Legislature(2019 - 2020)SENATE FINANCE 532

03/06/2019 09:00 AM FINANCE

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Audio Topic
09:02:05 AM Start
09:06:42 AM Economic Overview of Governor's Proposed Operating Budget
10:56:50 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Economic Overview of Governor's Proposed TELECONFERENCED
Operating Budget by Ed King, Chief Economist,
Office of Management & Budget & Dan Robinson,
Chief of Research & Analysis, Department of
Labor & Workforce Development
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       March 6, 2019                                                                                            
                         9:02 a.m.                                                                                              
                                                                                                                                
9:02:05 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:02 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Dan Robinson, Chief of Research  and Analysis, Department of                                                                    
Labor and  Workforce Development; Ed King,  Chief Economist,                                                                    
Office  of Management  and Budget;  Donna Arduin,  Director,                                                                    
Office   of   Management   and   Budget;   Bruce   Tangeman,                                                                    
Commissioner, Department of  Revenue; Senator Cathy Giessel;                                                                    
Senator Mia  Costello; Senator  Gary Stevens;  Senator Chris                                                                    
Birch.                                                                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^ECONOMIC OVERVIEW OF GOVERNOR'S PROPOSED OPERATING BUDGET                                                                    
                                                                                                                                
9:06:42 AM                                                                                                                    
                                                                                                                                
DAN ROBINSON, CHIEF OF RESEARCH  AND ANALYSIS, DEPARTMENT OF                                                                    
LABOR    AND    WORKFORCE   DEVELOPMENT,    discussed    the                                                                    
presentation,  "Alaska's Economy:  Insight from  Current and                                                                    
Historical Data" (copy on file).  He stated that the bulk of                                                                    
his work was  related to producing economic  data. That work                                                                    
was done with federal partners. He noted that he was non-                                                                       
partisan and policy neutral.                                                                                                    
                                                                                                                                
Mr.  Robinson highlighted  slide  2, "The  long  view of  AK                                                                    
population change."                                                                                                             
                                                                                                                                
Mr.  Robinson  addressed  slide   3,  "First  Question:  How                                                                    
healthy is our economy?"                                                                                                        
                                                                                                                                
Mr. Robinson  looked at  slide 4, "Three  plus years  of job                                                                    
losses."                                                                                                                        
                                                                                                                                
Mr. Robinson highlighted slide  5, "Losses/gains have varied                                                                    
throughout state":                                                                                                              
                                                                                                                                
     Total Job Loss or Gain by Alaska Area since 2015                                                                           
                                                                                                                                
          Boroughs and census areas, based on the first                                                                         
         three quarters of each years 2015 to 2018                                                                              
                                                                                                                                
9:14:48 AM                                                                                                                    
                                                                                                                                
Senator  Micciche  wondered  the metric  only  included  the                                                                    
first three quarters.                                                                                                           
                                                                                                                                
Mr. Robinson replied  that it was the most  current data for                                                                    
2018 in order to make the consistent comparisons.                                                                               
                                                                                                                                
Mr. Robinson addressed slide 6, "Six years of migration-                                                                        
related losses."                                                                                                                
                                                                                                                                
Co-Chair  Stedman  asked  whether   the  resident  and  non-                                                                    
resident were  parsed out. He  noted the job impacts  on the                                                                    
North Slope.                                                                                                                    
                                                                                                                                
Mr.  Robinson replied  that "residents"  were in  the census                                                                    
definition.  He stated  that Alaska  had between  35 and  40                                                                    
percent of the oil and  gas were not residents. He furthered                                                                    
that  percentage   dropped  from  37  percent   in  2016  to                                                                    
approximately 33 percent when the job losses began.                                                                             
                                                                                                                                
Co-Chair Stedman  looked at slide  5, and noted 4248  in the                                                                    
North Slope.                                                                                                                    
                                                                                                                                
Mr. Robinson corrected that the number referred to jobs.                                                                        
                                                                                                                                
