Legislature(1999 - 2000)

05/18/1999 01:21 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
May 18, 1999                                                                                                                    
1:21 AM                                                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-99 #145, Side A and Side B                                                                                                  
                                                                                                                                
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 1:21 A.M.                                                                                                         
                                                                                                                                
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
In addition to Co-Chair John Torgerson, Co-Chair Sean                                                                           
Parnell, Senator Dave Donley, Senator Loren Leman, Senator                                                                      
Gary Wilken, Senator Al Adams, Senator Pete Kelly, Senator                                                                      
Lyda Green and Senator Randy Phillips were present when the                                                                     
meeting was convened.                                                                                                           
                                                                                                                                
Also Attending:  Senator ROBIN TAYLOR; Representative PETE                                                                      
KOTT; JUANITA HENSLEY, Director, Division of Motor                                                                              
Vehicles, Department of Administration; ANNE CARPENETI,                                                                         
Assistant Attorney General, Legal Services Section,                                                                             
Criminal Division, Department of Law; TAM COOK, Director,                                                                       
Division of Legal and Research Services, Legislative                                                                            
Affairs Agency; PHIL OKESON, Fiscal Analyst, Division of                                                                        
Legislative Finance; aides to committee members and other                                                                       
members of the Legislature..                                                                                                    
                                                                                                                                
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
HB  87-UNEMPLOYMENT TRUST FUND                                                                                                  
                                                                                                                                
The Committee reviewed information provided by the                                                                              
Department of Labor and reported the bill out.                                                                                  
                                                                                                                                
HB 151-REVOCATION OF MINOR DRIVER'S LICENSE                                                                                     
                                                                                                                                
The Committee heard from the Chair of the Senate Judiciary                                                                      
Committee, the bill's sponsor, the Department of Law and                                                                        
the Department of Administration. A committee substitute                                                                        
was adopted and reported out with forthcoming fiscal notes.                                                                     
                                                                                                                                
HB 231-AK.INCOME ACCT/PERM FUND/FINANCE PLAN                                                                                    
                                                                                                                                
The Committee heard from the Division of Legal and Research                                                                     
Services and the Division of Legislative Finance. Two                                                                           
amendments were considered, with one adopted. The bill was                                                                      
reported from Committee.                                                                                                        
                                                                                                                                
                                                                                                                                
 HOUSE BILL NO. 87                                                                                                              
"An Act relating to money credited to the account of                                                                            
the state in the unemployment trust fund by the                                                                                 
Secretary of the Treasury of the United States; and                                                                             
providing for an effective date."                                                                                               
                                                                                                                                
                                                                                                                                
This was the second hearing for this bill in the Senate                                                                         
Finance Committee. The bill was held awaiting information                                                                       
to be provided by Rebecca Gamez, Director, Division of                                                                          
Employment Security, Department of Labor, regarding the                                                                         
Reed Act. That information was now before the members.                                                                          
(Copy on file.)                                                                                                                 
                                                                                                                                
Co-Chair John Torgerson briefly overviewed the answers to                                                                       
the Committee's earlier questions posed to Ms. Gamez. The                                                                       
first question asked if the Reed Act funds need to be                                                                           
appropriated annually to cover the three year (1999, 2000,                                                                      
2001) distributions. Ms. Gomez answered, "No. The bill                                                                          
provides for an effective date when it is signed into law                                                                       
and a sunset date of September 30, 2000. The fiscal note                                                                        
indicates should Alaska accept the federal Reed Act                                                                             
distribution, it will go into capital expenditures. We                                                                          
expect to expend the Reed Act distributions over a three-                                                                       
year period on our $2.6 million CIP project (UI Tax                                                                             
Redesign) that was approved by both legislative bodies this                                                                     
session. Should the distributions not cover the entire CIP                                                                      
project, the remainder will be covered by our operations                                                                        
budget."                                                                                                                        
                                                                                                                                
Co-Chair John Torgerson referred to another question he had                                                                     
asking if other unemployment insurance program funds would                                                                      
be available for re-appropriation if this bill passes. To                                                                       
answer, he quoted from a Directive issued by the US                                                                             
Department of Labor entitled "Unemployment Insurance                                                                            
Program Letter No. 44-97", which was provided by Ms. Gamez.                                                                     
(Copy on file.) The directive states, "States will need to                                                                      
amend their laws to implement the special Reed Act                                                                              
transfers.." Co-Chair John Torgerson continued quoting                                                                          
elsewhere in the directive, "Reed Act moneys transferred                                                                        
with respect to these fiscal years may be used only to pay                                                                      
expenses incurred by the state for the administration of                                                                        
its UC law. Unlike previous Reed Act transfers, states are                                                                      
prohibited from using the amounts transferred with respect                                                                      
to these three years for the payment of UC or the                                                                               
administration of state public employment offices."                                                                             
                                                                                                                                
There was no further discussion on the bill.                                                                                    
                                                                                                                                
Co-Chair Sean Parnell offered a motion to report HB 87 from                                                                     
Committee.  There was no objection and the bill was                                                                             
REPORTED OUT with individual recommendations and                                                                                
accompanying zero fiscal note from the Department of Labor.                                                                     
                                                                                                                                
                                                                                                                                
SENATE COMMITTEE SUBSTITUTE FOR COMMITTEE SUBSTITUTE                                                                            
FOR HOUSE BILL NO. 151(JUD)                                                                                                     
"An Act relating to possession, control, or                                                                                     
consumption of alcohol by a person under 21 years of                                                                            
age; relating to revocation and reinstatement of the                                                                            
driver's license of a person at least 14 years of age                                                                           
but not yet 21 years of age; and relating to offenses                                                                           
involving operating a motor vehicle by a person not                                                                             
yet 21 years of age."                                                                                                           
                                                                                                                                
