Legislature(2021 - 2022)BUTROVICH 205

09/03/2021 01:30 PM JUDICIARY

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Audio Topic
01:32:34 PM Start
01:33:45 PM SJR301
03:00:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
**Streamed live on AKL.tv**
                     ALASKA STATE LEGISLATURE                                                                                 
               SENATE JUDICIARY STANDING COMMITTEE                                                                            
                        September 3, 2021                                                                                       
                            1:32 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Roger Holland, Chair                                                                                                    
Senator Shelley Hughes                                                                                                          
Senator Robert Myers                                                                                                            
Senator Jesse Kiehl                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Mike Shower, Vice Chair                                                                                                 
OTHER LEGISLATORS PRESENT                                                                                                     
Representative James Kaufman                                                                                                    
COMMITTEE CALENDAR                                                                                                            
SENATE JOINT RESOLUTION NO. 301                                                                                                 
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to an appropriation limit; and relating to the budget                                                                  
reserve fund.                                                                                                                   
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SJR301                                                                                                                  
SHORT TITLE: CONST. AM: APPROP LIMIT                                                                                            
SPONSOR(s): SENATOR(s) MYERS                                                                                                    
09/01/21       (S)        READ THE FIRST TIME - REFERRALS                                                                       
09/01/21       (S)        JUD, FIN                                                                                              
09/03/21       (S)        JUD AT 1:30 PM BUTROVICH 205                                                                          
WITNESS REGISTER                                                                                                              
MATTHEW HARVEY, Staff                                                                                                           
Representative James Kaufman                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT: Answered  questions  on SJR 301  on behalf  of                                                           
Representative James Kaufman, sponsor of the companion bill.                                                                    
REPRESENTATIVE JAMES KAUFMAN                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT: Testified  as  sponsor of  the companion  bill                                                           
to SJR 301.                                                                                                                     
DAN ROBINSON, Research & Analysis Chief                                                                                         
Division of Administrative Services                                                                                             
Department of Labor and Workforce Development (DOLWD)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing  on SJR
301 on behalf of the administration.                                                                                            
CAROLINE SHULTZ, Policy Analyst                                                                                                 
Office of Management and Budget                                                                                                 
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing  on SJR
301 on behalf of the administration.                                                                                          
ED KING, Staff                                                                                                                  
Senator Roger Holland                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing  on SJR
301 on behalf of Senator Holland.                                                                                               
ACTION NARRATIVE                                                                                                              
1:32:34 PM                                                                                                                    
CHAIR   ROGER  HOLLAND   called  the   Senate  Judiciary   Standing                                                           
Committee  meeting to order  at 1:32  p.m. Present  at the call  to                                                             
order were Senators Myers, Hughes, Kiehl and Chair Holland.                                                                     
At ease from 1:33:16 to 1:33:45                                                                                                 
                 SJR 301-CONST. AM: APPROP LIMIT                                                                            
1:33:45 PM                                                                                                                    
CHAIR   HOLLAND   reconvened   the  meeting   and   announced   the                                                             
consideration  of   SENATE  JOINT  RESOLUTION  NO.   301  Proposing                                                             
amendments  to the  Constitution of  the State  of Alaska  relating                                                             
to  an appropriation  limit;  and relating  to  the budget  reserve                                                             
1:34:09 PM                                                                                                                    
SENATOR MYERS,  speaking as  sponsor of SJR  301, stated  that this                                                             
legislation proposes  a constitutional  spending limit. As  part of                                                             
the  fiscal   plan,  the   Fiscal  Policy   Working  Group   (FPWG)                                                             
unanimously  recommended revising Alaska's  spending limit  as part                                                             
of a  comprehensive  solution before  revenues begin  to rise.  The                                                             
spending  limit would  provide a  spending limit  of 14 percent  of                                                             
real  state   Gross  Domestic   Product   (GDP)  minus   government                                                             
spending.  It  would  provide  certain  exceptions,  including  the                                                             
largest  from a non-state  source  or primarily  federal funds.  It                                                             
would average  state GDP  over the  last five  years to smooth  out                                                             
annual  fluctuations.  It would  allow  flexibility  by statute  to                                                             
lower the limit  later and adjust  the rate as necessary.  It would                                                             
alter  the  ability   to  spend  from  the  Constitutional   Budget                                                             
Reserve (CBR)  to a simple  majority vote  if the amount  available                                                             
in the  general fund  (GF) is  lower than  the appropriation  limit                                                             
being proposed.                                                                                                                 
1:35:25 PM                                                                                                                    
SENATOR  MYERS  said   that  SJR  301  would  effectively   prevent                                                             
unsustainable  run-ups  in  state  spending   when  state  revenues                                                             
rise. Given  the nature  of Alaska's  boom and  bust economy  since                                                             
territorial days, a future revenue rise is inevitable, he said.                                                                 
1:36:24 PM                                                                                                                    
SENATOR  MYERS  presented  a graph  titled  "Comparison  of  Alaska                                                             
State Real GDP  for Private Industry  Only and State Total Operating                                                            
Budget  with   Capital   UGF  without   PFD,   Bonds  and   General                                                             