                                                                                                                                
Co-Chair Stedman  wondered whether  some of those  jobs were                                                                    
filled by non-residents.                                                                                                        
                                                                                                                                
Mr. Robinson replied in the affirmative.                                                                                        
                                                                                                                                
Senator  Micciche assumed  that  outmigration  was the  same                                                                    
migration. He surmised that the  residents could be eligible                                                                    
for the Permanent Fund Dividend (PFD).                                                                                          
                                                                                                                                
Mr.  Robinson   replied  that   the  census   definition  of                                                                    
residency was used in the slide.                                                                                                
                                                                                                                                
9:20:14 AM                                                                                                                    
                                                                                                                                
Senator Micciche asked whether  the department had collected                                                                    
data related to who was leaving Alaska.                                                                                         
                                                                                                                                
Mr.   Robinson  replied   in  the   affirmative.  He   spoke                                                                    
specifically to those working in the oil and gas industry.                                                                      
                                                                                                                                
Mr. Robinson discussed slide 7,  "We rank 50th in job growth                                                                    
from 2015-18."                                                                                                                  
                                                                                                                                
Mr. Robinson  highlighted slide 8, "Second  question: What's                                                                    
been the problem?"                                                                                                              
                                                                                                                                
Mr. Robinson looked at slide 9, "Can we just blame oil?"                                                                        
                                                                                                                                
Co-Chair Stedman remarked that Wyoming  was a coal state, so                                                                    
he did not feel it was a fair comparison.                                                                                       
                                                                                                                                
Mr. Robinson  replied that Wyoming  was a  natural resources                                                                    
state.                                                                                                                          
                                                                                                                                
9:25:42 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  wondered  whether Wyoming  had  the  same                                                                    
natural resource ownership structure as Alaska.                                                                                 
                                                                                                                                
Mr.  Robinson replied  that Wyoming  did not  have the  same                                                                    
structure.                                                                                                                      
                                                                                                                                
Co-Chair Stedman noted  that Alaska was the  only state that                                                                    
owned its subsurface.                                                                                                           
                                                                                                                                
9:26:59 AM                                                                                                                    
                                                                                                                                
Mr. Robinson replied in the affirmative.                                                                                        
                                                                                                                                
Mr. Robinson addressed slide 10, "One more comparison?"                                                                         
                                                                                                                                
Mr.  Robinson discussed  slide 11,  "A study  of state-level                                                                    
recessions."                                                                                                                    
                                                                                                                                
Mr.  Robinson discussed  slide 12,  "A study  of state-level                                                                    
recessions."                                                                                                                    
                                                                                                                                
Mr. Robinson  looked at slide  13, "So why is  our recession                                                                    
lingering?"                                                                                                                     
                                                                                                                                
     ? Uncertainty related to foundational questions about                                                                      
     the amount of state government we're going to have and                                                                     
     how we're going to pay for it                                                                                              
                                                                                                                                
     ? Economic costs related to some of the measures                                                                           
     already taken                                                                                                              
                                                                                                                                
9:32:59 AM                                                                                                                    
                                                                                                                                
Co-Chair von Imhof looked at  the first bullet, and wondered                                                                    
to what  degree that  it was self-inflicted  versus external                                                                    
uncontrollable forces.                                                                                                          
                                                                                                                                
Mr. Robinson stressed that  typically Alaska's recession was                                                                    
driven by  factors outside  of its  control, such  as prices                                                                    
and  the  cruise industry.  He  felt  that this  factor  was                                                                    
within Alaska's control.                                                                                                        
                                                                                                                                
Co-Chair  Stedman queried  definition of  "recession" within                                                                    
the presentation.                                                                                                               
                                                                                                                                
Mr. Robinson replied that there  was no formal definition of                                                                    
a state-level  recession. He stated that  his definition was                                                                    
"over three quarters of employment loss."                                                                                       
                                                                                                                                
9:35:33 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  queried  the   definition  of  a  federal                                                                    
recession, and why there was a difference.                                                                                      
                                                                                                                                