                                                                                                                                
This was the second hearing for this bill in the Senate                                                                         
Finance Committee. Co-Chair John Torgerson noted that in                                                                        
the earlier hearing, a proposed committee substitute was                                                                        
submitted by the Chair of the Senate Judiciary Committee.                                                                       
Co-Chair John Torgerson added that previous testimony from                                                                      
the departments stated that with the adoption of the                                                                            
committee substitute, the fiscal notes would be zeroed out.                                                                     
                                                                                                                                
Senator ROBIN TAYLOR, Chair, Senate Judiciary Committee,                                                                        
indicated that he was distributing information provided by                                                                      
GLAD, an organization working on this legislation. (Copy                                                                        
not provided for the record.) He qualified that the bill's                                                                      
prime sponsor, Representative Pete Kott does not support                                                                        
the committee substitute. He apologized, but argued that                                                                        
the Department of Law advised there was not adequate                                                                            
support for repealing the entire statute as the original                                                                        
version of the bill proposed.                                                                                                   
                                                                                                                                
Senator Robin Taylor stated that the committee substitute                                                                       
solves the problem of individuals being prohibited from                                                                         
receiving a driver's license until they are in their                                                                            
forties or fifties. Changes in the proposed committee                                                                           
substitute, he explained allows the department to review                                                                        
those cases and issue a license if the individual's                                                                             
behavior has improved.                                                                                                          
                                                                                                                                
Senator Robin Taylor then directed the Committee's                                                                              
attention to page four of his proposed committee                                                                                
substitute, saying that this version accomplishes a goal                                                                        
that couldn't be worked out in the House of                                                                                     
Representatives. He explained the new provision as, "if a                                                                       
court either finds you not guilty or the case is dismissed                                                                      
by a court of law; that automatically dismisses the                                                                             
administrative action that was based upon the same facts."                                                                      
This eliminates the situation where cases have been                                                                             
dismissed, but individuals still have their driver's                                                                            
licenses revoked by an administrative action, according to                                                                      
Senator Robin Taylor.                                                                                                           
                                                                                                                                
Representative PETE KOTT stressed that he still has                                                                             
concerns with the establishment of the punishment in                                                                            
relationship to the violation committed and the intended                                                                        
results of the statute. He said that statistics suggest                                                                         
this current law that revokes licenses for underage miners                                                                      
in possession of alcohol is not working. His intent was to                                                                      
establish legislation that will focus on those who posses                                                                       
and/or consume alcohol while driving. He referred to a                                                                          
Supreme Court case challenging the nexus of the existing                                                                        
law that resulted in a non-binding, tied vote.                                                                                  
                                                                                                                                
Senator Loren Leman asked Representative Pete Kott if he                                                                        
was satisfied with the revocation penalties of 30 days, 60                                                                      
days, 90 days and one-year periods as stipulated in Section                                                                     
3 of the proposed committee substitute.                                                                                         
                                                                                                                                
Representative Pete Kott responded that without the nexus                                                                       
argument in the bill, he was satisfied. However, he was                                                                         
hesitant to fully support the lowered penalties.                                                                                
                                                                                                                                
For Representative Pete Kott's benefit, Senator Loren Leman                                                                     
repeated comments he made in the last hearing.  His                                                                             
preference is to increase the penalties but also to provide                                                                     
a mechanism for juveniles to "buy back" some of that time                                                                       
through community service and treatment programs. He wanted                                                                     
to "encourage their good behavior through their positive                                                                        
actions." Because of the late date, he noted that he would                                                                      
not propose such an amendment unless there was full                                                                             
concurrence. He suggested the matter could be addressed                                                                         
during the interim.                                                                                                             
                                                                                                                                
Representative Pete Kott replied that the issue had been                                                                        
discussed through an earlier version of the bill. However,                                                                      
he said that the Department of Law advised that there are                                                                       
"due process" problems and that court hearings would be                                                                         
required, resulting in a fiscal note. He would have liked                                                                       
to see that provision included in the final bill, he said.                                                                      
                                                                                                                                
In the interest of producing legislation that has at least                                                                      
some benefit, Senator Loren Leman announced that he would                                                                       
not offer an amendment at this meeting. He qualified that                                                                       
he did want to revisit the matter later.                                                                                        
                                                                                                                                
ANNE CARPENETI, Assistant Attorney General, Legal Services                                                                      
Section, Criminal Division, Department of Law had reviewed                                                                      
the proposed committee substitute at the request of Co-                                                                         
Chair John Torgerson. She testified that the department was                                                                     
comfortable with the changes.                                                                                                   
                                                                                                                                
JUANITA HENSLEY, Director, Division of Motor Vehicles,                                                                          
Department of Administration relayed statistics supplied by                                                                     
the Division of Public Health, Community Health and                                                                             
Emergency Medical Services. She stressed that the                                                                               
statistics show alcohol-related injuries involving youths                                                                       
between ages fourteen and twenty from 1995-1997 decreased                                                                       
by 9.5 percent. The alcohol-related motor vehicle injuries                                                                      
had dropped twelve-percent for the same age group, she                                                                          
stated. She also noted alcohol-related assault injuries for                                                                     
this age group had decreased overall by thirty-three                                                                            
percent.                                                                                                                        
                                                                                                                                
Juanita Hensley was unsure if the reductions could be tied                                                                      
directly to the "Use It-Lose It" law, and suggested it                                                                          
could be a combination of all the juvenile laws passed in                                                                       
the last several years. However, she believed this law has                                                                      
had an impact.                                                                                                                  
                                                                                                                                
Juanita Hensley also referred to information supplied by                                                                        
the Highway Safety Planning Agency showing that the number                                                                      
of alcohol related motor-vehicle fatalities for this age                                                                        
group has dropped.                                                                                                              
                                                                                                                                
Co-Chair Sean Parnell moved for adoption of HB 151, Version                                                                     
"P" as a Workdraft. It was adopted as a Workdraft without                                                                       
objection.                                                                                                                      
                                                                                                                                
