appropriation and
priority process.
Ms. Frasca agreed and stated that a "scrutiny" process evolves
from which a determination of expenditures is made. She noted
that other legislation is pending that proposes to reclassify
designated funds and deposit them into the general fund column.
Co-Chair Wilken reviewed the effects of the amendment on the
amounts detailed in the FY 04 D-24 component, the FY 05 E-24
component, the FY 06 F-24 component, and the FY 07 G-24
component of the "SJR 3" chart [copy on file] that was provided
by Legislative Finance.
Mr. Tangeman replied that the FY 04 D-24 component and the FY 05
E-24 component on the aforementioned chart would each be reduced
$150 million, to $3,150,000,000 and $3,250,000,000,
respectfully; the FY 06 F-24 component would be reduced to
approximately $3,330,000,000; and the FY 07 G-24 component would
change to an undetermined amount.
Co-Chair Green removed her objection.
There being no further objection, Amendment #13 was ADOPTED.
Conceptual Amendment #14: This amendment changes language in
Section 1, subsections Section 16 (1) on page one, lines 13 and
15, and Section 16 (2) on page two, line three, in that the
words "second" and "third" would be replaced with the word
"two." This language would read as follows.
(1) the percentage rate of change in the Consumer
Price Index for all urban consumers for the Anchorage
metropolitan area compiled by a federal agency during the
two calendar years preceding the calendar year during which
the immediately preceding fiscal year began, but not to
exceed the percentage change in personal income of State
residents during the two calendar years preceding the
calendar year during which the immediately preceding fiscal
year begins; plus
(2) the percentage rate of change in the State
population during the two calendar years preceding the
calendar year during which the immediately preceding fiscal
year began compiled by a State department.
Co-Chair Wilken moved to adopt Amendment #14.
There being no objection, Amendment #14 was ADOPTED.
Co-Chair Wilken asked for further information regarding the Fund
Code language that is included as depicted in the handout titled
"Fund Codes Included in Limit" [copy on file]; specifically
whether the reference to such things as the Alaska Marine
Highway (AMH), code 1076, would signify that an increase in the
passenger fares or ridership would be subject to the spending
limit.
Mr. Tangeman confirmed that they would be.
Co-Chair Wilken questioned the rationale for this provision.
Ms. Frasca theorized that an increase in AMH revenue as a result
of increased fares or ridership might result in AMH requiring
fewer general fund dollars as those monies would be deposited
into the AMH fund to fund AMH operation expenses. She
additionally noted that this legislation is a limit on spending
as opposed to limiting fund sources.
Co-Chair Wilken asked whether the $91 million denoted for the
International Airport Fund, Code 1027, is an enterprise fund
comprised of such things as landing fees.
Ms. Frasca affirmed.
Co-Chair Wilken asked the rationale for its inclusion, as he
likened it to "discretionary funding on behalf of the
Legislature."
Ms. Frasca noted that the proceeds from bonds that were sold,
and whose the debt service was paid by the International Airport
Fund, are excluded in the Capital Budget. Continuing, she
pointed out that the Fund Code list includes several fund
sources that would continue into the future. Furthermore, she
stated that the question is how much would they increase from
one year to the next. She exampled that were a new terminal to
open within the next four years and result in a significant
increase in revenue, it might "cause some concern."
Co-Chair Wilken asked regarding the Alaska Aeronautical
Development Corporation (AADC), Fund Code 1101, whose "budget is
characterized by feast or famine" in that it might receive ten
million dollars one year and zero the next.
Ms. Frasca responded that AADC funding primarily consists of
federal receipts, which are exempt from the limit. She noted
that revenue from such things as contracts with private firms
for certain services would also be exempt.
Mr. Tangeman also noted that these fund sources reflect current
funding conditions. He noted that were this legislation to be
adopted, more in-depth analysis would be conducted on the
components of each fund source as he exampled that included in
the AADC Fund Code 1101 might be a combination of revenues such
as private contract revenue.