Mr.  Robinson stated  that the  National Bureau  of Economic                                                                    
Research  that became  the acceptable  recession determining                                                                    
committee.  There  was  an  examination  of  employment  and                                                                    
international  trade. That  organization  did not  determine                                                                    
and end date for a  recession until after approximately nine                                                                    
or ten months later.                                                                                                            
                                                                                                                                
Co-Chair  Stedman asked  whether there  was a  difference in                                                                    
the state and federal measurement periods.                                                                                      
                                                                                                                                
Mr. Robinson replied in the negative.                                                                                           
                                                                                                                                
Mr. Robinson  highlighted slide 14, "Third  question: Are we                                                                    
coming out of our recession?"                                                                                                   
                                                                                                                                
Mr. Robinson  discussed slide 15,  "Looks like  a recovering                                                                    
economy."                                                                                                                       
                                                                                                                                
9:39:56 AM                                                                                                                    
                                                                                                                                
Co-Chair von  Imhof requested the factors  used to calculate                                                                    
the gross domestic product (GDP).                                                                                               
                                                                                                                                
Mr.  Robinson replied  that gross  domestic product  was the                                                                    
value of all  the goods and services produced  in the state.                                                                    
He stated that  it did not mean that all  the value remained                                                                    
in the state.                                                                                                                   
                                                                                                                                
Co-Chair von Imhof  noted the drop in 2015,  and she assumed                                                                    
it was the  price of oil. Therefore, the total  value of the                                                                    
oil  being   produced  at   the  time   relatively  remained                                                                    
consistent. She guessed  that the large drop was  due to oil                                                                    
prices.                                                                                                                         
                                                                                                                                
Mr. Robinson replied in the affirmative.                                                                                        
                                                                                                                                
Co-Chair Stedman  recalled that  at oil prices  affected the                                                                    
GDP.                                                                                                                            
                                                                                                                                
Mr.  Robinson  noted that  the  category  that included  oil                                                                    
swung wildly in GDP.                                                                                                            
                                                                                                                                
Senator Micciche  wondered whether the POMV  helped with the                                                                    
state.                                                                                                                          
                                                                                                                                
Mr.  Robinson  replied that  the  state  did something  very                                                                    
important with  the POMV,  because there  was a  new revenue                                                                    
stream that was not directly tied to oil.                                                                                       
                                                                                                                                
9:45:52 AM                                                                                                                    
                                                                                                                                
Mr.  Robinson addressed  slide 16,  "Our  forecast for  2019                                                                    
employment, but?"                                                                                                               
                                                                                                                                
Mr.  Robinson looked  at  slide 17,  "How  accurate are  our                                                                    
forecasts?"                                                                                                                     
                                                                                                                                
Mr.  Robinson discussed  slide  18,  "Proposed budget  would                                                                    
change forecast."                                                                                                               
                                                                                                                                
9:49:27 AM                                                                                                                    
                                                                                                                                
Senator  Wielechowski  noted  that   ISER  had  stated  that                                                                    
approximately 1086 jobs were lost  for every $100 million in                                                                    
budget cuts.  He wondered whether  Mr. Robinson  agreed with                                                                    
that statement.                                                                                                                 
                                                                                                                                
Mr. Robinson  replied that he  could not speak for  ISER. He                                                                    
stated  that   his  approach  was   less  from   a  modeling                                                                    
perspective than from an historical pattern perspective.                                                                        
                                                                                                                                
Senator  Wielechowski  queried  an  impact to  the  jobs  in                                                                    
Alaska with a $1.1 billion budget cut.                                                                                          
                                                                                                                                
Mr. Robinson  remarked that there was  a contemplation about                                                                    
how it would be  changed, and so he did not  want to make an                                                                    
estimate or  assertion about the  impacts of  the individual                                                                    
cuts.                                                                                                                           
                                                                                                                                
Mr.  Robinson  looked at  slide  19,  "Case study  of  PFD's                                                                    
short-term job impact."                                                                                                         
                                                                                                                                