Co-Chair Sean Parnell offered a motion to report from                                                                           
Committee, SCS CSHB 151(FIN) with individual                                                                                    
recommendations and forthcoming zero fiscal notes from the                                                                      
Department of Health and Social Services, Department of                                                                         
Corrections and the Department of Law. There was no                                                                             
objection and the bill was REPORTED OUT.                                                                                        
                                                                                                                                
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 231(FIN) am                                                                             
"An Act relating to deposits to the Alaska permanent                                                                            
fund from mineral lease rentals, royalties, royalty                                                                             
sale proceeds, net profit shares under AS 38.05.180(f)                                                                          
and (g), federal mineral revenue sharing payments                                                                               
received by the state from mineral leases, and bonuses                                                                          
received by the state from mineral leases, and                                                                                  
limiting deposits from those sources to the 25 percent                                                                          
required under art. IX, sec. 15, Constitution of the                                                                            
State of Alaska; relating to income of the Alaska                                                                               
permanent fund, to the Alaska Income Account, and to                                                                            
permanent fund dividends; authorizing an advisory vote                                                                          
on a long term financial plan for the state; and                                                                                
providing for an effective date."                                                                                               
                                                                                                                                
                                                                                                                                
This was the first hearing for this bill in the Senate                                                                          
Finance Committee.                                                                                                              
                                                                                                                                
Co-Chair John Torgerson advised the Committee that he had a                                                                     
committee substitute, 1-LS0960/M, 5/17/99, drafted to                                                                           
incorporate the advisory vote ballot language of SB 76 as                                                                       
reported from the Senate Finance Committee at an earlier                                                                        
meeting. He noted that the committee substitute also                                                                            
incorporates the provisions contained in HB 96: returning                                                                       
to the ratio of oil revenue deposits of 25-percent to the                                                                       
permanent fund and 75-percent to the general fund.                                                                              
                                                                                                                                
TAM COOK, Director, Division of Legal and Research                                                                              
Services, Legislative Affairs Agency detailed the committee                                                                     
substitute as follows.                                                                                                          
                                                                                                                                
Section 1 amends the name of the "Statutory Budget                                                                              
Reserve Fund" making it the "Alaska Income Account."                                                                            
                                                                                                                                
Co-Chair John Torgerson interjected, saying this change is                                                                      
necessary in order for the committee substitute to conform                                                                      
to the title of the bill. Tam Cook affirmed and added that                                                                      
this change also clears up the confusion of having two                                                                          
funds with the same name. Tam Cook continued detailing the                                                                      
sections.                                                                                                                       
                                                                                                                                
Section 2 is a technical amendment to correct a                                                                                 
reference to the Statutory Budget Reserve Fund in                                                                               
another provision and to change the name to the Alaska                                                                          
Income Account.                                                                                                                 
                                                                                                                                
Section 3 is a technical change reflecting the repeal                                                                           
of AS 37.13.010(a)(2) in Section 4.                                                                                             
                                                                                                                                
Section 4 relates to the provision in SB 96, limiting                                                                           
the amount of money that goes into the permanent fund.                                                                          
                                                                                                                                
Section 5 is the heart of the financial plan. It                                                                                
rewrites the statutory provision on income that is                                                                              
retained in the Earnings Reserve Account.                                                                                       
                                                                                                                                
Section 6 rewrites the disposition of income and is                                                                             
substantially different from current law.  This                                                                                 
section establishes a formula for distributions out of                                                                          
the Earnings Reserve Account.                                                                                                   
                                                                                                                                
Subsection (a) addresses the transfer of money                                                                                  
from the Earnings Reserve Account to the general fund                                                                           
and is based on the average quarter-end market value                                                                            
of the last 20 fiscal year quarters before the fiscal                                                                           
year just ended. This applies to both the permanent                                                                             
fund itself and also the Constitutional Budget Reserve                                                                          
(CBR) fund. The proposed amount to be transferred in                                                                            
this committee substitute is 2.5 percent of that                                                                                
formula.                                                                                                                        
                                                                                                                                
Subsection (b) provides an additional transfer                                                                                  
that would occur each year similar to the one above                                                                             
but is an amount based on 2.75 percent of the quarter-                                                                          
end market value of the last 20 fiscal year quarters                                                                            
before the fiscal year just ended. This transfer goes                                                                           
directly to the dividend fund.                                                                                                  
                                                                                                                                
Subsection (c) is similar to the wording                                                                                        
contained in the House version of the bill.                                                                                     
                                                                                                                                
Section 7 is a technical correction to address the                                                                              
concept that there is no longer money available in the                                                                          
permanent fund for distribution.                                                                                                
                                                                                                                                
Section 8 is similar to Section 7.                                                                                              
                                                                                                                                
Section 9 is also technical.                                                                                                    
                                                                                                                                
Section 10 is the transition provision that phases-in                                                                           
the number of quarters that are averaged to determine                                                                           
the first distributions at the end of fiscal years                                                                              
2001 and 2002.                                                                                                                  
                                                                                                                                
Section 11 is the advisory vote and is similar to the                                                                           
language the Senate proposed in SB 76.  There is a                                                                              
change to subparagraph (3) on page 8, lines 5 and 6 of                                                                          
the committee substitute. Language has been inserted                                                                            
to say that the annual dividend will be based both on                                                                           
the market value of the permanent fund and the CBR as                                                                           
a combined figure. The description of Plan B is                                                                                 
unchanged from the Senate version.                                                                                              
                                                                                                                                
Section 12 provides that the bulk of bill does not                                                                              
take effect until January 1, 2001. This means that the                                                                          
permanent fund distribution provision in existence                                                                              
today is applicable to the 1999 and 2000                                                                                        
distributions. The date in 2001 is selected because it                                                                          
coincides with the beginning of the dividend year,                                                                              
which is a calendar year.                                                                                                       
                                                                                                                                
Section 13 provides and immediate effective date only                                                                           
for the advisory vote.                                                                                                          
                                                                                                                                
