Legislature(2019 - 2020)SENATE FINANCE 532

02/04/2020 09:00 AM FINANCE

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09:03:22 AM Start
09:03:54 AM SB104
09:43:00 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 104 APPROPRIATION LIMIT TELECONFERENCED
Heard & Held
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 4, 2020                                                                                           
                         9:03 a.m.                                                                                              
                                                                                                                                
9:03:22 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair von Imhof called the Senate Finance Committee                                                                          
meeting to order at 9:03 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator David Wilson                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator Cathy Giessel; Caroline Schultz, Staff, Senator                                                                         
Natasha von Imhof.                                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 104    APPROPRIATION LIMIT                                                                                                   
                                                                                                                                
          SB 104 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
SENATE BILL NO. 104                                                                                                           
                                                                                                                                
     "An Act relating to an appropriation limit; relating                                                                       
     to the budget responsibilities of the governor; and                                                                        
     providing for an effective date."                                                                                          
                                                                                                                                
9:03:54 AM                                                                                                                    
                                                                                                                                
Co-Chair von Imhof recalled that the previous day the                                                                           
committee had considered the proposed Motor Fuels tax. She                                                                      
asserted that  if the state  was going to  discuss revenues,                                                                    
Alaskans needed to be assured  that the state budget was not                                                                    
being  bloated in  response. She  emphasized that  the state                                                                    
still  needed to  look  for savings  and  thought there  was                                                                    
efficiencies to be found throughout the budget.                                                                                 
                                                                                                                                
Co-Chair  von  Imhof  continued  her  opening  remarks.  She                                                                    
opined that  the state needed  to hold down  spending growth                                                                    
by selling  unneeded state assets, consolidate  real estate,                                                                    
and manage the vacancy rate through worker attrition.                                                                           
                                                                                                                                
Co-Chair  von  Imhof  explained  the SB  104  would  put  an                                                                    
effective  spending  cap  in statute.  The  bill  was  first                                                                    
presented  on  April 10,  2019.  There  were two  additional                                                                    
hearings on April  29, when public testimony  was taken, and                                                                    
April 30, when  the Committee Substitute (CS)  version K was                                                                    
adopted.                                                                                                                        
                                                                                                                                
9:05:41 AM                                                                                                                    
                                                                                                                                
CAROLINE  SCHULTZ, STAFF,  SENATOR NATASHA  VON IMHOF,  gave                                                                    
provided an overview of the  bill. She addressed a Sectional                                                                    
Analysis (copy on file):                                                                                                        
                                                                                                                                
     Sec. 1: Amends AS  37.05.540(a) by deleting a reference                                                                    
     to the  existing statutory appropriation limit  that is                                                                    
     repealed by this bill.                                                                                                     
                                                                                                                                
     Sec.  2:  Enacts a  new  AS  37.05.545 -  Appropriation                                                                    
     Limit.                                                                                                                     
     (a) Establishes the parameters of the limit:                                                                               
      Includes   all   Unrestricted   General   Fund   (UGF)                                                                    
     appropriations  for  agency  spending,  Permanent  Fund                                                                    
     dividends,   retirement    obligations,   and   capital                                                                    
     projects.  Does not  include reappropriations,  federal                                                                    
     funds, Designated General  Fund (DGF) spending, program                                                                    
     receipts,  money  received  from nonstate  sources  for                                                                    
    specific purposes, or the exclusions listed in (b).                                                                         
      Starting  point is  $6  billion for  FY  2021, with  a                                                                    
     growth rate based on the  average of the previous five-                                                                    
     year's  inflation.  This  rate was  chosen  because  it                                                                    
     provides a  more stable rate  than an  annual inflation                                                                    
     adjustment.                                                                                                                
                                                                                                                                