Obligation."  This graph shows  what happened  in the past  several                                                             
decades  without an  effective spending  limit.  Further, it  shows                                                             
how  a  quick rise  in  state  revenues  led  to a  rapid  rise  in                                                             
spending.  It  shows   that  spending  compares  to   the  proposed                                                             
spending  limit, which  is  shown by  the upper  gray  line on  the                                                             
graph.  This  illustrates  how   the  state  is  dealing  with  the                                                             
"leftovers"  from  that  rise  in   spending.  It  shows  that  the                                                             
spending limit  has come close  to where  the state was  before the                                                             
rise. It has  become politically  tricky to reduce spending,  so it                                                             
is not happening, he said.                                                                                                      
1:37:24 PM                                                                                                                    
SENATOR MYERS  said that states with  spending limits tend  to have                                                             
higher  GPD and  population  growth.  There are  multiple  benefits                                                             
outside  of government  as well  as inside  government.  Currently,                                                             
the POMV  5 percent  draw is  the only  spending limit,  but  it is                                                             
not effective  on its own.  It is only  a partial revenue  cap, not                                                             
a  full spending  limit  since it  does  not account  for  revenues                                                             
outside  of the  permanent  fund or  investments  that rise  faster                                                             
than state  growth. He predicted  that the  state will face  a slow                                                             
population  growth   combined  with  rapid  growth   in  the  stock                                                             
market.  In  fact,  this  has  been  occurring  over  the  last  18                                                             
months,  he said.  This means  that the  money  available to  spend                                                             
will continue  to rise during the  same time that the state  is not                                                             
growing, he said.                                                                                                               
1:38:44 PM                                                                                                                    
SENATOR  MYERS stated  that  an appropriate  spending  limit  helps                                                             
save  for   future  downturns.   He  recalled  previous   testimony                                                             
indicated,   depending  on   the   how  the   spending  limit   was                                                             
structured, that  the spending limit  over the last 15  years could                                                             
have  provided  $150   billion  to  the  permanent   fund,  thereby                                                             
eliminating  the fiscal  crisis. Even  if the state  had saved  and                                                             
not invested,  the  state would  have ultimately  saved over  $14.7                                                             
billion  as shown  by  the red  line  above the  gray  line on  the                                                             
SENATOR MYERS  pointed out  that revenue spikes  in Alaska  tend to                                                             
lead to  high capital  spending.  He said a  significant amount  of                                                             
the  peaks  depict capital  spending  as  shown  by the  red  line.                                                             
Since projects  happen  simultaneously, maintenance  costs tend  to                                                             
fall due  at the  same time. This  often occurs  during periods  of                                                             
low  revenue.  He argued  that  one  current  problem is  that  the                                                             
maintenance  from the early  1980s capital  projects is all  coming                                                             
due.  However,  smoothing out  the  spending  over time  will  also                                                             
help smooth out maintenance costs.                                                                                              
1:40:03 PM                                                                                                                    
SENATOR MYERS  explained that previous  spending caps tended  to be                                                             
based on prior  spending using a  multiplier, such as  inflation or                                                             
population.   This  has  caused   some  perverse  incentives   when                                                             
switching  between funding  sources such as  the state  experienced                                                             
this year.  When  state general  funds were  replaced with  federal                                                             
American  Rescue  Plan (ARP)  funding  it effectively  lowered  the                                                             
state general  funds spent this year  but it would not allow  it to                                                             
increase  next year.  Such occurrences  may  cause policymakers  to                                                             
decide  not  to take  federal  funding  to alleviate  some  of  the                                                             
issues.  Tying  the  spending  cap to  GDP  takes  the  calculation                                                             
outside  of  the  government  arena.   It  would  fix  the  problem                                                             
because  it  doesn't  depend  on  previous   years'  spending.  The                                                             
proposed  5-year average  in GDP  growth would  also provide  a lag                                                             
in the  effect of  a downturn  giving the  state a  year or two  of                                                             
rising spending  while the  state tries  to find its  way out  of a                                                             
1:41:05 PM                                                                                                                    
SENATOR MYERS  offered his  view that when  government obtains  the                                                             
majority  of its funds  from investments  like the permanent  fund,                                                             
it does not  need to rely on the  private sector for  funding. This                                                             
can lead  to a tendency  for government to  not be concerned  about                                                             
what  happens  in  the  private  sector.   Growth  in  the  private                                                             
economy  tends to  attract more  workers  to Alaska  to spread  the                                                             
spending  among more people  without raising  the amount  available                                                             
to  spend. He  said  the state  needs  to encourage  government  to                                                             
grow  the economic  base as  a whole.  Tying  government growth  to                                                             
GDP  would  encourage that  to  happen,  he  said. As  the  private                                                             
economy  grows,  it affects  government  services  since  it  means                                                             
more students  are enrolled  in schools, more  money is needed  for                                                             
road maintenance  due  to increased  traffic or  more troopers  are                                                             
needed  since economic  booms tend  to bring  more crime.  However,                                                             
tying  spending  to GDP  will  increase  government for  the  right                                                             
reasons. He  emphasized that this  will help the government  be the                                                             
servant and not the master in Alaska.                                                                                           
1:42:26 PM                                                                                                                    
SENATOR MYERS  stated that  the current  spending level is  already                                                             
within the  proposed limit.  Therefore, it is  possible to  enact a                                                             