Co-Chair Sean Parnell asked for further clarification of                                                                        
the effective date for the new calculations on the market                                                                       
value.                                                                                                                          
                                                                                                                                
Tam Cook responded this is a delayed effective date                                                                             
stipulating that the entire financial plan contained in the                                                                     
bill is delayed until the year 2001.  She stressed that                                                                         
existing law stays in place, with respect to the functions                                                                      
of the Earnings Reserve Account and the calculation of the                                                                      
distributions, until then.  She explained that dividends                                                                        
would be paid according to existing statute for the years                                                                       
1999 and 2000.                                                                                                                  
                                                                                                                                
Co-Chair John Torgerson asked for further clarification of                                                                      
subparagraph (c) on page 5 beginning line 19.                                                                                   
                                                                                                                                
Tam Cook replied that this language states that once the                                                                        
financial plan goes into effect, the amount of a                                                                                
distribution from the Earnings Reserve Account is                                                                               
determined at the end of the fiscal year. However, she                                                                          
noted the provision also states the actual movement of                                                                          
funds into the general fund or the dividend fund could be                                                                       
made in installments. She explained that the dividend fund                                                                      
does not need the funds until the dividends are ready to be                                                                     
paid although it is necessary to know the amount of the                                                                         
transfer earlier. This provision, she explained, enables                                                                        
the permanent fund to retain the income for investment                                                                          
purposes for a portion of the fiscal year.                                                                                      
                                                                                                                                
Co-Chair Sean Parnell referred to the same subsection                                                                           
beginning on line 22 reading, "Transfers following the end                                                                      
of a fiscal year that are required under this section may                                                                       
not exceed the entire balance that is in the earnings                                                                           
reserve account during the fiscal year in which the                                                                             
installments are transferred."  He assumed this is a                                                                            
protection mechanism and wanted to know if the language is                                                                      
in current law or if it is new to this committee                                                                                
substitute.                                                                                                                     
                                                                                                                                
Tam Cook answered that the language was included in the                                                                         
original version of the bill although it is not current                                                                         
law. Under current law, she explained the matter of what                                                                        
happens if the fund itself is too low is not addressed.                                                                         
Instead, current law has a tier system that stipulates what                                                                     
is to be done with excess funds, according to Tam Cook. She                                                                     
affirmed that the purpose of the new language is to ensure                                                                      
that only the income of the permanent fund could actually                                                                       
be spent. She added that the language also serves the                                                                           
function of enabling payment in installments by limiting                                                                        
any single payment to the amount of the balance of the                                                                          
earnings reserve account. She explained that this allows                                                                        
the fund to earn interest.                                                                                                      
                                                                                                                                
Co-Chair Sean Parnell asked if in this committee                                                                                
substitute, the earnings reserve includes both unrealized                                                                       
and realized gains. Tam Cook directed the Member's                                                                              
attention to Section 5, which directs that all the income                                                                       
of the fund is to go to the earnings reserve account and                                                                        
that the balance of the account will be determined                                                                              
according to generally accepted accounting principles. She                                                                      
did not know if generally accepted accounting principles                                                                        
include unrealized income.                                                                                                      
                                                                                                                                
Co-Chair John Torgerson referred to a rule called "GASB 31"                                                                     
that addresses unrealized income and said he thought this                                                                       
rule would be followed in determining what gains would be                                                                       
included.                                                                                                                       
                                                                                                                                
Senator Al Adams asked for further clarification of the                                                                         
advisory vote and the effective dates and wanted to know                                                                        
what happens if the people vote "no".                                                                                           
                                                                                                                                
Tam Cook responded that if the Legislature does not take                                                                        
action before January 1, 2000, the formula changes would                                                                        
still become law.                                                                                                               
                                                                                                                                
Co-Chair John Torgerson stressed his understanding that a                                                                       
law cannot be automatically triggered by an advisory vote.                                                                      
Tam Cook replied that there is debate as to whether that is                                                                     
possible. She stated that the Attorney General is                                                                               
optimistic that it could be done. However she was not,                                                                          
saying that the legislature cannot delegate its legislative                                                                     
power to the people. She allowed that it had been done once                                                                     
before in this state, referring to a binding vote held in                                                                       
1968 with no evidence the resulting statute has been                                                                            
challenged. Therefore, she concluded it is an "unknown                                                                          
territory."                                                                                                                     
                                                                                                                                
Co-Chair Sean Parnell asked the possibility of inserting a                                                                      
repealer date of March 15, 2000 on the bill.  He answered                                                                       
his own question and said it would not work.                                                                                    
                                                                                                                                
Tam Cook suggested if a repealer is used then a shorter                                                                         
time-period of only one day would be necessary. At that                                                                         
point, she explained it would be up to the legislature to                                                                       
repeal either the effective date section or the section                                                                         
containing the repealer itself. She stated that if no                                                                           
action was taken, the repealer section would control the                                                                        
legislation.                                                                                                                    
                                                                                                                                
Senator Lyda Green wanted the ballot language to stipulate                                                                      
what kind of tax there would be if in fact there would be a                                                                     
tax. She used income, sales and motor fuel as examples of                                                                       
types of taxes.                                                                                                                 
                                                                                                                                
[Tape Malfunction - possibly some discussion lost]                                                                              
                                                                                                                                
If the advisory voted failed, Co-Chair Sean Parnell wanted                                                                      
the opportunity to revisit to the legislation.                                                                                  
                                                                                                                                
Senator Gary Wilken asked if the CBR fund is "collapsed" in                                                                     
Section 1 of the committee substitute.                                                                                          
                                                                                                                                
According to Tam Cook there are actually two CBRs. She                                                                          
explained that the Statutory Budget Reserve funds pre-                                                                          
existed the Constitutional Budget Reserve and the two funds                                                                     
operate independently from each other. She understood that                                                                      
very little, if any money is currently held in the                                                                              
Statutory Budget Reserve fund and the fund has not been                                                                         
used for the past few years.                                                                                                    
                                                                                                                                