     (b) Lists the exclusions to the appropriation limit:                                                                       
     (1)  Appropriations  to  the Permanent  Fund  principal                                                                    
     (corpus);                                                                                                                  
     (2) Debt payments;                                                                                                         
     (3) Disaster funding; and                                                                                                  
     (4) Deposits  into savings accounts and  transfers into                                                                    
     accounts that require  additional legislative action to                                                                    
     spend.                                                                                                                     
                                                                                                                                
     (c) Allows  an additional five percent  above the limit                                                                    
     to be spent on capital projects.                                                                                           
                                                                                                                                
     (d)  Defines  the  terms  "debt  obligation",  "program                                                                    
     receipts",  and  "unrestricted  general fund"  for  the                                                                    
     purposes of this section.                                                                                                  
                                                                                                                                
     Sec. 3:  Adds a  requirement to  AS 37.07.020  that the                                                                    
     governor  submit,  along  with  the  annual  budget,  a                                                                    
     report  noting  whether  the  proposal  is  within  the                                                                    
     spending limit.  The report must be  updated to include                                                                    
     any supplemental appropriations and budget amendments.                                                                     
                                                                                                                                
     Sec.  4: Repeals  the  current statutory  appropriation                                                                    
     limit, specifically AS  37.05.540(b); 37.05.540(c), and                                                                    
     37.04.540(e).                                                                                                              
                                                                                                                                
     Secs 5  - 7:  Applicability, transition,  and effective                                                                    
     date   language    that   specifies   when    the   new                                                                    
     appropriation  limit and  reporting requirements  would                                                                    
     take  effect.  The  limit would  apply  to  the  FY2021                                                                    
     budget and the  governor would be required  to file the                                                                    
     necessary reports for the  proposed budgets starting in                                                                    
     December 2020.                                                                                                             
                                                                                                                                
9:07:40 AM                                                                                                                    
                                                                                                                                
Ms. Schultz addressed the presentation, "Senate Finance                                                                         
Committee Presentation - 2/4/2020" (copy on file).                                                                              
                                                                                                                                
Ms. Schultz addressed slide 1, "Decision Points":                                                                               
                                                                                                                                
     1. Starting Point                                                                                                          
     2. Growth rate                                                                                                             
     3. What is included under the cap                                                                                          
     4. What is excluded outside the cap                                                                                        
                                                                                                                                
Ms. Schultz tuned to slide 2, "Decision Points: current SB
104 (v. K)":                                                                                                                    
                                                                                                                                
     1. Starting Point $ 6 Billion                                                                                              
     2. Growth rate 5-year trailing average CPI                                                                                 
     3. What is included under the cap                                                                                          
          ? UGF, except the specific exclusions below,                                                                          
          including Permanent Fund Dividends                                                                                    
     4. What is excluded outside the cap                                                                                        
              Appropriations    to   PF    Principal,   debt                                                                    
          obligations, disaster, transfers that require                                                                         
          further appropriation                                                                                                 
                                                                                                                                
Co-Chair von  Imhof paused  on slide  2 for  discussion. She                                                                    
recalled the previous  year that the starting  point for the                                                                    
spending  cap  in the  first  bill  was approximately  $5.25                                                                    
million.  There   had  been  committee  discussion   and  an                                                                    
amendment to increase the amount  to $6 billion. She thought                                                                    
it was  important to  understand that  the spending  cap was                                                                    
not intended  to be a spending  goal and was also  not meant                                                                    
to be punitive. She thought  there needed to be a definitive                                                                    
line, then go forward with  the CPI growth rate. The purpose                                                                    
of the cap  was to constrain spending when  there was higher                                                                    
than  expected revenue.  She  observed  that state  revenues                                                                    
were  currently  steady,  but  in  some  years,  there  were                                                                    
extreme jumps in revenue.                                                                                                       
                                                                                                                                