Co-Chair Wilken asked whether the sale of State land,
specifically Fund Code 1153, would count against the general
fund spending limitation.
Ms. Frasca responded that currently it would. However, she noted
that the proceeds from those sales would normally support
functions within the Department of Natural Resources. Continuing
she noted that general fund dollars have been supplanted with
the State land proceeds. She reiterated that this legislation
addresses how funds are spent rather than how funds are
generated.
Ms. Frasca further noted that the International Airport Fund
Code might consist of contractual relationship between the
airlines and the airport, which she reiterated would be exempt
from the limit.
Senator Dyson commented that this is an informative list as it
"really is the delta between the numbers that we see and what we
generally think of as general fund."
Co-Chair Wilken asked the identity of the Fund Cod 1180 A/D P&T
Fd as listed on the list.
Ms. Frasca identified it as the Alcohol and Drug Prevention and
Treatment Fund.
Co-Chair Wilken asked regarding Fund Code 1168 Tob ED/CES and
Fund Code 1170 SBED RLF.
Ms. Frasca, Mr. Schultz, and Committee Members identified those
Fund Codes as the Tobacco Education and Cessation Fund and the
Small Business Economic Development Revolving Loan Fund.
Senator B. Stevens asked whether any Fund codes were excluded
from the list.
Mr. Tangeman replied that the Fund codes not included in the
list would be those of the university; those that are federally
funded; trust funds; and approximately 15 dedicated fund codes.
Ms. Frasca stated that approximately 20 fund codes not are
included.
Senator B. Stevens asked for confirmation that the fund code
identified as 1179 PFC is the Permanent Fund Corporation.
Ms. Frasca replied that this Fund code pertains to the operation
of the Corporation itself.
Senator B. Stevens asked for further information, such as
whether this Code pertains to billable amounts or is the result
of a formula distribution.
Ms. Frasca responded that it is based on the budget.
SFC 04 # 70, Side A 10:42 AM
Senator B. Stevens asked for specific information regarding how
the amount was determined.
Ms. Frasca responded that in terms of the Corporation itself,
the number is based on the budget approved by the Legislature.
Continuing, she noted that this item might be related to
management fees of the Permanent Fund. She noted that were a
large amount being invested, "there is the potential for it to
be extraordinary." This situation, she stated might require
Legislative action.
Co-Chair Wilken stated that staff has informed him that rather
than Fund Code 1179 pertaining to the Permanent Fund Corporation
it pertains to Passenger Facility Charges.
Mr. Tangeman concurred that Fund Code 1179 is, in fact,
Passenger Facility Charges [PFC] and that Fund Codes 1041 and
1105, which are not included on the list, pertain to the
Permanent Fund Corporation.
Senator B. Stevens asked whether the Passenger Facility Charges
Fund Code is a component of the Alaska Marine Highway System or
the Department of Transportation and Public Facilities.
TRACI CARPENTER, Staff to Senator Green, responded that the
Passenger Facility Charges are airport fees.
Senator B. Stevens questioned therefore, whether the inclusion
of this Fund in the Appropriation Limit would negatively affect
the spending limit were an increase in international or tourism
travel to occur as a result "of success in a non-government
entity."
Ms. Frasca responded that that could occur.
Senator B. Stevens asked, therefore, that the PFC component's
inclusion in the Limit be further reviewed. Continuing, he asked
whether "encouraging non-government enterprise to utilize
renewable resources," such as the Timber Receipts Fund Code
1155, for example, could have the same result as the PFC
component.
Mr. Tangeman concurred that it would.
Senator B. Stevens voiced the understanding that this
legislation is a limit on spending as opposed to a limit on
revenue. However, he voiced concern regarding the process were
an increase in revenue to occur. He asked for verification that
the revenues generated from various Fund Codes would be
deposited into the general fund.