Senator Gary Wilken asked if the Statutory Budget Reserve                                                                       
Account would now be called the Alaska Income Account. Tam                                                                      
Cook affirmed.                                                                                                                  
                                                                                                                                
Senator Gary Wilken next referred to the advisory vote                                                                          
language addressing the Constitutional Budget Reserve fund                                                                      
on page 8, line 27, and asked if this relates to the actual                                                                     
CBR or the new account. Tam Cook answered this refers to                                                                        
the CBR.                                                                                                                        
                                                                                                                                
Senator Gary Wilken then wanted to know the benefit of the                                                                      
Alaska Income Account.                                                                                                          
                                                                                                                                
Tam Cook responded that it would be easier to trace the two                                                                     
funds. Also, the name change allows the committee                                                                               
substitute to fit under the title of the original bill                                                                          
passed out of the House of Representatives.                                                                                     
                                                                                                                                
Senator Gary Wilken asked if the new Alaska Income Account                                                                      
would then be used. Tam Cook was unsure if it would ever                                                                        
serve a useful purpose.                                                                                                         
                                                                                                                                
Co-Chair John Torgerson clarified that the newly titled                                                                         
fund would not be used under this bill.                                                                                         
                                                                                                                                
PHIL OKESON, Fiscal Analyst, Division of Legislative                                                                            
Finance came to the table to detail the financial plan as                                                                       
contained in Section 5 of the committee substitute.                                                                             
                                                                                                                                
Phil Okeson confirmed Co-Chair John Torgerson's earlier                                                                         
assumption that the GASB 31 rule would apply to this fiscal                                                                     
plan. He explained that the goal of this legislation is to                                                                      
comply with all GASB rules and thereby alleviate the                                                                            
concerns with the definition of income. Under this plan, he                                                                     
noted, the definition of income becomes less important                                                                          
because dividends would no longer be calculated based on                                                                        
income and would instead be based on a percentage of market                                                                     
value.                                                                                                                          
                                                                                                                                
Co-Chair John Torgerson asked if the language of the                                                                            
committee substitute should stipulate that GASB accounting                                                                      
rules must be followed or if the proposed language is                                                                           
sufficient.                                                                                                                     
                                                                                                                                
Phil Okeson responded that the current language is                                                                              
satisfactory and that the matter had been discussed and                                                                         
agreed upon with the Permanent Fund Corporation.                                                                                
                                                                                                                                
Phil Okeson continued saying that the "disposition of                                                                           
income" is the core of how the proposed financial system                                                                        
works. He explained that there are two distributions from                                                                       
the combined accounts with the first being a 2.5 percent                                                                        
rolling market quarterly five-year average that is                                                                              
deposited into the general fund. The second distribution,                                                                       
he said is 2.75 percent that is deposited into the                                                                              
permanent fund dividend account to be paid out as                                                                               
dividends.                                                                                                                      
                                                                                                                                
Phil Okeson explained that subparagraph (c) refers to the                                                                       
timing of transfers. He said the intent is to allow for                                                                         
different amounts to be deposited into accounts at                                                                              
different times and thus allow the permanent fund to earn                                                                       
maximum interest. He envisioned that the deposit into the                                                                       
permanent fund dividend account would be done late in the                                                                       
year and the deposit into the general fund would be done in                                                                     
the beginning of the fiscal year.                                                                                               
                                                                                                                                
Phil Okeson addressed the transition language and said the                                                                      
new plan is not implemented right away using the five-year                                                                      
average. Instead, he explained the first year of                                                                                
implementation uses a 12-quarter average, the second year                                                                       
uses a 16-quarter average, and the amount of quarters                                                                           
increases until the five-year average is reached in 2003.                                                                       
He said the reason for this gradual phase is to allow the                                                                       
distribution amount in the early years of the plan to be                                                                        
adequate. He noted this is similar transitional language as                                                                     
was included in the original House version of the financial                                                                     
plan.                                                                                                                           
                                                                                                                                
Phil Okeson referred to the earlier discussion about the                                                                        
effective date. He stated that if the advisory vote is                                                                          
negative, there is sufficient time for the legislature to                                                                       
repeal the contingent language of the committee substitute                                                                      
since the effective date is January 1, 2001. The dividend                                                                       
would still be calculated using the existing method for the                                                                     
next two years, he stressed.                                                                                                    
                                                                                                                                
Phil Okeson then referred to his earlier presentation on SB
76 showing the financial outcome of the balanced budget                                                                         
plan.                                                                                                                           
                                                                                                                                
Phil Okeson indicated he checked his figures against those                                                                      
supplied by the Department of Revenue.                                                                                          
                                                                                                                                
Senator Al Adams asked if the dividend would be the same                                                                        
amount under both plans for the next two years.                                                                                 
                                                                                                                                
Phil Okeson said the amount would be the same and estimated                                                                     
that the dividend for the following year could be in excess                                                                     
of $1800.                                                                                                                       
                                                                                                                                
Senator Lyda Green referred to Section 4 on page 4 and                                                                          
wanted to know if the inclusion of the 25-percent language                                                                      
as proposed in HB 96 is necessary for the success of this                                                                       
financial plan.                                                                                                                 
                                                                                                                                
Phil Okeson answered that in the early years of the plan,                                                                       
the provisions in HB 96 are not be necessary because the                                                                        
percent change only amounts to about $8 million. However,                                                                       
he stated it could become more important in later years. He                                                                     
noted that the original Senate Balanced Budget Plan was                                                                         
based on the assumption that HB 96 did not pass.                                                                                
                                                                                                                                
Senator Lyda Green asked if the ratio changes proposed in                                                                       
HB 96 could be removed from this committee substitute.                                                                          
                                                                                                                                
Co-Chair John Torgerson responded that there could be                                                                           
difficulties with compliance to the original bill title                                                                         
relating to the provisions of HB 96 and therefore this                                                                          
portion of the language should not be changed.                                                                                  
                                                                                                                                