Co-Chair  von  Imhof continued  to  speak  to slide  2.  She                                                                    
expressed the  intent to save  funds during times  of excess                                                                    
revenue and  have funds  for down  years. She  reminded that                                                                    
the FY 20 budget, including  the supplemental budget and the                                                                    
recently  paid  $1600  Permanent Fund  Dividend  (PFD),  was                                                                    
estimated  to  be  approximately   $5.7  billion;  so  total                                                                    
spending  was under  the proposed  cap.  She qualified  that                                                                    
technically only $5.5 billion of  FY 20 spending would apply                                                                    
to  the   cap,  because  certain  debt   payments  were  not                                                                    
included. She  reiterated that the  proposed $6  billion cap                                                                    
was  not  a  spending  goal, but  rather  was  to  constrain                                                                    
spending.                                                                                                                       
                                                                                                                                
9:10:36 AM                                                                                                                    
                                                                                                                                
Senator Bishop mentioned the state's  large repayment to the                                                                    
Constitutional Budget  Reserve (CBR) and did  not anticipate                                                                    
the state receiving a windfall  anytime soon. He thought the                                                                    
bill was a good first step.                                                                                                     
                                                                                                                                
Co-Chair  von  Imhof  reminded  that  any  payments  to  the                                                                    
state's  savings  accounts  were   not  included  under  the                                                                    
proposed cap.                                                                                                                   
                                                                                                                                
Senator Wielechowski raised the  issue of population change.                                                                    
He  thought  spending caps  in  other  states were  tied  to                                                                    
population  change.  He  asked  if Co-Chair  von  Imhof  had                                                                    
rationale for not including it as a metric.                                                                                     
                                                                                                                                
Co-Chair von  Imhof discussed  the growth  rate as  shown on                                                                    
slide  2. She  stated  that  she had  looked  at the  5-year                                                                    
trailing  average CPI.  She had  looked at  states that  had                                                                    
spending  caps or  tax and  expenditure limits.  Some states                                                                    
had   included  just   CPI,   some   states  included   just                                                                    
population, and  some a blend  of the two. Most  states that                                                                    
had population included had some  type of statewide tax. She                                                                    
asserted that as the population went  up and down it did not                                                                    
affect the percent  of market value (POMV)  or oil revenues.                                                                    
She noted  that the  CPI showed  a slow  and steady  rate of                                                                    
population growth.                                                                                                              
                                                                                                                                
Senator Wielechowski  thought that in prior  versions of the                                                                    
bill, the appropriation limit excluded  the payment of PFDs.                                                                    
In the current version,  the bill excluded appropriations to                                                                    
the principal of  the Permanent Fund, but  not dividends. He                                                                    
was concerned that the state  would continue to have a fight                                                                    
over  what  the  dividend  should  be  and  what  should  be                                                                    
available  for   government.  He   was  curious   about  the                                                                    
rationale from taking the payment to the dividend out.                                                                          
                                                                                                                                
Co-Chair von Imhof thought it  was important to consider all                                                                    
the state's  spending obligations. She noted  there had been                                                                    
discussion  about  changing the  formula  for  the PFD.  She                                                                    
referenced  a  Supreme  Court ruling  and  thought  that  if                                                                    
agency spending was  under the cap, then  the Permanent Fund                                                                    
should be under  the cap. She emphasized  that having fiscal                                                                    
discipline required managing all obligations.                                                                                   
                                                                                                                                
9:14:35 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman   was  concerned  about   not  considering                                                                    
population  growth  in  the  spending  cap  calculation.  He                                                                    
mentioned the  issue of the  trailing CPI, which  he thought                                                                    
was  smoothing   in  constant   dollars  and   freezing  the                                                                    
purchasing power  at the  base rate  being used.  He thought                                                                    
the CPI index was heavily  weighted to housing and therefore                                                                    
would be  heavily weighted to the  Anchorage housing market.                                                                    
He  thought  it  should  be considered  that  Anchorage  was                                                                    
dissimilar economically to many areas of the state.                                                                             
                                                                                                                                