spending  limit  without forcing  significant  immediate  cuts.  He                                                             
stated  that  Representative  Kaufman   created  this  concept  and                                                             
sponsored HJR 301, which is the companion bill to SJR 301.                                                                      
1:43:15 PM                                                                                                                    
SENATOR HUGHES  said she likes  the premise  in SJR 301  because it                                                             
is important  for the  cost of  government not  to exceed what  the                                                             
private  sector can  afford.  She  related her  understanding  that                                                             
once the permanent  fund reaches  $100 billion, the amount  of draw                                                             
would  be  large  enough  that  the  state  will  not  need  to  be                                                             
concerned   about  what   happens  in  the   private  sector.   She                                                             
cautioned that  government spending  increased during boom  periods                                                             
in oil production.                                                                                                              
1:44:18 PM                                                                                                                    
SENATOR  HUGHES played  the devil's  advocate by  asking whether  a                                                             
boom in  GDP should increase  government  spending. She noted  that                                                             
this  proposal  incorporates  a rolling  average.  She  highlighted                                                             
one  problem  with   the  original  spending  cap   in  the  Alaska                                                             
Constitution  was that  the inflation  rate  and population  growth                                                             
allowed  government spending  to  increase. She  explained that  as                                                             
government  grows,   there  is  not   a  1:1  correlation   between                                                             
population and  the need for additional  government employees.  For                                                             
example, adding  100,000 more children  in the 54 school  districts                                                             
doesn't   mean  that  the   Department  of   Education  and   Early                                                             
Development (DEED)  needs to increase  their employees on  an equal                                                             
basis  since enrollment  occurs in  54 school  districts.  However,                                                             
that  scenario   would  require   additional  law  enforcement   or                                                             
prosecutors. She  commented that the  GDP goes up with a  boom. She                                                             
asked how this would be different under SJR 301.                                                                                
1:45:51 PM                                                                                                                    
SENATOR MYERS  responded that  part of  the conflict reflects  that                                                             
up until recently  oil represented  20 percent of Alaska's  GDP but                                                             
it provided  85-90 percent  of the state's  revenue. Thus,  revenue                                                             
rose much  faster than  GDP, which  is the reason  Alaska ended  up                                                             
overspending.  Since SJR  301 proposes  tying the  spending cap  to                                                             
GDP, it  will help  encourage the  state to  broaden other  sectors                                                             
of the  economy. He agreed  that government  does not need  to grow                                                             
at a  1:1 ratio compared  to GDP,  but the  14 percent proposed  in                                                             
SJR 301 is  a 1:7 ratio. SJR 301  will still provide  for necessary                                                             
growth  as  the  population  grows,  he said.  He  noted  that  GDP                                                             
already  incorporates  inflation  plus it  indirectly  incorporates                                                             
population growth.  In a sense,  this resolution already  addresses                                                             
those  easily identified  indices,  he said,  but it  does so  in a                                                             
rational  way  by  basing  it on  how  government  can  best  serve                                                             
1:47:41 PM                                                                                                                    
CHAIR  HOLLAND  pointed out  that  the  table in  members'  packets                                                             
shows that  many states  base their tax  and expenditure  limits on                                                             
personal  income growth.  He asked  whether any  other states  were                                                             
using GDP.                                                                                                                      
SENATOR  MYERS  answered  no.  He explained  that  one  problem  in                                                             
Alaska  is that  the state  has a  higher concentration  of  higher                                                             
wage jobs,  such as those  in the oil sector,  and lower  wage jobs                                                             
in others,  such  as retail  and restaurants,  but fewer  mid-range                                                             
jobs.  Thus, personal  income growth  doesn't track  as well  using                                                             
GDP as it  does in a number of  other states to determine  how well                                                             
the economy is functioning.                                                                                                     
1:48:52 PM                                                                                                                    
CHAIR  HOLLAND asked  the rationale  for  using 14  percent as  the                                                             
statutory cap in SJR 301.                                                                                                       
1:50:10 PM                                                                                                                    
MATTHEW  HARVEY,   Staff,  Representative  James   Kaufman,  Alaska                                                             
State  Legislature, Juneau,  Alaska,  on behalf  of  Representative                                                             
James Kaufman,  responded  that initially  the companion bill,  HJR
301 started  with the  statutory  limit of 11.5  percent, which  is                                                             
the  current  level.  Next,  he reviewed  the  savings  at  various                                                             
rates  and found  that  2.5 percent  higher  would  provide a  good                                                             
rate, based  on what has been drawn  down in the CBR,  the spending                                                             
growth, and the overall savings.                                                                                                
1:50:54 PM                                                                                                                    
CHAIR HOLLAND  commented that  it seemed as  though 14 percent  was                                                             
selected  to curtail  spikes in spending  yet still  provide  for a                                                             
little growth.                                                                                                                  
1:51:44 PM                                                                                                                    
SENATOR  KIEHL asked  for a general  overview of  what is  included                                                             
in GDP.                                                                                                                         
1:52:11 PM                                                                                                                    
MR.  HARVEY   answered  that   GDP  would   add  factors   such  as                                                             
population,  inflation  and  productivity  that  lead  to  personal                                                             
income, plus  business factors and  government spending.  Since SJR
301  backs out  government  expenditures,  GDP  would  be based  on                                                             