Co-Chair John Torgerson then referred to Section 8 on page                                                                      
5 and read, "the endowment shall be held and invested by                                                                        
the Alaska Permanent Fund Corporation." and noted that                                                                          
"endowment" in this case only reflects existing language to                                                                     
cover endowments the corporation is currently investing in.                                                                     
                                                                                                                                
Phil Okeson understood that to be correct and deferred to                                                                       
Tam Cook.                                                                                                                       
                                                                                                                                
Senator Loren Leman directed the witness's attention to the                                                                     
description of Plan B in Section 11 page 8, line 26.  He                                                                        
remembered Department of Revenue Commissioner Wilson Condon                                                                     
testifying that the second transfer of $4 billion from the                                                                      
earnings reserve fund to the general fund would occur in                                                                        
2010 rather than 2011 as shown in the ballot language.                                                                          
                                                                                                                                
Phil Okeson replied that the fiscal year 2011 date is                                                                           
garnered from the most recent spreadsheet issued by the                                                                         
Department of Revenue showing the Governor's budget plan.                                                                       
He clarified that technically, fiscal year 2011 occurs in                                                                       
calendar year 2010.                                                                                                             
                                                                                                                                
Senator Loren Leman then referred to the description of                                                                         
"income tax" under Plan B on line 29. He noted the language                                                                     
states, "Impose a personal income tax on all wage earners."                                                                     
He surmised that the governor's actual proposal stipulates                                                                      
that the income tax would only be imposed on some wage                                                                          
earners. He cited testimony Commissioner Condon gave to                                                                         
affirm this.                                                                                                                    
                                                                                                                                
Senator Loren Leman stated he would like both                                                                                   
aforementioned issues to be considered by the Committee.                                                                        
                                                                                                                                
Co-Chair John Torgerson referred to a spreadsheet issued by                                                                     
the Department of Revenue dated 5/14/99 2:37 PM showing the                                                                     
latest figures for the Governor's plan.  (Copy not                                                                              
distributed.)  Co-Chair John Torgerson noted the                                                                                
spreadsheet shows the second $4 billion withdrawal from the                                                                     
permanent fund begins in calendar year 2010.                                                                                    
                                                                                                                                
Senator Loren Leman expressed concerns with how the two                                                                         
plans were compared. He noted that Plan A asks all Alaskans                                                                     
to participate in a reduced dividend.                                                                                           
                                                                                                                                
                                                                                                                                
Tape: SFC - 99 #145, Side B                                                                                                     
                                                                                                                                
                                                                                                                                
Senator Loren Leman continued saying what troubled him the                                                                      
most is the prioritization of the spending increases                                                                            
proposed in Plan A as education, public safety and                                                                              
transportation. He wanted the order to be reversed with                                                                         
transportation listed first. He argued that people                                                                              
contribute to transportation proportionate to their use of                                                                      
vehicles and purchase of fuel. While he thought everyone                                                                        
benefits somewhat from public safety, he stressed that                                                                          
before all Alaskans could be asked to contribute to                                                                             
education, there should be a mechanism to allow parents to                                                                      
chose a delivery system that costs the state less money. He                                                                     
viewed this as an economic incentive and suggested that                                                                         
this matter could be addressed in separate legislation.                                                                         
                                                                                                                                
Senator Loren Leman moved to amend the committee substitute                                                                     
to delete "2011" and insert "2010" and delete "all wage                                                                         
earners" and insert "certain wage earners". The motion was                                                                      
ruled out of order as the committee substitute had not been                                                                     
adopted as a Workdraft and was therefore not available for                                                                      
amending.                                                                                                                       
                                                                                                                                
Senator Loren Leman moved for adoption of SCS CSHB 231                                                                          
Version "M" as a Workdraft. There was no objection and the                                                                      
committee substitute was adopted as a workdraft.                                                                                
                                                                                                                                
[Note: amendments were considered out of order.]                                                                                
                                                                                                                                
Amendment #2: This amendment deletes "2011" and inserts                                                                         
"2010" on page 8 line 26, changing the Plan B description                                                                       
language to read, "Permanent Fund Earnings Reserve:                                                                             
Immediately transfer $4,000,000,000 from the permanent fund                                                                     
earnings to the constitutional budget reserve fund, with an                                                                     
additional $4,000,000,000 in 2010, and $4,000,000,000 in                                                                        
2020." This amendment also deletes "all" and inserts                                                                            
"certain" on line 29, changing the language to read,                                                                            
"Income Tax: Impose a personal income tax on certain wage                                                                       
earners projected to be 31 percent of a person's federal                                                                        
income tax, collecting $350,000,000."                                                                                           
                                                                                                                                
Senator Loren Leman moved for adoption. The amendment was                                                                       
adopted without objection or further discussion.                                                                                
                                                                                                                                
Amendment #1: This amendment replaces the advisory vote                                                                         
ballot language in Section 11 as follows.                                                                                       
                                                                                                                                
QUESTION                                                                                                                        
Preamble: The state treasury's reliance upon declining                                                                          
Alaska oil production and erratic world oil prices                                                                              
constitutes an unsustainable state budget system. The                                                                           
legislature and governor seek Alaskans' input in                                                                                
selecting a long-term balanced budget plan. Please                                                                              
select the plan you believe Alaska should implement                                                                             
for a balanced budget.                                                                                                          
                                                                                                                                