Ms. Frasca responded that while the revenue would be deposited
into the general fund, it would be allocated to these designated
Receipt Funds, which have been established by the Legislature.
Senator B. Stevens surmised therefore that these Fund Source
Codes are established to fund such things as the Department of
Natural Resources "or some other mechanism."
Ms. Frasca affirmed. She stressed that the challenge is how to
place a limit on how much the State could spend regardless of
where the funds generated. She attested that "this is the
spending side of the equation."
Senator Dyson reminded that, in the State's "foreseeable
future," what would be diminished were a spending limit in
place, would be the amount spent from the Constitutional Budget
Reserve (CBR). Continuing, he stated that rather than "limiting
new business and new enterprises and growth" in the future this
legislation would limit the amount of money that the State would
have "to borrow ? while significantly increasing our financial
stability and our wealth."
Co-Chair Wilken asked, for clarification, whether an "available
annual growth" increase of one million dollars from the FY 05
level of $12.4 million to an FY 06 level of $13.4 million in
Fund Code 1179 PFC would decrease the overall FY 06 amount
available for appropriation by the same amount.
Mr. Tangeman responded that this scenario might not be accurate
as he noted that while the FY 05 base is $3.25 billion, it does
not mean that the entire amount would be appropriated. He stated
that were the actual appropriation to be less and were the FY 06
appropriation to be to the limit, then the affect would be an
increase above the FY 05 limit of $86 million. He reminded that
the FY 06 amount is based on estimates for FY 04 and FY 05.
Therefore, he declared that the FY 06 number would be affected
by how much was actually appropriated in FY 04 and FY 05.
Co-Chair Wilken advanced, therefore, to the FY 09 fiscal year
limit specified on the aforementioned CS SJR 3 chart, and noted
that the information depicts that $95 million would be available
in FY 09. Continuing, he asked whether a one million dollar
increase in the PFD Fund Code in FY 09 would serve to reduce the
$95 million to $94 million.
Mr. Tangeman asked that the question be further clarified.
Co-Chair Wilken clarified that it has been experienced in the
past, that when the State received a grant or when the State
"increased the cost of providing government service directly to
the provider," a problem arose in "that that counted as State
spending" with the result being that the State was required to
reduce State spending "somewhere else in the budget an equal
amount." Therefore, he restated his question by asking whether a
one million dollar increase in the PFC Fund would require a one
million dollar reduction somewhere else in the budget such as in
K-12 education.
Mr. Tangeman responded that were the State's spending to be at
the appropriation limit, yes.
Co-Chair Wilken understood, therefore, that were any of the Fund
Code components that are included in the Limit to increase, a
dollar for dollar decrease in the amount available to spend in
that fiscal year would be required.
Ms. Frasca responded that the assumption is that were another
dollar raised, another dollar could be spent by a program.
However, she continued, "the challenge is to say that these
activities don't necessarily have first claim on every dollar
that they bring in. It could be that they also have a general
fund subsidy that is supporting the program." Therefore, she
stated, that general fund subsidy dollar could be replaced with
the excess money raised by the Fund, and the general fund
subsidy could be used, for instance, to support another program
such as K-12 education. That, she attested, is the balance that
could be applied.
Senator Hoffman stated, "therein lies the problem," as he
exampled that were a Legislature's majority party to not support
a certain department's budget, rather than supporting one of the
department's program with excess money the aforementioned
scenario might produce, whatever is determined by the majority
"to be a priority area" would be the area that would receive
that additional funding. This he declared "is a key problem."
Senator Dyson reiterated that for the four-years this
legislation would be in effect, the money that would be reduced
is the money that would be withdrawn from the CBR, and in
addition, he stressed, State debt would be reduced. He declared
that both he and Senator B. Stevens desire that the money that
has been withdrawn from the CBR should be repaid in order "to
rebuild that bridge to the future, and be promise keepers." He
stressed that "the focus" should be that any additional revenues
from these Fund Code sources should "be going to build fiscal
stability, reduce our borrowing, and repay our Rainy Day
accounts. " He declared that, "this is very, very important to a
State that depends so much on the sale of natural resources that
are sold on a world commodity market."