personal income and business activity.                                                                                          
SENATOR  MYERS added  that GDP  is personal  consumption,  business                                                             
investment,   government  expenditures   and  net  exports,   which                                                             
includes oil,  fish and mining.   SJR 301  backs out government  in                                                             
an  effort to  proportion  government to  the  private economy.  He                                                             
said he would  like to see net exports  grow but those  are often a                                                             
product of business investment.                                                                                                 
1:53:30 PM                                                                                                                    
SENATOR  KIEHL  stated  that  the  Alaska  Constitution   discusses                                                             
managing  the resources  for  people's use  and  benefit. He  asked                                                             
why  SJR 301  bases the  spending limit  on  business activity  and                                                             
exports   rather  than  basing   it  on   what  directly   benefits                                                             
Alaskans,  which   is  personal   income.  Personal  income   would                                                             
reflect  and  be   dependent  on  business  activity,   which  also                                                             
includes resource activity into the foreseeable future.                                                                         
MR. HARVEY  answered that in Alaska  GDP is volatile, which  is why                                                             
a  smoothing  factor  was  included.  He  explained  that  personal                                                             
income   runs  along   that  same   line.   Government  should   be                                                             
proportional  to the population for  services like law  enforcement                                                             
and  schools.  Other   government  spending  includes   regulators,                                                             
audits,  permitting, project  management and  engineering. He  said                                                             
that including  business activity  may better tether government  to                                                             
needs  of  Alaska   as  a  whole,  which  relates   to  population,                                                             
inflation,  productivity and business  activity because  government                                                             
should support all of those functions.                                                                                          
1:55:45 PM                                                                                                                    
SENATOR  HUGHES asked  for an  assessment  of the  current GDP  and                                                             
where the state is with its spending.                                                                                           
REPRESENTATIVE  JAMES KAUFMAN,  Alaska  State Legislature,  Juneau,                                                             
Alaska,  speaking as  sponsor  of HJR  301, the  companion bill  to                                                             
SJR 301,  answered that the  GDP is currently  at 11.5 percent.  He                                                             
said  these  resolutions  propose  a  new  constitutional  spending                                                             
limit  set at  14  percent  with high  head  room, but  allows  the                                                             
legislature   to  dial  it  back   statutorily.  For  example,   he                                                             
introduced  HB 4006,  which would  set the  appropriation limit  to                                                             
11.5  percent.  Currently,   the  legislature  is   seeking  budget                                                             
reductions   so  a  bill   can  provide   the  mechanism   for  the                                                             
legislature to  dial down spending  by setting a strategic  target.                                                             
He said  the resolution is  a robust indicator  and measure  of the                                                             
economic  sector using  a trailing  5-year average  of the  private                                                             
sector economic  performance  to smooth it  out. The  appropriation                                                             
limit  was  designed  to  create  something  relevant,  robust  and                                                             
flexible  but not so  rigid it will  break. He  opined that  is why                                                             
SJR 301  is set at 14  percent, even though  spending at  that rate                                                             
would  be too much.  The bill  allows the  state to  fine tune  the                                                             
1:58:06 PM                                                                                                                    
SENATOR  HUGHES  wondered  if there  would  be  a conflict  if  the                                                             
constitutional  amendment is set at  14 percent and the  statute at                                                             
11.5 percent.  She asked  if that would  provide a guideline  since                                                             
the courts might view it as such.                                                                                               
REPRESENTATIVE  KAUFMAN deferred to  Legislature Legal  Services to                                                             
respond. He  suggested that  it can provide  something to  point to                                                             
in regards  to spending, which  the legislature does not  currently                                                             
have.  The   legislature  is   so  far  out   of  range   with  the                                                             
expenditure  limits that  it is  irrelevant.  He characterized  the                                                             
current  legislative   discussions   as  arguments  over   spending                                                             
rather than setting a healthy spending limit.                                                                                   
1:59:16 PM                                                                                                                    
CHAIR  HOLLAND stated  that  Legislature  Legal was  not  available                                                             
1:59:35 PM                                                                                                                    
SENATOR  MYERS responding  to  Senator Hughes'  question,  referred                                                             
to  page  2,  lines  2-4  "The  percentage   that  applies  to  the                                                             
calculation  in this  section shall  be established  by law  except                                                             
that the percentage  shall not be  more than fourteen  percent." He                                                             
said  he would  need  to ask  Legislative  Legal  or  wait for  the                                                             
courts  to weigh  in to  see  the result.  This  language seems  to                                                             
strongly  state   that  the  spending   limit  would  be   set  and                                                             
2:00:28 PM                                                                                                                    
SENATOR  KIEHL said  Senator Hughes'  question leads  to a  broader                                                             
question.  He acknowledged  that the  current limit  in the  Alaska                                                             
Constitution  has  not  limited spending.  It  hasn't  stopped  the                                                             
legislature  from  cutting  budgets,  growing  budgets  or  arguing                                                             
over the  right level, which  is the role  of representatives  in a                                                             
republic.   He  asked  why   it  is  necessary   to  limit   future                                                             
SENATOR  MYERS  responded  that unfortunately  politicians  do  not                                                             
always  do what  is rational.  Instead  of looking  ten years  out,                                                             
the legislature  often only considers  two-years out since  that is                                                             
an election  cycle.  As money  becomes available,  the  legislature                                                             
devises  ways  to spend  money,  including  when the  pipeline  was                                                             