Plan A                                                                                                                          
Summary of Plan A: Plan A has further spending                                                                                  
reductions. Dividends are a percentage of the value of                                                                          
the Alaska Permanent Fund. This plan has no personal                                                                            
income tax.                                                                                                                     
(1) Spending Reductions                                                                                                         
Continue state general fund budget                                                                                              
reductions of at least $70 million over                                                                                         
the next two fiscal years.                                                                                                      
(2) Permanent Fund                                                                                                              
Guarantee the Alaska Permanent Fund is                                                                                          
inflation-proofed to protect the value of                                                                                       
the principle of the fund for all Alaskans,                                                                                     
including future generations.                                                                                                   
(3) Permanent Fund Dividends                                                                                                    
Guarantee a dividend is paid to qualified                                                                                       
Alaska residents at a minimum of $1,700 in                                                                                      
1999 and $1,700 in 2000. Thereafter, the                                                                                        
annual dividend is based on a rate of 2.75                                                                                      
percent of the market value of the Alaska                                                                                       
Permanent Fund, including the Alaska                                                                                            
Permanent Fund Earnings Reserve Account.                                                                                        
These dividends are projected to be $1,250                                                                                      
in 2001 to $1,430 in 2010.                                                                                                      
(4) Permanent Fund Earnings Reserve                                                                                             
Guarantees inflation-proofing the Alaska                                                                                        
Permanent Fund and pays Permanent Fund                                                                                          
Dividends, then spends remaining funds in                                                                                       
the Alaska Permanent Fund Earnings Reserve                                                                                      
Account for state government services.                                                                                          
(5) -Revenues                                                                                                                   
No personal income tax or new broad-based                                                                                       
taxes. Use at least $100 million in new                                                                                         
revenues from resource development (NPRA,                                                                                       
ANWR).                                                                                                                          
                                                                                                                                
Plan B                                                                                                                          
Summary of Plan B: Plan B has no further state                                                                                  
spending reductions. Dividends from the Alaska                                                                                  
Permanent Fund are calculated under the current                                                                                 
method. This plan includes a personal income tax.                                                                               
(1) Spending Reductions                                                                                                         
No further reductions to state spending.                                                                                        
(2) Permanent Fund                                                                                                              
Guarantee the Alaska Permanent Fund is                                                                                          
inflation-proofed to protect the value of                                                                                       
the principle of the fund for all Alaskans,                                                                                     
including future generations.                                                                                                   
(3) Permanent Fund Dividends                                                                                                    
Dividend will not be changed from the                                                                                           
current formula and method of calculation.                                                                                      
The dividend is projected to be $1,796 in                                                                                       
2001 and $1,784 in 2010.                                                                                                        
(4) Permanent Fund Earnings Reserve                                                                                             
Immediately transfer $4 billion from the                                                                                        
permanent fund earnings to the                                                                                                  
Constitutional Budget Reserve Fund, with an                                                                                     
additional transfer of $4 billion in 2010                                                                                       
and $4 billion in 2020. Spend the                                                                                               
Constitutional Budget Reserve Fund earnings                                                                                     
for state government services.                                                                                                  
(5) Revenues                                                                                                                    
Impose a personal income tax on all wage                                                                                        
earners projected to be 31% of a person's                                                                                       
federal income tax, beginning January 1st,                                                                                      
2000 collecting $350 million.                                                                                                   
                                                                                                                                
Please select one: ____  Plan A ____  Plan B                                                                                    
                                                                                                                                
Senator Randy Phillips made a technical correction to the                                                                       
amendment to insert "and the Constitutional Budget Reserve                                                                      
Fund" at the end of the second sentence of the third                                                                            
descriptive paragraph of Plan A.                                                                                                
                                                                                                                                
Senator Randy Phillips made another technical correction to                                                                     
the amendment to reflect the adoption of Amendment #2 and                                                                       
accurately state the year the income tax goes into effect.                                                                      
                                                                                                                                
Senator Randy Phillips moved for adoption of Amendment #1                                                                       
as technically amended.  Co-Chair John Torgerson objected                                                                       
for explanation.                                                                                                                
                                                                                                                                
Senator Randy Phillips explained the amendment changes the                                                                      
ballot language to present to the voters, a balanced and                                                                        
fair representation of both plans. Plan A lists the                                                                             
projected dividend amount, which he felt is important for                                                                       
the public to know. He said the amendment also contains                                                                         
stylistic changes to the wording for both Plan A and Plan                                                                       
B.                                                                                                                              
                                                                                                                                
Senator Randy Phillips added that the forth descriptive                                                                         
paragraph of Plan A stipulates that the remaining funds in                                                                      
the Alaska Permanent Fund Earnings Reserve Account are                                                                          
spent for government services. This change addresses                                                                            
Senator Loren Leman's concerns about the prioritization of                                                                      
education, public safety and transportation, according to                                                                       
Senator Randy Phillips.                                                                                                         
                                                                                                                                
The final difference between the ballot language in the                                                                         
committee substitute and the amendment, Senator Randy                                                                           
Phillips stated, is the committee substitute gives voters                                                                       
two choices and the amendment gives one choice. He                                                                              
explained that the amendment asks voters to chose one of                                                                        
the two plans where the committee substitute asks voters to                                                                     
decide yes or no for each plan.                                                                                                 
                                                                                                                                
Senator Gary Wilken moved to amend Amendment #1 to delete                                                                       
the language in the forth descriptive paragraph of Plan A                                                                       
and insert the language contained in the committee                                                                              
substitute. He stated he wished the priority of education,                                                                      
public safety and transportation to remain part of the                                                                          
ballot language. Senator Dave Donley objected.                                                                                  
                                                                                                                                
Senator Gary Wilken reiterated earlier discussion on the                                                                        
advisory vote language noting that the Committee adopted                                                                        
the priority language. He felt the plan is based on                                                                             
priority spending that recognizes that certain parts of                                                                         
government will grow at a rate greater than other areas of                                                                      
government. He stressed that the remaining government                                                                           
spending is held flat. He thought this language shows that                                                                      
the legislature is willing to spend funds for those areas                                                                       
that constituents were asking for.                                                                                              
                                                                                                                                
By a roll call vote of 4-3-2, the amendment to the                                                                              
amendment was adopted and Amendment #1 was AMENDED. Senator                                                                     
Lyda Green, Senator Randy Phillips and Senator Dave Donley                                                                      
cast nay votes and Senator Pete Kelly and Senator Loren                                                                         
Leman were absent.                                                                                                              
                                                                                                                                