Co-Chair Stedman continued his remarks.  He thought he had a                                                                    
slightly  different view  of the  dividend.  He thought  the                                                                    
payout to the PFD should be  unrelated, and if the fund grew                                                                    
it  should  be  shared  with  the public,  as  well  as  the                                                                    
inverse.  He  thought  embedding  the  dividend  within  the                                                                    
spending cap was destabilizing to  the overall objective. He                                                                    
thought it  may appear on the  surface that the state  had a                                                                    
trailing  5-year average  growth rate,  but in  reality, the                                                                    
CPI  was freezing  spending at  the  local purchasing  power                                                                    
today.                                                                                                                          
                                                                                                                                
Co-Chair Stedman  offered a counterpoint.  He felt  the best                                                                    
way to  control spending was through  controlling cash flow.                                                                    
He asserted  that as long  as cash flow swelled,  there were                                                                    
needs from the  agencies. He thought some  agency budget had                                                                    
seen staggering changes. He recalled  that some agencies had                                                                    
proposed 15 percent changes in spending.                                                                                        
                                                                                                                                
9:18:07 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman continued  to discuss  state spending.  He                                                                    
posited that spending pressure did  not solely reside within                                                                    
the legislature but came from  agencies. He suggested if the                                                                    
legislature  wanted to  control spending  at the  municipal,                                                                    
state,  or federal  level; it  was  through controlling  the                                                                    
cash  flow. He  referenced a  large display  of a  check for                                                                    
$4.9  billion in  the committee  room  that represented  the                                                                    
contribution  to the  principal  of the  Permanent Fund.  He                                                                    
thought the  proper course  was to make  sure there  was not                                                                    
excess  liquidity or  excess  spending of  the  ERA. He  was                                                                    
cautious of  a prescriptive plan  for spending and  was more                                                                    
comfortable with controlling cash flow.                                                                                         
                                                                                                                                
9:19:42 AM                                                                                                                    
                                                                                                                                
Co-Chair  von  Imhof  advanced to  slide  3,  "Appropriation                                                                    
Limits: Article  XI, Section  16 vs  SB104," which  showed a                                                                    
line  graph that  depicted the  revenues  and spending  from                                                                    
1982 to  2032. She noted  that revenues were shown  in green                                                                    
and spending  was shown in  orange. She pointed out  that in                                                                    
2006 and 2017,  revenue had gone up  precipitously then went                                                                    
down. Spending  went up and  was going down  while cushioned                                                                    
using the  CBR funds.  She pointed  out a  gray line  at the                                                                    
top,  which  represented  the constitutional  spending  cap,                                                                    
which had  both CPI  and population at  100 percent  for the                                                                    
growth rate. She pointed out  the gray line that represented                                                                    
the current spending cap, and  the growth rate was high. The                                                                    
royal  blue line  was the  recalculated  spending cap  using                                                                    
just the CPI.                                                                                                                   
                                                                                                                                
Co-Chair von  Imhof pointed  out that  during the  time when                                                                    
revenues  and  expenses peaked,  had  the  state kept  to  a                                                                    
spending  cap, the  state would  have saved  more money  and                                                                    
spent  less. She  estimated that  the state  would have  $10                                                                    
billion to  $15 billion more in  the CBR if the  state had a                                                                    
more effectual spending cap at  the time. She commented that                                                                    
the Permanent  Fund was steady  with constant  market growth                                                                    
and  an  annual  5  percent draw.  She  thought  the  Alaska                                                                    
Permanent  Fund Corporation  (APFC) had  estimated that  the                                                                    
fund would be at about $80 million in ten years.                                                                                
                                                                                                                                
Co-Chair  von Imhof  pondered  what the  state  would do  if                                                                    
there  was  an  increase  in  oil  revenue.  She  considered                                                                    
alternatives  such  as  implementing savings,  spending  for                                                                    
deferred maintenance,  agency spending, or a  larger capital                                                                    
budget.  She  thought there  had  been  discussion over  the                                                                    
years about  maintaining fiscal discipline,  particularly in                                                                    
agency  spending, and  reimbursing the  CBR. She  reiterated                                                                    
that  the spending  cap  was not  punitive,  but was  merely                                                                    
keeping a lid on growth in  the event of high revenue years.                                                                    
She suggested that  the committee could put a  sunset on the                                                                    
cap and revisit it in five years.                                                                                               
                                                                                                                                