built. He  advocated for  saving more and  spending less.  However,                                                             
it is  easy for spending  to rise but it  is difficult to  downsize                                                             
spending  unless the  state runs  out  of money.  The arguments  in                                                             
the  legislature  show  how  difficult  it can  be  to  reduce  the                                                             
budget. SJR  301 would  provide a significant  piece of the  puzzle                                                             
by putting  the state on a long-term,  sustainable fiscal  path. As                                                             
most  financial  planners  would agree,  a  long-term,  sustainable                                                             
financial  path can provide  stability and  a look-forward  instead                                                             
of looking at how much money is in the bank account today.                                                                      
2:03:24 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN highlighted that  SJR 301 would  provide an                                                             
instrument   of  agreement.   He  said  the   spending  limit   was                                                             
intentionally  set high.  He  directed attention  to  the peaks  on                                                             
the graph  that reflect the periods  of excess spending.  He stated                                                             
that  had  this  spending  limit  been  in  place,  it  would  have                                                             
prevented  the  legislature's  worst  excesses.  First,  the  state                                                             
would have  $3 billion in the bank  and it would have  smoothed out                                                             
the peaks.  Second,  if the statute  had limited  spending to  11.5                                                             
percent,  the  state would  have  $22  billion  in the  bank.  This                                                             
would have  occurred simply through  the smoothing process  without                                                             
taking the  drastic measures  using the  five-year lag formula.  In                                                             
addition,  the  spending  limit   could  provide  a  sense  of  the                                                             
agreement on  spending. The legislature  could argue over  the bill                                                             
and  build  consensus.   Certainly,  he  would  like   to  see  the                                                             
smoothing  of maintenance  costs. Finally,  rather than funnel  the                                                             
legislature into  a constricted path,  it would provide  stability.                                                             
He characterized it as a reasonable path with good boundaries.                                                                  
2:05:59 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN  pointed out  it is  important  to look  at                                                             
the right  factors.  In his  background in  quality management,  he                                                             
has found  it is important  to select a key  indicator to use  as a                                                             
reference  and  build the  metric.  SJR  301/HJR 301  selected  the                                                             
best key  indicator to  reference spending  and build that  metric,                                                             
which is  how the range  between 14 and  11.5 percent was  selected                                                             
to use  as guidance.  He said  he has discussed  this concept  with                                                             
economists  and it  seems  to fit  Alaska's unique  experience  and                                                             
spending history.                                                                                                               
2:07:15 PM                                                                                                                    
CHAIR HOLLAND  related his  understanding that  one reason  for SJR
301 was  to create  concern for  state government  and success  for                                                             
the  private  sector.  He  highlighted  some  concern  exists  over                                                             
appropriating  matching  dollars  to capture  federal  dollars  and                                                             
about  living  within  5  percent  POMV to  the  detriment  of  the                                                             
state's  economy. Under  SJR 301, as  the state  GDP grows and  the                                                             
private sector  economy is  encouraged to grow,  the state  will be                                                             
invested  in  it   and  benefit  from  it.  He  acknowledged   that                                                             
personal growth was a consideration.                                                                                            
REPRESENTATIVE  KAUFMAN   agreed.  He  stated  that   the  relevant                                                             
indicator  should show  the economic  health as  a key  performance                                                             
indicator  of  what  is happening  in  the  economy.  Although  the                                                             
permanent  fund  is  great for  the  state,  it  also has  a  moral                                                             
peril. In  fact, the legislature  is grappling right now  to decide                                                             
what the  right disbursement  to the public  should be and  what is                                                             
best  moving forward.  One  thing  the legislature  must  do is  to                                                             
guard  against  dependency  at  the expense  of  other  growth.  He                                                             
concluded  that the state  needs to  decide how  to proceed  and if                                                             
it should spend or store its wealth.                                                                                            
2:10:10 PM                                                                                                                    
SENATOR  MYERS  stated  that the  smoothing  and  fiscal  stability                                                             
that  SJR 301  will  provide would  encourage  private  investment.                                                             
States  with  effective spending  limits  end  up with  higher  GDP                                                             
growth  because   they  are  more  fiscally  stable.   He  directed                                                             
attention to  the red line on the  graph to illustrate  the state's                                                             
instability.   He  recalled   Dr.  Reitveld   discussed   Harvard's                                                             
endowment  and  other endowments  and  how  those funds  are  used.                                                             
Further,  the City of  Fairbanks has  had a permanent  fund  for 25                                                             
years but it  does not live on  it. Neither does Harvard,  he said.                                                             
The state  proposes  that the permanent  fund provide  the bulk  of                                                             
the funding,  supplemented  by other revenues.  This is  backwards,                                                             
he  said.  Many endowments,   including  Harvard and  the  City  of                                                             
Fairbanks,  build their  budgets  based on  their regular  revenue.                                                             
He compared  the two scenarios. One  is retirees who live  on their                                                             
savings.  The  other are  workers  in  the workforce  who  rely  on                                                             
income  earned to  provide for  living expenses  and their  savings                                                             
to smooth  it out.  The state  is in  danger because  it relies  on                                                             
the  permanent  fund  to provide  budgetary  funds  thereby  acting                                                             
more  like  a  retiree.  He  questioned  what  the  state  actually                                                             
produces. He  characterized the state  as acting as the  master and                                                             
not the servant.                                                                                                                
2:14:06 PM                                                                                                                    