Mr.  Robinson highlighted  slide  20, "Case  study of  PFD's                                                                    
short-term job impact."                                                                                                         
                                                                                                                                
9:56:00 AM                                                                                                                    
                                                                                                                                
Co-Chair  von  Imhof  wondered  what  would  change  if  the                                                                    
dividend was  paid out  in smaller  payments versus  one big                                                                    
sum.                                                                                                                            
                                                                                                                                
Mr.  Robinson  replied that  the  PFD  had been  studied  as                                                                    
universal basic income. He remarked  that there was not much                                                                    
study on how the PFD was  spent. He remarked that it was not                                                                    
spent to a high degree right away in Alaska.                                                                                    
                                                                                                                                
Senator Bishop  commented that it  would be nice  to analyze                                                                    
where the money went.                                                                                                           
                                                                                                                                
Mr. Robinson concluded his presentation.                                                                                        
                                                                                                                                
Co-Chair  Stedman stated  that there  was a  request for  an                                                                    
analysis about how the dividend was spent.                                                                                      
                                                                                                                                
Mr. Robinson  replied that there  was a  consideration about                                                                    
how the analysis would be done.                                                                                                 
                                                                                                                                
9:59:23 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman  looked  at  slide 7.  He  noted  that  the                                                                    
university directly supported 7500  jobs with an annual wage                                                                    
of close to $350 million.  He remarked that when jobs linked                                                                    
to the  university, the university supported  15,800 jobs at                                                                    
a total  wage of  $630 million.  He wondered  whether Alaska                                                                    
was further south than what was represented in the slide.                                                                       
                                                                                                                                
Mr.  Robinson replied  that it  was related  to the  details                                                                    
about how the budget would impact jobs.                                                                                         
                                                                                                                                
Senator Hoffman stressed that the  university was one of the                                                                    
largest employers.                                                                                                              
                                                                                                                                
Mr. Robinson replied that the  forecast would have been more                                                                    
in the negative.                                                                                                                
                                                                                                                                
Senator Hoffman did not know  that the forecast would occur,                                                                    
but was proposed by the administration.                                                                                         
                                                                                                                                
Senator Wielechowski requested a  changed forecast under the                                                                    
proposed budget.                                                                                                                
                                                                                                                                
Mr.  Robinson  replied that  he  had  never done  that,  but                                                                    
agreed to talk about the possibility.                                                                                           
                                                                                                                                
Co-Chair Stedman asked  whether it could be  included in the                                                                    
presentation.                                                                                                                   
                                                                                                                                
Mr.  Robinson  stated that  it  was  not economic  modeling,                                                                    
rather it was trend analysis.                                                                                                   
                                                                                                                                
10:04:47 AM                                                                                                                   
                                                                                                                                
Senator Micciche looked at slide  15, and the possibility of                                                                    
work to get out of  the recession. He wondered whether there                                                                    
was   a  significant   destabilization   that  would   cause                                                                    
additional downward response.                                                                                                   
                                                                                                                                
Mr. Robinson replied  that most of the attention  was on the                                                                    
industry's actions.                                                                                                             
                                                                                                                                
Senator Micciche wondered whether  a 30 percent reduction in                                                                    
state  spending  would  send a  signal  negative  investment                                                                    
signal to industry.                                                                                                             
                                                                                                                                
Mr. Robinson replied that it was disruptive.                                                                                    
                                                                                                                                
Co-Chair Stedman felt that it  was not an economic stimulus,                                                                    
rather it was an economic retardant.                                                                                            
                                                                                                                                
Mr. Robinson replied that it was accurate.                                                                                      
                                                                                                                                
Co-Chair Stedman  encouraged the  committee to  have decorum                                                                    
during the presentation.                                                                                                        
                                                                                                                                
10:10:59 AM                                                                                                                   
                                                                                                                                
ED KING,  CHIEF ECONOMIST, OFFICE OF  MANAGEMENT AND BUDGET,                                                                    
introduced himself.                                                                                                             
                                                                                                                                