Senator Bunde announced that this legislation "would not result
in a problem that does not already exist," as a Legislative
majority could increase or "attempt to control spending"
regardless of whether a spending limit were in effect. He stated
that were the CBR unavailable then more control might be
exerted, based on "philosophical points of view."
Senator Hoffman responded that "therein lays the argument for
having a spending limit."
Senator Hoffman asked how a one-time emergency or extraordinary
circumstance would be addressed were this legislation enacted,
as he remarked that it is unclear whether the appropriation
language pertaining to emergencies and extraordinary
circumstances, as identified in Section 16, subsection (2)(d)
and (e) located on page two, line 27 through page three, line
five, would be considered a component of the base.
Mr. Shultz pointed out that language in Section 16, on page one,
lines six through ten "is meant to indicate" that emergencies
and extraordinary circumstances would be exempt from the
establishment of a base, and that the base would be the amount
appropriated the previous year.
Senator Hoffman asked whether "the substantial changes" being
made this year to the education budget to address the Public
Employees Retirement System (PERS) /Teachers Retirement System
(TRS) and the student base foundation funding formula would be
considered a component of the base or would, on an annual basis,
be addressed as an extraordinary circumstance.
Mr. Shultz responded that were the expenditure to exceed the
appropriation limit, then it would be required to be considered
as an extraordinary circumstance.
Co-Chair Wilken referred to the aforementioned chart and asked
whether an approximate $50 million dollar PERS/TRS obligation is
included in the FY 06 appropriation limit of approximately $86
million, as identified in Cell (f) (25) of the chart.
Mr. Shultz responded that the base year numbers would allow some
"headroom" for the PERS/TRS obligation for FY 06 and FY 07.
Co-Chair Wilken noted that a $50 million TRS obligation would be
expected for several forthcoming fiscal years. He asked whether
this has been accounted for in the chart.
Mr. Shultz responded in the affirmative. He noted, however, that
the FY 06 number, rather than being the actual number, is
elevated as it is based on an adjusted base year.
Senator Bunde moved to report the committee substitute for SJR
3, Version "Z," as amended, from Committee with individual
recommendations and accompanying fiscal notes.
Co-Chair Wilken objected for discussion.
Senator Hoffman objected. He characterized the Legislature as
being fugal, as it has not budgeted to an established spending
limit in the past. Furthermore, he stated that as priorities are
determined, the Legislature would budget accordingly. While he
understood that this legislation would establish a four-year
spending limit that would be reviewed; he declared, "that the
current system is working quite well." He removed his objection.
Co-Chair Wilken stated that an updated chart and a population
change analysis would be forthcoming to accompany the bill as it
progresses.
Senator Dyson voiced that it would be useful to have "a general
graph" developed to reflect how current spending would be
portrayed were a spending limit in place. He voiced that the
graph should start in the early 1970's in order to reflect the
boom years the State underwent with its oil wealth. However, he
noted that this suggestion has been characterized as being
difficult to produce.
Co-Chair Green asserted that this chart would be "woefully
difficult" to develop as every piece of legislation that
affected the budget would require analysis. She, therefore,
remarked that the current information is adequate.
Co-Chair Wilken remarked that this request would be considered
by Legislative Finance staff.
Senator Hoffman recalled that when the State had a large
quantity of "extraordinary income," and a tremendous amount of
money was available, most votes to use discretionary funds for
such things, as capital projects were unanimous.
Co-Chair Wilken removed his objection.
There being no further objection, CS SJR 3 (FIN) was REPORTED
from Committee with a new $1,500 fiscal note from the Division
of Elections, dated January 28, 2004.
[NOTE: SJR 3 was referred back to the Finance Committee on April
13, 2004. No further hearing on it was conducted.]
#
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 11:02 AM
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