Legislature(2017 - 2018)SENATE FINANCE 532
03/08/2017 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB21 || SB26 || SB70 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| += | SB 26 | TELECONFERENCED | |
| += | SB 70 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 8, 2017
9:04 a.m.
9:04:29 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:04 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Mike Dunleavy
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Rob Carpenter, Fiscal Analyst, Legislative Finance
Division; Alexei Painter, Fiscal Analyst, Legislative
Finance Division; Senator Bert Stedman.
SUMMARY
SB 21 PERMANENT FUND: INCOME; POMV; DIVIDENDS
SB 21 was HEARD and HELD in committee for further
consideration.
SB 26 PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS
SB 26 was HEARD and HELD in committee for further
consideration.
SB 70 APPROP. LIMIT/BUDGET PROCESS/PERM FUND
SB 70 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 21
"An Act relating to appropriations from the income of
the Alaska permanent fund; relating to the calculation
of permanent fund dividends; and providing for an
effective date."
SB 21 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 26
"An Act relating to the Alaska Permanent Fund
Corporation, the earnings of the Alaska permanent
fund, and the earnings reserve account; relating to
the mental health trust fund; relating to deposits
into the dividend fund; relating to the calculation of
permanent fund dividends; relating to unrestricted
state revenue available for appropriation; and
providing for an effective date."
SB 26 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 70
"An Act relating to an appropriation limit; relating
to the budget responsibilities of the governor;
relating to the Alaska permanent fund, the earnings of
the Alaska permanent fund, and the earnings reserve
account; relating to the mental health trust fund;
relating to deposits into the dividend fund; relating
to the calculation and payment of permanent fund
dividends; and providing for an effective date."
SB 70 was HEARD and HELD in committee for further
consideration.
9:05:43 AM
ROB CARPENTER, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION, (LFD) introduced himself.
ALEXEI PAINTER, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION, introduced himself.
9:05:51 AM
Mr. Carpenter discussed the document titled, "Model Output
Comparison by Bill" (copy on file). He pointed out to the
committee that the document laid out the status quo, SB 21,
SB 26, and SB 70 scenarios. He that the Office of Budget
and Management 10-year plan had been added into the
assumptions on the page. He reminded the committee that the
slide was only one picture, with different assumptions than
in previous model runs. He stated that the only bill that
contained an FY 17 percentage of market value (POMV) draw
was SB 26, because of the immediate effective date. He
stated that SB 70 had an effective date of July 1, 2018,
and the division had not assumed an FY 17 draw for the
model. He relayed that the Alaska Permanent Fund
Corporation's (APFC) realized gains of 90 percent had been
used in the model because it provided a more realistic
scenario for the status quo; more returns would be realized
to pay for government.
9:07:47 AM
Mr. Carpenter noted that the unrestricted general fund
revenue (UGF), UGF budget, and the fiscal deficit before
POMV remained identical for all scenarios, with $1.6
billion if revenue in FY16. He noted that the model gave
numbers for FY 18 and FY 26, with SB 26 and SB 70
reflecting a reduction in royalty revenue going to the
permanent fund and an additional $50 million to $70 million
deposited into the general fund. He stated that the UGF
budget assumed $4.3 billion in FY 18, and $4.9 billion in
FY 26, as related to the OMB 10-year plan growth
expectations. He furthered that this would provide a fiscal
deficit in FY 18 of $2.7 billion and $2.9 billion in the
out years, and was slightly different in SB 26 and SB 70,
due to the royalty change to the general fund. He continued
that lines 7 thorough 9 compared the POMV and the split
between dividends and government. He relayed that SB 21
offered 4.5 percent with a 50/50 split with 2.25 percent
being the minimum going to the permanent fund dividend. He
stated that SB 26 offered an 80/20 split with the caveat
that an additional 20 percent from UGF royalties went to
the permanent fund dividend. He related that SB 70 was
currently 75/25 split between the government and the
dividend, respectively.
9:10:04 AM
Mr. Painter noted that in FY 18, both SB 26 and SB 70 had
minimum dollar amount dividends of $1000; while the formula
showed a 75/25 percent split, the dividend would be $1000 -
higher than 25 percent.
9:10:35 AM
Mr. Carpenter relayed that the only change between SB 26
and SB 70 regarding POMV was the decrease to 5 percent; the
state would see 3 years a 5.25 percent and then drop wo 5
percent in the out years. Lines 11 through 13 offered the
dividend dollar appropriation amount, which was $1.5
billion in FY 18, and $1.9 billion by FY 26, under the
status quo. Under SB 21 the dividend appropriation would be
$1.082 billion in FY 18, rising to $1.4 billion in FY 26.
Under both SB 26 and SB 70, there would be $700 million and
$800 million appropriated, respectively. He noted that the
next line showed the amount going to government (line 12).