DONNA  ARDUIN, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
introduced herself.                                                                                                             
                                                                                                                                
BRUCE   TANGEMAN,  COMMISSIONER,   DEPARTMENT  OF   REVENUE,                                                                    
introduced himself.                                                                                                             
                                                                                                                                
Mr.  King  discussed  the presentation,  "State  of  Alaska;                                                                    
Office  of Management  and Budget;  Macroeconomic Impact  of                                                                    
Fiscal   Options;  Presentation   to   the  Senate   Finance                                                                    
Committee; March 6, 2019; Chief  Economist Ed King" (copy on                                                                    
file).                                                                                                                          
                                                                                                                                
10:13:38 AM                                                                                                                   
                                                                                                                                
Mr. King looked at slide  2, "ISER Report." He displayed the                                                                    
Institute of Social and Economic Research (ISER) report.                                                                        
                                                                                                                                
Mr.  King  highlighted  slide  3,  "Illustration  of  a  10x                                                                    
Multiplier Effect":                                                                                                             
                                                                                                                                
     Takeaways:                                                                                                                 
     1.  It  can  takes  years for  the  full  indirect  and                                                                    
     induced effects to materialize                                                                                             
     2. Stopping  an injection always creates  the basis for                                                                    
     a recession (spending trap)                                                                                                
     3. If the injection comes  from a draw elsewhere in the                                                                    
     same economy, there are offsetting effects                                                                                 
                                                                                                                                
                                                                                                                                
10:19:29 AM                                                                                                                   
                                                                                                                                
Mr. King discussed slide 4, "Implied Net Impact of                                                                              
Increasing Spending by Decreasing PFD (per $100 million)."                                                                      
                                                                                                                                
Mr. Kind looked at slide 5, "Comments on ISER Report":                                                                          
                                                                                                                                
     ? The numbers in the report are commonly misunderstood                                                                     
         o Be careful when looking at jobs numbers                                                                              
          o Ensure you are making a realistic comparison                                                                        
          o Timing matters                                                                                                      
     ?  The  ceteris  paribus  assumption only  holds  in  a                                                                    
     synthetic environment*                                                                                                     
          o Behavioral responses are important                                                                                  
         o Not all dollars/jobs/programs are equal                                                                              
     ?  All   models  endeavor   to  provide   insight,  not                                                                    
     instruction                                                                                                                
     ? Consider long-term impacts as well                                                                                       
     ? The comparisons between tax types is valuable                                                                            
     ?   The   strength  of   this   report   lays  in   the                                                                    
     distributional analysis                                                                                                    
                                                                                                                                
10:21:18 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:21:51 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
10:22:20 AM                                                                                                                   
                                                                                                                                
Mr. King continued to discuss slide 5:                                                                                          
                                                                                                                                
         o Be careful when looking at jobs numbers                                                                              
          o Ensure you are making a realistic comparison                                                                        
          o Timing matters                                                                                                      
     ?  The  ceteris  paribus  assumption only  holds  in  a                                                                    
     synthetic environment*                                                                                                     
          o Behavioral responses are important                                                                                  
         o Not all dollars/jobs/programs are equal                                                                              
        All models endeavor to provide insight, not                                                                             
     instruction                                                                                                                
     ? Consider long-term impacts as well                                                                                       
     ? The comparisons between tax types is valuable                                                                            
     ? The strength of this report lays in the                                                                                  
     distributional analysis                                                                                                    
                                                                                                                                
10:25:38 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  remarked  that   ISER  would  be  in  the                                                                    
committee the following day.                                                                                                    
                                                                                                                                
10:26:06 AM                                                                                                                   
                                                                                                                                
Mr. King  continued to  discussed slide 5.  He wanted  to be                                                                    
sure that people understood the ISER analysis.                                                                                  
                                                                                                                                
Mr.  King  highlighted slide  6,  "The  No Change  Scenario;                                                                    
Avoiding  budget  cuts  without  addressing  the  structural                                                                    
issue."                                                                                                                         
                                                                                                                                