SENATOR KIEHL  said Representative  Kaufman and Senator  Myers just                                                             
provided  the justification  for a broad-based  tax. He  questioned                                                             
the notion  of trying  to limit  what government  has available  in                                                             
relation  to income  and production  but not  tying regular  income                                                             
to  it. He  stated that  under SJR  301  the state  still runs  the                                                             
risk of  a distorted  tax policy  with only one  or two  industries                                                             
paying all the bills.                                                                                                           
2:15:42 PM                                                                                                                    
At ease                                                                                                                         
2:15:47 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.                                                                                           
2:16:00 PM                                                                                                                    
SENATOR  HUGHES asked  that the  sponsors request  a legal  opinion                                                             
to   address  the   discrepancy  between   the   language  in   the                                                             
constitutional  spending  limit  and  the  statutory  language.  In                                                             
response to  Senator Kiehl,  she said one  of the main reasons  for                                                             
the  constitutional  spending  cap  is  to  attract  businesses  by                                                             
providing   certainty.    Many   businesses   and    organizations,                                                             
including  the  Alaska  Chamber and  the  Alaska  Support  Industry                                                             
Alliance, have stability as their first priority.                                                                               
2:17:49 PM                                                                                                                    
SENATOR HUGHES  asked why the GDP  rolling average would  be better                                                             
than  the  current  system.  She noted  that  some  spending  limit                                                             
proposals  are pinned to  an inflation  adjustment, which  would be                                                             
smoother  since Alaska's  GDP is  volatile. Second,  she asked  how                                                             
many  states  have a  spending  limit.  Lastly, she  asked  whether                                                             
this would  create a revenue gap  between the POMV draw  and the 14                                                             
percent  limit. She  predicted that  legislators  would likely  use                                                             
the entire  14 percent, creating a  spending gap if it were  in the                                                             
Alaska Constitution.                                                                                                            
2:19:57 PM                                                                                                                    
MR. HARVEY  responded that  there are two  types of spending  caps.                                                             
One  limits  how  much  spending  can  grow and  the  other  is  an                                                             
absolute  limit on  spending. There  are various  factors that  can                                                             
be   used,   including   population,    inflation,   business   and                                                             
productivity.  One possible problem  with limits on growth  tied to                                                             
population  and  inflation  was raised  in  the  sponsor's  initial                                                             
statements. This  relates to replacing  general fund spending  with                                                             
another source  not subject to the  cap, such as federal  spending.                                                             
This  can  cause the  general  fund  spending  to be  decreased  at                                                             
least temporarily  due to a fund  source swap. If the  spending cap                                                             
is tied to  the growth factor, it  would be possible to  ratchet it                                                             
down. Since  the proposed  cap in SJR 301  is an absolute  spending                                                             
limit,  it  would not  necessarily  have  that  ratcheting  effect.                                                             
State  spending   would  have  some  peaks  and  troughs   but  the                                                             
smoothing  factor would  remove the  peaks and  troughs due  to GDP                                                             
2:21:46 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN responded  that with  respect to  inflation                                                             
and population,  Alaska's  inflation is  often disconnected,  which                                                             
is  why this  proposal  would  move  away from  that  concept.  Ten                                                             
years  ago, the  cost of  living  differential  between Alaska  and                                                             
the  Lower  48  was  much  greater  than  it  is  now.  Alaska  has                                                             
stagnated.  However, Alaska's  situation is  unique in the  nation.                                                             
If  it were  linked to  the national  inflation,  it might  measure                                                             
something that isn't necessarily true in Alaska, he said.                                                                       
2:23:03 PM                                                                                                                    
SENATOR  MYERS pointed  out that Representative  Kaufman  mentioned                                                             
that the  rate of inflation  is not the  same rate as the  national                                                             
inflation.  It is more  difficult to measure  inflation in  a state                                                             
with  a small  population  like Alaska.  Senator  Hughes  mentioned                                                             
GDP spikes,  which he acknowledged  can occur, but an  inflationary                                                             
spike  can also  occur. In  fact, that  is currently  happening  in                                                             
the  US. Inflation  has been  hovering  under 2  percent since  the                                                             
Great Recession  but right now it  is at 6 percent. One  reason for                                                             
Alaska's GDP  spike historically is  due to the state's  dependence                                                             
on  commodities  such  as  oil.  However,   oil  prices  can  swing                                                             
wildly. Part  of what he hoped SJR  301 would do is to  broaden the                                                             
state's economy to other areas without resulting in wild swings.                                                                
2:34:39 PM                                                                                                                    
SENATOR MYERS  reviewed the list  in members' packets of  23 states                                                             
that have  spending limits. He pointed  out that some  have revenue                                                             
limits,  some  have  constitutional   provisions  and  others  have                                                             
statutory  ones.  Some  states  have   both  revenue  and  spending                                                             
limits. He  said that Alaska  technically is  one of the  23 states                                                             
that has  a spending  limit.  However, the  state's spending  limit                                                             
is effectively meaningless, he said.                                                                                            
2:25:15 PM                                                                                                                    
SENATOR  HUGHES reiterated  her third question,  which was  whether                                                             
it would create a fiscal gap from 11 to 14 percent.                                                                             
MR. HARVEY  answered that if  SJR 301 was  in place there  would be                                                             