9:23:54 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  thought it  would be nice  to look  at the                                                                    
chart  on   slide  3  with  primary   consideration  of  the                                                                    
operating budget.  He thought the real  underlying challenge                                                                    
was  the  state's  handling  of  the  operating  budget.  He                                                                    
mentioned  deferred maintenance,  which  was building  again                                                                    
after multiple  minimal capital budgets.  He thought  it was                                                                    
important to  keep a close  eye on agency operations  and it                                                                    
was an area of the greatest challenge.                                                                                          
                                                                                                                                
Co-Chair von  Imhof acknowledged  that slide  2 was  a "busy                                                                    
slide."  She thought  the slide  showed  the decisions  made                                                                    
that put  the state  in the fiscal  crisis it  was currently                                                                    
experiencing.  She   thought  DGF,  UGF,  and   other  state                                                                    
spending should be under the cap.                                                                                               
                                                                                                                                
9:25:43 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  wanted to  put a  finer point  on Co-Chair                                                                    
von  Imhof's comment  for the  public. He  relayed that  the                                                                    
state  had problems  in the  past  with reclassification  of                                                                    
funds, which had enabled an  appearance of less growth in GF                                                                    
spending  or reductions  in  GF spending  which  had not  in                                                                    
reality taken place.  He explained that there  had been year                                                                    
after  year   of  budget  growth.   He  recalled   that  the                                                                    
legislature had  gone forward with  a process  to reclassify                                                                    
and  restate  spending  to  get  an  accurate  view  of  the                                                                    
magnitude  and  direction  of the  budget.  He  thought  the                                                                    
practice  of  fund  reclassification had  started  to  occur                                                                    
again in the previous few  years and thought the legislature                                                                    
had to practice continual vigilance.                                                                                            
                                                                                                                                
Co-Chair  von   Imhof  concurred  with   Co-Chair  Stedman's                                                                    
remarks.  She recalled  legislation the  previous year  that                                                                    
pertained  to   tax  revenues  from  marijuana   sales.  She                                                                    
mentioned  designating some  of the  revenues to  recidivism                                                                    
efforts, anti-drug  efforts, and after-school  programs. She                                                                    
thought only a quarter of  the marijuana tax revenue went to                                                                    
the General Fund,  and much of it was designated.  She was a                                                                    
full believer and supporter of  the spending cap and thought                                                                    
the cap  would provide  guidance for future  legislators and                                                                    
help  replenish   the  CBR  and  give   discipline  to  find                                                                    
efficiencies in agency spending.  She thought a spending cap                                                                    
would prevent large  jumps in overall UGF  spending in times                                                                    
of plentiful funds.                                                                                                             
                                                                                                                                
9:28:40 AM                                                                                                                    
                                                                                                                                
Senator  Bishop looked  at Section  2 (c)  of the  committee                                                                    
substitute, which  described an  additional 5  percent above                                                                    
the cap  limit to spend  on capital projects.  He referenced                                                                    
Co-Chair   Stedman's    comments   relating    to   deferred                                                                    
maintenance. He could not recall  if the 5 percent provision                                                                    
was modelled after the deferred maintenance schedule.                                                                           
                                                                                                                                
Co-Chair von  Imhof stated that  the committee came  up with                                                                    
the  provision  the  previous  April,   and  the  5  percent                                                                    
amounted  to  about $3  million.  She  referenced a  capital                                                                    
limit in  the constitution.  The feedback that  was received                                                                    
related to  investing in capital  when the state  had enough                                                                    
funds,  but  not  so  much that  there  was  not  sufficient                                                                    
workforce  to keep  up with  the  demand. There  had been  a                                                                    
"sweet spot" discussed that was  particular to the state. It                                                                    
was  thought  that $300  million  would  allow the  headroom                                                                    
needed  to  address  deferred maintenance  and  the  capital                                                                    
needs of  the state. The  amount also provided a  slight bit                                                                    
of headroom to do geo bonds and leverage the funds more.                                                                        
                                                                                                                                