10:29:23 AM                                                                                                                   
                                                                                                                                
Senator Bishop  wondered whether  SB 26  solved most  of the                                                                    
problem in the previous legislative session.                                                                                    
                                                                                                                                
Mr. King replied that it solved half of the problem.                                                                            
                                                                                                                                
Co-Chair  Stedman felt  that the  slides should  be kept  in                                                                    
order.                                                                                                                          
                                                                                                                                
Senator  Bishop agreed  that there  may be  a difference  of                                                                    
opinion of how much of the problem had been solved.                                                                             
                                                                                                                                
Co-Chair Stedman  remarked that there was  an expectation of                                                                    
roughly  $300  million  deficit,  because  there  were  more                                                                    
recent favorable issues. He looked  at FY 20, which showed a                                                                    
$1.6 billion deficit with a  PFD payout of $3000. He queried                                                                    
the reason behind the equal lines for FY 19 and FY 20.                                                                          
                                                                                                                                
Mr. King replied  that the numbers on  the slide represented                                                                    
the UGF expenditures versus the UGF revenues.                                                                                   
                                                                                                                                
Co-Chair Stedman stressed care in using acronyms.                                                                               
                                                                                                                                
Mr. King stated that the UGF was the discretionary funding.                                                                     
                                                                                                                                
Senator Hoffman assumed  that SB 26 was status  quo with the                                                                    
draw from ERA.                                                                                                                  
                                                                                                                                
Co-Chair Stedman queried a definition of SB 26.                                                                                 
                                                                                                                                
10:35:17 AM                                                                                                                   
                                                                                                                                
Mr.  King  explained that  SB  26  gave permission  for  the                                                                    
legislature to transfer money from the  ERA to the GF of the                                                                    
state to  be used  to cover the  expenditures in  the state.                                                                    
The requirement  in that statute  was that the  transfer for                                                                    
the next  fiscal year could  not exceed 5.25 percent  of the                                                                    
lagging  five-year rolling  average  of the  balance of  the                                                                    
Permanent Fund. Moving  forward, that would be  reduced to 5                                                                    
percent beginning in 2021.                                                                                                      
                                                                                                                                
Senator  Hoffman wondered  whether it  was assumed  that the                                                                    
dividend be $1600 per year.                                                                                                     
                                                                                                                                
Mr. King  replied that  the PFD  was not  UGF in  the graph,                                                                    
rather  it was  an off-book  transfer  from the  ERA to  the                                                                    
dividend fund.                                                                                                                  
                                                                                                                                
Senator   Hoffman  stated   that  the   governor  tied   the                                                                    
legislature's hands  if they  could not  consider additional                                                                    
income and  other allocations. He felt  that the legislature                                                                    
needed to make those considerations.                                                                                            
                                                                                                                                
Mr.  Tangeman   agreed  that  the  governor   presented  his                                                                    
solution, and expected the legislature  to engage and create                                                                    
their own solutions.                                                                                                            
                                                                                                                                
Co-Chair von Imhof wondered how  all the proposed cuts would                                                                    
impact the economy across the  state, and wondered when that                                                                    
conversation would occur.                                                                                                       
                                                                                                                                
Mr. Tangeman  replied that the presentation  was setting the                                                                    
stage before each unique silos were addressed.                                                                                  
                                                                                                                                
10:41:50 AM                                                                                                                   
                                                                                                                                
Co-Chair von  Imhof was relieved  knowing that  the economic                                                                    
impacts were  being analyzed. She  felt that June 30  at 5pm                                                                    
was a "bright date stamp."                                                                                                      
                                                                                                                                
Co-Chair  Stedman  stated  that  the  different  departments                                                                    
would be available to discuss those analyses.                                                                                   
                                                                                                                                
Mr. Arduin stated that the  only proposal to analyze was the                                                                    
governor's proposal.                                                                                                            
                                                                                                                                
Mr. King looked at slide 8, "Status Quo Fiscal Situation."                                                                      
                                                                                                                                
