Legislature(2019 - 2020)SENATE FINANCE 532
06/08/2019 04:00 PM Senate CONFERENCE COMMITTEE ON HB39 AND HB40
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* first hearing in first committee of referral
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| += | HB 39 | TELECONFERENCED | |
| += | HB 40 | TELECONFERENCED | |
31ST ALASKA STATE LEGISLATURE
FIRST SESSION
CONFERENCE COMMITTEE ON HB 39 and HB 40
June 8, 2019
5:41 p.m.
5:41:03 PM
CALL TO ORDER
Chair Foster called the Conference Committee meeting on HB
39 and HB 40 to order at 5:41 p.m.
MEMBERS PRESENT:
House:
Representative Neal Foster, Chair
Representative Tammie Wilson
Representative Cathy Tilton
Senate:
Senator Bert Stedman, Vice-Chair
Senator Natasha Von Imhof
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT:
David Teal, Director, Legislative Finance Division; fiscal
analysts with the Office of Management and Budget and
Legislative Finance Division; and aides to committee
members and other members of the Legislature.
SUMMARY
HB 39 APPROP: OPERATING BUDGET/LOANS/FUNDS
CCSSSHB 39 was REPORTED out of committee with a
"do pass" recommendation.
HB 40 APPROP: MENTAL HEALTH BUDGET
CCSSSHB 40 was REPORTED out of committee with a
"do pass" recommendation.
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 39(FIN) am(brf
sup maj fld)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
and providing for an effective date."
SENATE CS FOR CS FOR SS FOR HOUSE BILL NO. 39(FIN) am S
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations and
reappropriations; and providing for an effective
date."
and
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 40(FIN)
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
SENATE CS FOR CS FOR SS FOR HOUSE BILL NO. 40(FIN)
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
5:41:35 PM
Co-Chair Foster invited David Teal, Director of the
Legislative Finance Division, to come to the testifier
table.
He explained how objections would be handled. If there was
an objection, he would make note of that item and hold it
aside. The committee would continue to go through the other
items in the department, adopt them, and then would come
back to any item that had an objection.
In the present meeting the committee would be addressing
the remaining open items in HB 39 and HB 40 based on the
motion sheets dated June 8th for the following departments:
DEPARTMENT OF NATURAL RESOURCES
PERMMANENT FUND
LANGUAGE ITEMS
^DEPARTMENT NATURAL RESOURCES
5:42:20 PM
Vice-Chair Stedman MOVED to ADOPT the following in the
Department of Natural Resources budget:
Item 3 Senate
Representative Wilson Objected.
Representative Wilson expressed a concern about the state's
portion of costs and future obligations related to
receiving $1 million in federal receipts for a program the
state did not currently have in place. She hoped the
department would exercise caution in taking the funding.
Co-Chair Wilson WITHDREW her OBJECTION.
Representative Tilton OBJECTED.
Representative Tilton aligned herself with the comments
made by the previous speaker.
Representative Tilton WITHDREW her OBJECTION.
There being NO OBJECTION, it was so ordered. The action
CLOSED conferencable Item 3 in the Department of Natural
Resources budget.
^PERMMANENT FUND
5:43:51 PM
Vice-Chair Stedman MOVED to ADOPT the following in the
Permanent Fund:
Item 1 House
Item 2 House
Item 3 House
Item 4 Senate, plus $2.6 billion for a total of
$9.4 billion
Item 5 Senate
Item 6 Senate, with $99.8 million appropriated from
the Earning Reserve Account to the General
Fund and $99.8 million appropriated from the
General Fund to the principal of the
Permanent Fund
Item 7 Senate, with $80.0 million appropriated from
the Earning Reserve Account to the General
Fund and $80.0 million appropriated from the
General Fund to the principal of the
Permanent Fund
Item 8 Senate, minus $2.6 billion for a total of
$9.4 billion. There being NO OBJECTION, it
was so ordered.