Co-Chair von  Imhof reviewed  slide 4,  which showed  a data                                                                    
table which showed  a framework of the  budget showing total                                                                    
UGF revenue,  total operating and  capital budgets,  and the                                                                    
PFD  payment. The  total  budget with  the  PFD payment  was                                                                    
about  $5.7  billion, which  yielded  about  a $647  million                                                                    
deficit, which  was a  draw on the  CBR. She  considered the                                                                    
budget and  implementation of the proposed  spending cap for                                                                    
FY 21. The spending subject to  the cap was $5.4 billion. As                                                                    
the cap grew over time with  the 5-year trailing CPI, it was                                                                    
possible to  see how  state spending was  under or  over the                                                                    
cap for FY 22 and FY  23. She summarized that there would be                                                                    
quite  a bit  of headroom  with  the proposed  cap in  place                                                                    
considering projected  revenues based  on the  Department of                                                                    
Revenue   forecast.  She   reiterated  that   if  additional                                                                    
revenues came in, the state could choose to use them.                                                                           
                                                                                                                                
9:32:48 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman clarified that there  had not been a policy                                                                    
decision  about  the  upcoming  dividend  appropriation.  He                                                                    
thought the table on the slide  showed a PFD check of $1600,                                                                    
and  reminded   that  the  number  was   a  placeholder  for                                                                    
consideration of  potential fiscal  impacts of  the proposed                                                                    
spending cap.                                                                                                                   
                                                                                                                                
Co-Chair  von Imhof  concurred  with  Co-Chair Stedman.  She                                                                    
pointed   out  that   line  J   showed  $773   million  that                                                                    
represented  an approximately  $1100  PFD. For  calculation,                                                                    
every $325  million spent  would add  $500 to  each dividend                                                                    
check. She confirmed that line J was a placeholder.                                                                             
                                                                                                                                
Co-Chair  Stedman   mentioned  that   when  the   state  had                                                                    
substantial revenue  inflow seven years ago,  there had been                                                                    
robust capital  budgets to address deferred  maintenance and                                                                    
build  infrastructure  that  was needed  around  the  state.                                                                    
There  had been  a  discussion  at the  time  to use  bonded                                                                    
indebtedness and  go forward with  bond packages,  which had                                                                    
been  done  a couple  of  times.  He  brought up  the  topic                                                                    
because  the  indebtedness  would  be outside  the  cap.  He                                                                    
thought  there was  an extremely  high  likelihood that  the                                                                    
legislature would  add bonded debt  for capital  projects to                                                                    
get around  a spending cap.  He recalled that the  topic had                                                                    
been discussed  before, and some colleagues  felt the public                                                                    
did  not understand  bond debt  as  part of  the budget.  He                                                                    
discussed  debt   service  and   was  concerned   about  the                                                                    
potential for  budget "games" as  mentioned by  Co-Chair von                                                                    
Imhof.                                                                                                                          
                                                                                                                                
9:36:33 AM                                                                                                                    
                                                                                                                                
Co-Chair  von  Imhof  agreed   with  Co-Chair  Stedman.  She                                                                    
recalled that  state debt manager had  discussed the state's                                                                    
low capacity for  bonding. She thought it  was important not                                                                    
to overuse  the capacity and potentially  not have available                                                                    
cashflow to  pay the  debt. She had  asked Mr.  Mitchell how                                                                    
the rating  agencies would  react if the  state went  to its                                                                    
capacity in  bond debt yet utilized  revenues for dividends.                                                                    
Mr. Mitchell had thought the  situation could put a negative                                                                    
rating on the state.                                                                                                            
                                                                                                                                