Co-Chair  Stedman queried  the dividend  assumption used  in                                                                    
the presentation.                                                                                                               
                                                                                                                                
Mr. King replied that it was the statutory calculation.                                                                         
                                                                                                                                
10:45:19 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman wondered whether  it increased or decreased                                                                    
the percentage split of the ERA draw.                                                                                           
                                                                                                                                
Mr. King replied  that PFD consumed a larger  portion of the                                                                    
POMV.                                                                                                                           
                                                                                                                                
Co-Chair Stedman wondered what would  occur if there were no                                                                    
PFD payout.                                                                                                                     
                                                                                                                                
Mr.  King responded  that within  the first  four years  the                                                                    
total  access  to  cash  would meet  or  exceed  the  needed                                                                    
expenditures.  He noted  that there  would eventually  be no                                                                    
room.                                                                                                                           
                                                                                                                                
Co-Chair Stedman asked for that description in a slide.                                                                         
                                                                                                                                
Senator Olson  noted that  the revenues  appeared to  be the                                                                    
same.                                                                                                                           
                                                                                                                                
Mr. King  replied in  the affirmative, and  was a  result of                                                                    
the price and  production forecast that did not  grow at the                                                                    
same rate of inflation.                                                                                                         
                                                                                                                                
Senator Olson noted  that part of the POMV would  be paid in                                                                    
dividends, and wondered if there  was a consideration of the                                                                    
stock market.                                                                                                                   
                                                                                                                                
Mr. King agreed to provide that information.                                                                                    
                                                                                                                                
Co-Chair Stedman wondered whether there  was use of a linear                                                                    
projection.                                                                                                                     
                                                                                                                                
Mr.  King  replied  that the  slide  contained  public  data                                                                    
information.                                                                                                                    
                                                                                                                                
10:50:27 AM                                                                                                                   
                                                                                                                                
Mr. Tangeman furthered that the  question of a 2008 scenario                                                                    
would like.  He noted that  they did  not get asked  about a                                                                    
more recent scenario with really good returns.                                                                                  
                                                                                                                                
Senator Hoffman wondered whether  determining an option that                                                                    
had a  dividend that was  less than $3000 and  could balance                                                                    
the budget with the CBR.                                                                                                        
                                                                                                                                
Ms. Arduin replied  that the governor's proposal  was to pay                                                                    
the full statutory dividend.                                                                                                    
                                                                                                                                
Senator  Hoffman recalled  that  the  presenters had  stated                                                                    
that the legislature could examine  other options to balance                                                                    
the budget. One  of those options was using the  CBR, and an                                                                    
adjusted  PFD.  He  asked whether  the  other  options  were                                                                    
acceptable to the administration.                                                                                               
                                                                                                                                
Ms. Arduin replied  that once a full  budget proposed budget                                                                    
was in  place, Mr.  King would provide  an analysis  of that                                                                    
proposal.                                                                                                                       
                                                                                                                                
Senator  Olson  stressed  that  he  wanted  answers  to  the                                                                    
questions.                                                                                                                      
                                                                                                                                
Co-Chair Stedman stressed that  the dividend was statutorily                                                                    
controlled, much like many other  funds. He wondered whether                                                                    
the   administration  intended   to  make   all  statutorily                                                                    
required expenditures, or treat the PFD differently.                                                                            
                                                                                                                                
Mr. King deferred to Ms. Arduin.                                                                                                
                                                                                                                                
Ms. Arduin replied  that once there was a  final budget, the                                                                    
governor  would live  within the  statutory requirements  in                                                                    
the budget.                                                                                                                     
                                                                                                                                
Co-Chair Stedman discussed committee business.                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:56:50 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:56 a.m.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
030619 DLWD Current and Histroical Data Presentation.pdf SFIN 3/6/2019 9:00:00 AM
Economic Trends
030619 OMB Economic Impacts of Policy Decisions 3.6.19.pdf SFIN 3/6/2019 9:00:00 AM
SB 20