Representative Tilton OBJECTED to Item 1, Item 4, and Item
8.
Co-Chair Foster indicated the committee would address items
1, 4, and 8.
Representative Tilton spoke to her objection. She explained
that Item 1 would pay a statutory dividend. She believed it
was the legislature's obligation to follow the law and
wanted to see the dividend remain in the budget. She had
not seen another bill put forward to support a dividend for
the people of Alaska.
Senator Olson also objected to Item 1. He disagreed with
not providing a full dividend to Alaskans, as they had
expectations of receiving a dividend. He thought not
issuing a dividend would have a detrimental effect on the
lower income residents of the State of Alaska.
Representative Wilson agreed that the legislature should
follow statute. However, she did not believe the operating
budget bill was the appropriate vehicle for the dividend
appropriation. She mentioned that there was a separate bill
making its way through the process that encompassed the
dividend amount and the funding mechanism. She had always
disagreed with having the dividend in the operating budget.
She believed the operating budget should only include day-
to-day costs. She relayed that until a few years ago it was
not being recorded in the same way. Although she would
support taking the appropriation out of the operating
budget, she agreed with the dividend and with following
statute. She agreed that a bill addressing the dividend
separately was the correct vehicle.
5:47:52 PM
Vice-Chair Stedman clarified to Alaskans watching at home
that Item 1 would pull the current year's dividend out of
the operating budget by accepting the House's position. He
emphasized that the position of the legislature was not to
not have a dividend, but to address the issue separately in
a different bill. He thought the legislature would be
paying a dividend in October 2019.
Senator Olson understood where the chairmen of the finance
committees from each body were coming from. However, until
he saw a bill clarifying the amount of the dividend and its
fund source, he could not support Item 1 as proposed. He
was concerned about his constituents being negatively
impacted by less than a full dividend.
Representative Tilton MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: von Imhof, Wilson, Stedman, Foster
OPPOSED: Olson, Tilton
The MOTION PASSED (4/2) [Note: House (2/1); Senate (2/1)].
Item 1 was ADOPTED.
5:49:49 PM
Representative Tilton spoke to her objection. She explained
that Item 4 would remove approximately $9 billion from the
Earnings Reserve Account (ERA) and move it into the corpus
of the Permanent Fund. Although she was not opposed to
moving monies into the corpus, she suggested the amount
might be too much at the present time.
Representative Wilson was in favor of moving the sum of
$9.4 billion. She mentioned the Legislature's track record
of using state savings to pay operating expenses, a
practice that she believed could not continue. She
explained that by transferring the funds from the ERA to
the corpus of the fund the monies would be protected. Money
could only be removed from the corpus by a vote of the
people of Alaska. The transfer would also allow for a
greater returns because the Alaska Permanent Fund
Corporation (APFC) would know the money could not be
touched. The earnings would be deposited into the ERA. She
had heard from her constituents that they wanted to have a
Permanent Fund in the future. The transfer would help to
ensure the health of the fund.
5:51:23 PM
Vice-Chair Stedman had a mild objection. He indicated that,
in the spirit of cooperation, the Senate had proposed a $12
billion transfer but compromised its number bringing it
down to $9.4 billion. He would have preferred a larger
number, but thought the number was workable. He noted the
significance of adding to the corpus of the Permanent Fund.
He thought all members should take credit for the historic
appropriation, as it was the largest appropriation ever.
The benefits of the decision would be felt for several
generations. He did not believe the appropriation would
affect the dividend, as there would be continued earnings
on the Permanent Fund. The entire fund would continue to
earn handsome returns and could easily generate $3 billion
to $4 billion per year for the state.