Co-Chair von Imhof emphasized that  it was important to look                                                                    
at all spending,  including debt. She thought  it could make                                                                    
sense  to put  debt under  the cap.  She pondered  where the                                                                    
revenue  would  go to  pay  back  the additional  debt.  She                                                                    
questioned  the  opportunity  gained by  paying  a  dividend                                                                    
versus capital and deferred maintenance.                                                                                        
                                                                                                                                
Senator Wielechowski  thought the state had  classified some                                                                    
of its debt as "subject  to appropriation" debt, such as oil                                                                    
tax  credits. He  referenced SB  331 [legislation  passed in                                                                    
2018  creating  a public  bond  corporation  to finance  the                                                                    
purchase of tax  credits]. He asked if it was  the intent of                                                                    
the bill  to include things  such as tax credits  under debt                                                                    
obligations  such  that  they would  be  excluded  from  the                                                                    
appropriation limit.                                                                                                            
                                                                                                                                
Co-Chair von  Imhof stated that  the state had  the headroom                                                                    
currently  to  pay  the  statutory  tax  credit  payment  if                                                                    
needed.  She thought  there would  be more  headroom if  the                                                                    
constitutionality  of paying  with a  bond was  established.                                                                    
She thought  the payments would  be reduced even  further if                                                                    
there  were  additional  discounts  as  proposed  by  former                                                                    
Governor Bill Walker.                                                                                                           
                                                                                                                                
9:39:54 AM                                                                                                                    
                                                                                                                                
Ms.  Schultz  addressed  Senator Wielechowski's  point.  She                                                                    
pointed out that  in Section 2 (d), debt  obligation did not                                                                    
include state pension liability  or appropriation for school                                                                    
bond debt reimbursement. The intent  of including debt as an                                                                    
exception was  in order to  reassure any possible  buyers of                                                                    
state  debt  that there  was  not  something preventing  the                                                                    
state from paying  the debt. She noted that  there were some                                                                    
things included  in the  "debt" category  that would  not be                                                                    
excluded in  the cap. The  bill was written with  the intent                                                                    
of having a narrow definition of state debt.                                                                                    
                                                                                                                                
Senator   Wielechowski   asked    how   much   "subject   to                                                                    
appropriation debt"  the state  had and  how much  was being                                                                    
appropriated per year.                                                                                                          
                                                                                                                                
Ms.  Schultz stated  that in  the  FY 20  budget, there  was                                                                    
roughly  $90  million in  state  debt  in the  budget,  that                                                                    
included  general obligation  debt payments  and other  bond                                                                    
payments.  There was  also an  appropriation for  50 percent                                                                    
bond debt  reimbursement, which  was included  in the  FY 20                                                                    
budget following  the governor's  veto of half  the payment.                                                                    
There  was  also  a  roughly $300  million  payment  to  the                                                                    
retirement obligation not included  in the definition in the                                                                    
bill.                                                                                                                           
                                                                                                                                
Co-Chair von Imhof  set the bill aside.  She asked committee                                                                    
members to  contact her office  with ideas  and suggestions.                                                                    
She wanted  to bring the  bill back before the  committee in                                                                    
ten days' time.                                                                                                                 
                                                                                                                                
Co-Chair von  Imhof discussed the  agenda for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
9:43:00 AM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 9:43 a.m.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
SB 104 Sectional Analysis v. K 2.3.2020.pdf SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 DRAFT Fiscal Note GOV-OMB 2.3.2020.pdf SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 - Sponsor Statement.pdf SFIN 4/10/2019 9:00:00 AM
SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 Explaination of Changes version K.pdf SFIN 4/30/2019 9:00:00 AM
SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 Work Draft Version K.pdf SFIN 4/30/2019 9:00:00 AM
SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 Presentation 2020.02.04.pdf SFIN 2/4/2020 9:00:00 AM
SB 104