a  gap. It  would  be up  to the  legislature  to  determine if  it                                                             
wanted to seek additional revenue to spend up to that limit.                                                                    
SENATOR  HOLLAND  pointed out  the  state  currently has  a  fiscal                                                             
2:26:16 PM                                                                                                                    
SENATOR  HUGHES  asked  for  the  gap  calculation  between  the  5                                                             
percent POMV draw and the 14 percent limit.                                                                                     
MR.  HARVEY  answered  that  including  all  revenue,  the  current                                                             
spending of  $1 billion  falls just under  the 14 percent  proposed                                                             
in SJR 301.                                                                                                                     
2:26:50 PM                                                                                                                    
SENATOR KIEHL  asked if he  could elaborate  on the choice  of GDP.                                                             
When things  are going  poorly, it is  important for government  to                                                             
spend counter  cyclically. As Senator  Myers alluded to,  it can be                                                             
done  in foolish  ways,  but it  can also  be done  in  responsible                                                             
ways that  help the private sector  recover. Given the  fluctuation                                                             
in oil  revenues and  resource extraction  in Alaska,  he asked  if                                                             
the other  factors like personal  income smooth in ways  that would                                                             
allow the government to act more counter cyclically.                                                                            
2:27:57 PM                                                                                                                    
MR. HARVEY  answered that the counter  cyclical effect is  shown on                                                             
the  gray  line in  the  graph.  He explained  that  the  smoothing                                                             
effect  levels the  peaks and  valleys to  resemble rolling  hills,                                                             
which are  funds that  would not  have been spent  if the  spending                                                             
limit  was in  place.  The  counter cyclical  effect  takes  effect                                                             
when revenues  decrease and the limit  is above that spending.  The                                                             
net effect would result in a savings of $3 billion.                                                                             
2:28:50 PM                                                                                                                    
SENATOR   MYERS  responded   to  Senator   Kiehl's  point   on  the                                                             
difference  between  using  GDP versus  personal  income.  Alaska's                                                             
economy is  heavily influenced by  commodities prices.  The sectors                                                             
such as  oil, mining or  fishing tend to  be high-paying  jobs, but                                                             
they tend  to be  the jobs lost  when those  commodity prices  dip.                                                             
He offered  to double  check but  said the  lower-paying jobs  such                                                             
as  retail  and hospitality  typically  last  longer.  Although  he                                                             
would need  to check with  an economist,  he offered his  view that                                                             
occurrence would  ratchet down the  spending faster than  measuring                                                             
GDP as a whole.                                                                                                                 
2:30:15 PM                                                                                                                    
SENATOR  KIEHL  stated  it  would   be  interesting  to  see  those                                                             
figures.  He  suggested  that  a significant  number  of  peaks  in                                                             
state expenditures  were due  to increases  in the capital  budget.                                                             
Historically    infrastructure    often   results    in    deferred                                                             
maintenance  when  revenues  are   down,  which  are  covered  when                                                             
revenue  increases.  That  is  fairly   valid.  However,  with  the                                                             
spending  cap,  when   revenues  increase,  the  ability   to  fund                                                             
deferred   maintenance  is   constrained.   He  expressed   concern                                                             
related  to  ongoing deferred  maintenance  for  buildings  driving                                                             
costs  up.   He  asked   for  the  mechanism   to  cover   deferred                                                             
maintenance  other than general  obligation  (GO) bond debt,  which                                                             
he noticed was exempt.                                                                                                          
2:31:45 PM                                                                                                                    
SENATOR MYERS  responded that while  there is not a mechanism,  the                                                             
incentives  have changed.  Currently,  the legislature  finds  ways                                                             
to  spend additional  revenue.  The  spending  cap will  force  the                                                             
legislature  to do  long-term  planning.  It will  primarily  force                                                             
the departments,  primarily  the Department  of Transportation  and                                                             
Public Facilities  (DOTPF), and legislators  to plan ahead.  It may                                                             
mean  keeping  the operating  budget  constrained  to  allow for  a                                                             
capital   budget  or   planning  capital   projects  and   building                                                             
maintenance  schedules  because  the  projects  will not  be  added                                                             
after the  operating budget is approved.  It will help  the economy                                                             
because  capital  budget  spikes  tend  to result  in  bringing  in                                                             
operating  engineers  or  construction  workers  for  a  couple  of                                                             
years.  These  workers  make  substantial  money and  go  home,  he                                                             
said.  Under  a spending  cap,  it  would tend  to  turn  transient                                                             
workers  into  residents because  the  work  is steady.  These  new                                                             
residents  raise   families  and   help  build  the  state   moving                                                             
2:33:47 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN highlighted  that  it also  relates to  how                                                             
well the  state optimizes  the funds  on the  few critical  things.                                                             
He  recalled  committee  testimony  that  gave Alaska  a  very  low                                                             
score  on its  infrastructure.  However,  the  state has  spent  $1                                                             
billion  per  year for  ten  years. He  said  he wondered  why  the                                                             
state received  such a low score.  The theme of this resolution  is                                                             
continuous  improvement.  SJR 301  does  not institute  a  partisan                                                             
cap that  is designed to  slash budgets or  start arguments  but is                                                             
designed to  help the state learn  to do a better with  its revenue                                                             
and find processes to smooth out the financial situation.                                                                       
2:36:36 PM                                                                                                                    
DAN   ROBINSON,   Research   &   Analysis    Chief,   Division   of                                                             