Vice-Chair Stedman mentioned the track record of
accumulated earnings and the spending of billions to meet
state obligations. He suggested that elected officials had
significant concerns about preserving the wealth
accumulation over the previous 40 years for the future
benefit of Alaskans. The state had ample funds after the
transfer to pay whatever dividend amount the legislature
chose in the current year. He indicated there would be
significant funds to pay the following year's dividend
regardless of the amount. He reiterated that the transfer
did not affect the dividend. However, it placed $9.4
billion into the constitutionally protected corpus which
could only be accessed by the legislature with a vote of
the people. He reiterated that the Senate had made a good
faith effort to work with the House to come up with a
compromise amount. He did not want to see the earnings
squandered leaving future Alaskans with a crippled
Permanent Fund and an empty oil reservoir. He supported the
compromise position with the House.
5:56:13 PM
Senator Olson gave credit to the co-chair of finance for
his leadership when the bipartisan coalition was in effect.
He had been responsible for putting $16 billion into the
Constitutional Budget Reserve (CBR) which was spent leaving
the state in crisis mode again. However, his claim that the
Senate passed out a $12 billion transfer proposal was not
accurate, as a number of members did not agree with the
figure. He conveyed that the reality was that the money
going into the corpus would no longer be accessible for any
sort of emergency in the future. Of the years he had been
in the legislature, the budget presented on February 13,
2019 was the most precarious he had seen. The budget
totally defunded the Alaska Marine Highway System which he
argued was completely irresponsible. He suggested that the
legislature needed to have appropriate access to funds to
be able to continue state services mandated by the Alaska
Constitution. He was concerned with the large amount.
Representative Tilton MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Stedman, Wilson, von Imhof
OPPOSED: Tilton, Olson
The MOTION PASSED (4/2) [Note: House (2/1); Senate (2/1)].
Item 4 was ADOPTED.
5:59:06 PM
Representative Tilton indicated that she objected to Item 8
for the same reasons as the previous item. She asked for
someone to explain what Item 8 accomplished.
Vice-Chair Stedman replied that they were offsetting
similar to the previous item discussed. It had to do with
the same issue and monies and accomplished the transfer.
The discussions and the arguments were the same.
Representative Tilton MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Olson, Stedman, Foster, von Imhof, Wilson
OPPOSED: Tilton
The MOTION PASSED (5/1) [Note: House (2/1); Senate (3/0)].
Item 8 was ADOPTED.
6:00:57 PM
Vice-Chair Stedman wanted to put on record that the net
result of modified items 6 and 7 was identical to the
result of former Senate items 2, 3, 6 and 7. The changes
complied with the legislative auditor's request for
clarification that items 2, 3, 6 and 7 eliminated potential
FY 18 and FY 19 general fund liability to the Permanent
Fund. Reports generated by the Legislative Finance Division
would show the movement of money from the ERA to the corpus
as intra-fund transfers that did not affect general fund
revenue or expenditures. The intent of this treatment was
to ensure that the APFC would not be forced to liquidate
assets in order to transfer money from the reserve account
to the corpus.
Vice-Chair Stedman further explained what was being done.
He relayed that the committee was adding other monies to
the corpus of the Permanent Fund. At the end of the budget
cycle the legislature would be transferring about $10.5
billion including inflation proofing for FY 20. He noted
that 25 percent of oil royalties was supposed to go to the
Permanent Fund. For some of the newer oil fields, 50
percent of the royalties were supposed to go into the
Permanent Fund. However, in some cases that did not happen.
Essentially, the committee was trying to keep the Permanent
Fund whole.
Co-Chair Foster asked Mr. Teal if he wanted to add a
comment.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
suggested that Co-Chair Foster make it clear that the
committee had adopted the items that did not have an
objection. He was not sure the co-chair had done so.
Co-Chair Foster asked for any comments or questions from
members.
Senator Olson asked Mr. Teal if there were any surprises in
the document, as he and other members had only seen the
document when the meeting convened.
Mr. Teal responded that he did not think there was anything
in the document that was not clear. The Legislative Finance
Division had tried to put as many notes of explanation in
the document as possible. The items were discussed at
length by the co-chairs. He thought the decisions were
properly explained. He could not see anything that
underlined the motions on the page.