He shared that under the status quo nothing would go to
government in FY 18, but the assumption had been made that
the deficit from the ERA would need to be filled in FY 26,
totaling $2.7 billion. He said that SB 21 would assume a
50/50 split because of the need for money to pay for
government.
Mr. Carpenter continued to discuss the model output
comparison by bill using the following notes/assumptions:
OMB 10-year plan for operating budget; FY 17 POMV draw for
SB 26 only (other bills effective July 1, 2017); APFC's 90
percent realized gains.
9:14:52 AM
AT EASE
9:22:39 AM
RECONVENED
9:22:47 AM
Senator Dunleavy queried the assumptions embedded in the
model. He assumed that the model was based on the OMB 10-
year revenue forecast, and wondered whether there were
assumed reductions reflected in the model.
Mr. Painter replied that the assumption was based on the
DOR Fall 2018 Revenue Forecast, with adjustments. He stated
that the first adjustment was the higher percentage of
royalties going to the general fund under SB 26 and SB 70.
He said that the second assumption was in the budget
baseline that reflected the statutory minimum of tax
credits being paid out each year, one impact of which would
be that more of them would be used against tax liability.
He said that the budget that the division was assuming used
OMB's 10-year plan for the operating budget, which had
small reductions over the next 3 years, and then grew with
inflation at 2.5 percent. He furthered that OMB's 10-year
plan assumed that the state would begin bonding for the
capital budget, which was complicated, so the division had
assumed a flat capital budget of $180 million per year
beginning in FY 19.
9:24:31 AM
Senator Dunleavy understood that the numbers were for
modeling purposes only, and that the senate had not adopted
the OMB 10-year projections.
Co-Chair MacKinnon replied in the affirmative, and
explained that the division was attempting to provide an
apples to apples comparison of the three bills before the
committee and the status quo.
9:24:52 AM
Mr. Carpenter explained that one of the reasons that the
division used the OMB 10-year plan was that the last time
they presented model output there had been feedback that
growth should be built in. He said that a flat budget had
been assumed under the scenarios because of natural
inflationary pressures. He noted that there was pressure
for a decreasing budget. He stressed that the model was no
more realistic than any other projections, but was another
point of view.
9:25:44 AM
Senator Dunleavy assumed that the methodology the division
used for the overall permanent fund calculation was
different from what the corporation itself used.
Mr. Painter replied that for this model the methodology was
nearly identical. He added that more conservative numbers
for realized earnings had been used in other modeling, but
this version was very similar.
9:26:27 AM
Senator Micciche wondered why 2.5 percent had been used
instead of 2.25 percent.
Mr. Painter replied that OMB had used 2.5 percent. He noted
that the Governor's budget assumed the adoption of a motor
fuel tax increase, and the division model did not because
the bill was not currently in committee.
9:27:32 AM
Senator Micciche understood that the comparisons were all
apples to apples except for the POMV draw for SB 26.
Mr. Painter agreed.
9:27:58 AM
Senator Dunleavy queried the projected deficit in FY 26,
under each scenario.
Mr. Carpenter directed committee attention to Line 5 of the
model output comparison. The line reflected the fiscal
deficit before POMV under each scenario.
9:29:47 AM
AT EASE
9:31:49 AM
RECONVENED
9:31:57 AM
Mr. Painter looked at Line 21, which offered figures for
the CBR balance at the end of the year under each scenario.
He noted that the CBR would be gone by FY 26 under the
status quo and SB 21. SB 26 and SB 70 differed, SB 26
offering the higher balances in FY 18 and FY 26. He
continued to the ERA end of the year balance, which offered
similarities between SB 26 and SB 70; however, SB 26
provided the higher balances.
9:37:43 AM
AT EASE
9:41:54 AM
RECONVENED
9:42:14 AM
Mr. Painter looked at Line 26, which reflected the
principal of the permanent fund. Under the status quo there
was inflation proofing that was tied to the actual
inflation value going from the ERA to the principal, in
addition to 30 percent royalties. He said that the
principal would grow from $46.5 billion to $60 billion
under the status quo. He stated that SB 21 did not have
inflation proofing built in going from the ERA to the
principal, so the only visible growth was in unrealized
gains and the growth in royalties. He relayed that under SB
26 and SB 70, the inflation proofing mechanism would be the
4X draw.
Co-Chair MacKinnon encouraged the members to provide
amendments to the legislation.
SB 21 was HEARD and HELD in committee for further
consideration.
SB 26 was HEARD and HELD in committee for further
consideration.
SB 70 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
9:44:27 AM
The meeting was adjourned at 9:44 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 21, SB 26, SB 70 SFC Bill Compare Slide.pdf |
SFIN 3/8/2017 9:00:00 AM |
SB 21 SB 26 SB 70 |