Amendment #1 as amended read as follows.                                                                                        
                                                                                                                                
QUESTION                                                                                                                        
Preamble: The state treasury's reliance upon declining                                                                          
Alaska oil production and erratic world oil prices                                                                              
constitutes an unsustainable state budget system. The                                                                           
legislature and governor seek Alaskans' input in                                                                                
selecting a long-term balanced budget plan. Please                                                                              
select the plan you believe Alaska should implement                                                                             
for a balanced budget.                                                                                                          
                                                                                                                                
Plan A                                                                                                                          
Summary of Plan A: Plan A has further spending                                                                                  
reductions. Dividends are a percentage of the value of                                                                          
the Alaska Permanent Fund. This plan has no personal                                                                            
income tax.                                                                                                                     
(1) Spending Reductions                                                                                                         
Continue state general fund budget                                                                                              
reductions of at least $70 million over                                                                                         
the next two fiscal years.                                                                                                      
(2) Permanent Fund                                                                                                              
Guarantee the Alaska Permanent Fund is                                                                                          
inflation-proofed to protect the value of                                                                                       
the principle of the fund for all Alaskans,                                                                                     
including future generations.                                                                                                   
(3) Permanent Fund Dividends                                                                                                    
Guarantee a dividend is paid to qualified                                                                                       
Alaska residents at a minimum of $1,700 in                                                                                      
1999 and $1,700 in 2000. Thereafter, the                                                                                        
annual dividend is based on a rate of 2.75                                                                                      
percent of the market value of the Alaska                                                                                       
Permanent Fund, including the Alaska                                                                                            
Permanent Fund Earnings Reserve Account and                                                                                     
the Constitutional Budget Reserve Fund.                                                                                         
These dividends are projected to be $1,250                                                                                      
in 2001 to $1,430 in 2010.                                                                                                      
(4) Permanent Fund Earnings Reserve                                                                                             
Guarantee inflation-proofing the Alaska                                                                                         
Permanent Fund and payment of permanent fund                                                                                    
dividends, then prioritize remaining funds                                                                                      
in the Alaska permanent fund earnings                                                                                           
reserve account for education, public safety                                                                                    
and transportation.                                                                                                             
(5) -Revenues                                                                                                                   
No personal income tax or new broad-based                                                                                       
taxes. Use at least $100 million in new                                                                                         
revenues from resource development (NPRA,                                                                                       
ANWR).                                                                                                                          
                                                                                                                                
Plan B                                                                                                                          
Summary of Plan B: Plan B has no further state                                                                                  
spending reductions. Dividends from the Alaska                                                                                  
Permanent Fund are calculated under the current                                                                                 
method. This plan includes a personal income tax.                                                                               
(1) Spending Reductions                                                                                                         
No further reductions to state spending.                                                                                        
(2) Permanent Fund                                                                                                              
Guarantee the Alaska Permanent Fund is                                                                                          
inflation-proofed to protect the value of                                                                                       
the principle of the fund for all Alaskans,                                                                                     
including future generations.                                                                                                   
(3) Permanent Fund Dividends                                                                                                    
Dividend will not be changed from the                                                                                           
current formula and method of calculation.                                                                                      
The dividend is projected to be $1,796 in                                                                                       
2001 and $1,784 in 2010.                                                                                                        
(4) Permanent Fund Earnings Reserve                                                                                             
Immediately transfer $4 billion from the                                                                                        
permanent fund earnings to the                                                                                                  
Constitutional Budget Reserve Fund, with an                                                                                     
additional transfer of $4 billion in 2010                                                                                       
and $4 billion in 2020. Spend the                                                                                               
Constitutional Budget Reserve Fund earnings                                                                                     
for state government services.                                                                                                  
(5) Revenues                                                                                                                    
Impose a personal income tax on certain wage                                                                                    
earners projected to be 31% of a person's                                                                                       
federal income tax, beginning January 1st,                                                                                      
2001 collecting $350 million.                                                                                                   
                                                                                                                                
Please select one: ____  Plan A ____  Plan B                                                                                    
                                                                                                                                
Senator Dave Donley commented that the Committee was too                                                                        
fatigued to be giving this bill the proper consideration                                                                        
that it deserves. Co-Chair Sean Parnell pointed out that                                                                        
the Committee had already made these decisions with SB 76.                                                                      
Senator Randy Phillips argued that the changes were not                                                                         
word-for-word and stressed that he felt the language needed                                                                     
to be balanced.                                                                                                                 
                                                                                                                                
The amended amendment FAILED to be adopted by a vote of 2-                                                                      
7. Senator Lyda Green and Senator Randy Phillips voted in                                                                       
favor.                                                                                                                          
                                                                                                                                
Senator Dave Donley expressed concern with language on                                                                          
pages seven and eight of the committee substitute, but                                                                          
noted they had been addressed previously.                                                                                       
                                                                                                                                
Senator Lyda Green commented that while some voters oppose                                                                      
any changes, they would be willing to consider a low                                                                            
statewide seasonal sales tax.  She felt that was more                                                                           
informative than simply asking if voters want their                                                                             
dividend cut.                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson qualified that the ballot language                                                                      
was not ideal for every member, but noted that the                                                                              
Committee had already discussed and voted on the matter.                                                                        
                                                                                                                                
Senator Lyda Green appreciated that no vote outcome would                                                                       
show an overwhelming pattern and noted that a "paragraph"                                                                       
style to the ballot language might be a more appropriate                                                                        
approach.                                                                                                                       
                                                                                                                                
Co-Chair Sean Parnell offered a motion to report from                                                                           
Committee, SCS CSHB 231(FIN) as amended with individual                                                                         
recommendations and $939. fiscal note from the Office of                                                                        
the Governor, Division of Elections. Without objection, the                                                                     
bill was REPORTED OUT.                                                                                                          
                                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
Co-Chair John Torgerson recessed the Committee at 2:40 AM.                                                                      
SFC-99 (21) 5/18/99                                                                                                             

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