6:05:19 PM
Senator Olson was not trying to imply that anyone did
anything tricky. Rather, he wanted to make sure he had not
missed something that was not obvious.
Co-Chair Foster summarized that the committee removed the
amount of the Permanent Fund Dividend because it would be
dealt with in another piece of legislation. Secondly, the
committee put $250 million of oil royalty monies into the
Permanent Fund. Lastly, the committee placed $9.4 billion
into the Permanent Fund where it would be constitutionally
protected. He asked Mr. Teal if he was accurate.
Mr. Teal responded that the co-chair had been very clear.
Co-Chair Foster clarified that there was NO further
OBJECTION, it was so ordered. The action CLOSED
conferencable Item 1 through Item 8 in the Permanent Fund.
Co-Chair Foster indicated the committee would be taking up
amendments. Three items were before the committee.
6:06:40 PM
Vice-Chair Stedman MOVED to ADOPT Conference Committee
Amendment 3.
Co-Chair Stedman explained that the appropriation in
Permanent Fund Item 8 would transfer $9.4 Billion of
realized gains from the Earnings Reserve to the Corpus of
the Permanent Fund. The adoption of the amendment
instructed the APFC to transfer any assigned, associated
unrealized gains in conjunction with the funds transferred
in Permanent Fund Item 8. The amendment also clarified that
the funds appropriated from the Earnings Reserve Account to
the Corpus of the Permanent Fund in Permanent Fund Item 8
would serve as inflation proofing payments to the Permanent
Fund Corpus for the next eight years.
There being NO OBJECTION, Amendment 3 was ADOPTED.
^LANGUAGE ITEMS
6:07:59 PM
Vice-Chair Stedman MOVED to REOPEN the identical language
from sections 23(i) and 24(f) of the house version of HB 39
and sections 32(h) and 33(f) of the Senate version of HB 39
previously adopted by the committee.
Co-Chair Foster OBJECTED for discussion.
Co-Chair Foster asked Mr. Teal to explain the motion.
6:08:42 PM
AT EASE
6:09:56 PM
RECONVENED
Co-Chair Foster invited Co-Chair Stedman to provide an
explanation of the changes.
Vice-Chair Stedman explained that the motion would take
Community Assistance Program funding from the Power Cost
Equalization (PCE) Fund to the General Fund.
Senator Olson asked what would happen with the deficit of
the PCE Fund.
Vice-Chair Stedman responded that rather than funding the
Community Assistance Program through the PCE Fund, it would
be funded through the General Fund.
Senator Olson clarified that the PCE Fund would be held
harmless.
Co-Chair Foster responded, "That was my understanding."
Senator Olson asked Mr. Teal to comment.
Mr. Teal indicated it was a fund source change.
Co-Chair Foster WITHDREW his OBJECTION.
Representative Tilton OBJECTED. She understood that with
the fund source change the monies would come out of the
General Fund rather than the PCE Fund. She did not believe
it was an appropriate time with state's fiscal challenges
to draw the proposed amount from the General Fund. She
thought the action would not be prudent.
6:12:30 PM
AT EASE
6:14:09 PM
RECONVENED
Co-Chair Foster reexplained that the motion before the
committee was to reopen certain sections.
Representative Tilton WITHDREW her OBJECTION.
There being NO OBJECTION, it was so ordered.
6:14:36 PM
AT EASE
6:15:55 PM
RECONVENED
Vice-Chair Stedman MOVED to ADOPT Item 4, Senate, with a
fund source change for the Community Assistance Program
from 1169 (PCE Endowment Fund) to 1004 (General Fund).
Representative Tilton OBJECTED. She spoke to the objection
earlier when the sections were being reopened. She
reiterated that it was not an appropriate time to add to
the general fund budget.
Senator Olson asked what the fund transfer did to the
surplus of the General Fund.
Vice-Chair Stedman responded, "It shrinks it."
Senator Olson asked how much it shrunk it.
Co-Chair Stedman replied, "Just a little bit."
Representative Tilton MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: von Imhof, Wilson, Olson, Stedman, Foster
OPPOSED: Tilton
The MOTION PASSED (5/1) [Note: House (2/1); Senate (3/0)].
Language Item 4, Senate was ADOPTED.
6:18:14 PM
Vice-Chair Stedman MOVED to ADOPT Item 5, Senate, amended
to read, "The sum of $454,000 is appropriated from the
Power Cost Equalization Endowment Fund (AS 42.45.070) to
the renewable energy grant fund (AS 42.45.045)."
Representative Tilton OBJECTED. She asked to hear from Mr.
Teal about the effect of the transfer.
Mr. Teal explained that the original language followed the
law with a cascading appropriation. The Power Cost
Equalization Endowment Fund earned money. The first $30
million of the earnings went to the PCE Program. If there
was additional money remaining, the first $30 million would
go to the Community Assistance Program, and any remaining
dollars would go to the Renewable Energy Grant Fund. After
taking action on Item 4, the Community Assistance Program
would no longer use PCE Funds. Under the cascade, it would
have put up to $25 million into the Renewable Energy Grant
Fund. There was some question about the interpretation of
the law and, the intent was that the original $454,000
would go to the grant fund rather than cascading being
applied. Rather than trying to argue over the
interpretation of the law, the approach was to have the
original $454,000 and ignore cascading.
Senator Olson asked about the net effect to the PCE
Endowment Fund.
Mr. Teal explained that the PCE Fund would have an
additional $30 million that it would not have had without
the action taken on Item 4.
Senator Olson asked for further clarification.
Mr. Teal restated that the additional $30 million that
would have gone to the Community Assistance Program would
remain in the PCE Fund.
Representative Tilton WITHDREW her OBJECTION.
There being NO OBJECTION, it was so ordered. Item 5 was
ADOPTED.
Co-Chair Foster indicated that the action CLOSED all
conferencable items in the budget.
6:21:37 PM
Vice-Chair Stedman MOVED to give Legislative Finance
Division and Legislative Legal Services the ability to make
technical and conforming changes to the Conference
Committee Substitute for HB 39 and HB 40.
There being NO OBJECTION, it was so ordered.
Vice-Chair Stedman MOVED to REPORT CCSSSHB 39 and
CCSSSHB 40 from committee with individual recommendations.
There being NO OBJECTION, it was so ordered.
6:22:32 PM
AT EASE
6:24:14 PM
RECONVENNED
Chair Foster thanked the committee and support staff. He
also thanked Vice-Chair Stedman and his staff, Pete
Ecklund. He also extended his thanks to Senator von Imhof,
Senator Olson, Representative Wilson, Representative Tilton
and their staff. He thanked David Teal, Amanda Ryder and
the crew at Legislative Finance. He thanked Linda Bruce,
the budget bill drafter at Legislative Legal Services and
the rest of the staff at Legislative Legal Services who
worked diligently on the budget bills. He continued to
thank the Finance Committee secretaries and Legislative
Information Office staff who made the committee process run
smoothly. Lastly, he thanked his staff Brodie Anderson, and
Ryan Johnston.
Vice-Chair Stedman MOVED to ADJOURN proudly with roughly
$10.5 billion heading to the corpus of the Alaska Permanent
Fund. He announced that it had been a historic night and
the chairman had been a pleasure to work with. He thanked
the committee.
There being NO OBJECTION, it was so ordered.
CCSSSHB 39 was REPORTED out of committee with a "do pass"
recommendation.
CCSSSHB 40 was REPORTED out of committee with a "do pass"
recommendation.
ADJOURNMENT
6:25:49 PM
The meeting was adjourned at 6:25 p.m.
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