Administrative   Services,  Department   of  Labor  and   Workforce                                                             
Development  (DOLWD), Juneau,  Alaska, remarked  that the  division                                                             
is policy neutral  on SJR 301. He  offered to answer any  technical                                                             
questions members may have                                                                                                      
2:37:03 PM                                                                                                                    
SENATOR MYERS  asked him to address  whether using GDP  or personal                                                             
income is the better approach.                                                                                                  
2:37:28 PM                                                                                                                    
MR. ROBINSON  explained  that the  volatility of  GDP is  primarily                                                             
tied to the  volatility of oil prices  in Alaska. Those  swings are                                                             
dramatic  compared  to  other  states.  Personal  income  tends  to                                                             
bounce  around  significantly   less.  He  explained   that  it  is                                                             
definitional  in terms  of which  one  is better  for the  economy.                                                             
GDP is  hard to measure  but conceptually it  is simple. It  is the                                                             
value  of  goods  and  services  produced  by  the  economy.  Those                                                             
figures  must  be   backed  into  as  some  previously   mentioned.                                                             
However,  much  of  that  value   does  not  stay  in  Alaska.  For                                                             
example,  BP makes  a lot  of money  in Alaska  because oil  prices                                                             
are high,  but shareholders  of  BP make  a lot of  that money.  It                                                             
leaves  the state.  Personal  income  is a  different  definitional                                                             
concept.  It is  income  going to  residents.  About two-thirds  of                                                             
income is  wages but it also includes  transfer payments,  which is                                                             
money from  government, such  as the permanent  fund dividend.  The                                                             
additional  personal income  component is  derived from  dividends,                                                             
interest and rent, which is investment income.                                                                                  
2:39:17 PM                                                                                                                    
SENATOR KIEHL  asked for  the value of  Alaska GDP attributable  to                                                             
federal government spending.                                                                                                    
MR.   ROBINSON   answered   that   the   federal   government   was                                                             
approximately  $2  billion for  the  military  and $2  billion  for                                                             
non-military out of $52 billion.                                                                                                
2:40:24 PM                                                                                                                    
CAROLINE  SHULTZ,   Policy  Analyst,   Office  of  Management   and                                                             
Budget, Office  of the  Governor, Juneau,  Alaska, stated  that she                                                             
was available  to answer questions  on the governor's bill,  SJR 5.                                                             
She suggested  that there  was synergy  between the two  proposals.                                                             
The  main priority  from  the administration's  perspective  is  to                                                             
establish   a   working   appropriation   limit   in   the   Alaska                                                             
Constitution. SJR 301 has a lot of potential, she said.                                                                         
2:41:45 PM                                                                                                                    
SENATOR HUGHES asked Mr. King to provide his background.                                                                        
2:42:01 PM                                                                                                                    
ED KING,  Staff, Senator Roger  Holland, Alaska State  Legislature,                                                             
Juneau,  Alaska, on  behalf of  Senator Holland,  answered that  he                                                             
has  worked as  an  economist  for the  last  seven years  for  the                                                             
State  of Alaska.  He  said  he served  the  state working  at  the                                                             
Department  of Revenue  (DOR),  Office  of Management  and  Budget,                                                             
the  Department  of  Natural  Resources  (DNR)  on  behalf  of  the                                                             
governor and  for the legislature  in various roles. He  related he                                                             
is a professional economist with a Master's degree in Economics.                                                                
2:42:51 PM                                                                                                                    
MR. KING  explained GDP  versus personal  income. Most states  with                                                             
constitutional  amendments  tied to  the economy  have been  linked                                                             
to personal  income. Most  of those limits  were put into  place in                                                             
a different  era. The  economy continues  to become more  digitized                                                             
and connected.  As the state's population  is aging, more  and more                                                             
of the  personal  income is  coming from  retirement income  versus                                                             
wages. Over  the last 40  years the way  the economy functions  has                                                             
significantly changed.                                                                                                          
2:43:43 PM                                                                                                                    
MR. KING  said he was unsure  when those constitutional  amendments                                                             
were put  in place, but if  they had been  in place prior  to 2000,                                                             
the economy  was different.  Thus, a  case could  be made that  GDP                                                             
is  a   better  reflection   of  what   happens  locally.   If  the                                                             
government  is designed  to  provide services  locally,  government                                                             
would  want an economic  measure  that measures  locally, he  said.                                                             
If personal  income is  increasingly coming  from pension  accounts                                                             
and  federal government  transfer  payments, an  argument could  be                                                             
made that  the connection  to the economy  is becoming  diminished.                                                             
He  acknowledged  that he  would  need to  confirm  if  that was  a                                                             
valid  argument.  However, GDP  is  a measure  of  the value  being                                                             
produced  locally  so  it  is  a  better  direct  tie  to  what  is                                                             
occurring domestically.  As Mr. Robinson  stated, GDP in  Alaska is                                                             
very  volatile  because  the  value  of the  oil,  which  is  price                                                             
multiplied by quantity, is volatile.                                                                                            
2:44:50 PM                                                                                                                    
MR. KING  said when oil  price changes, the  GDP changes.  When oil                                                             
volume  declines, GDP  declines. The  tie for  Alaska's economy  is                                                             
very connected  to the price and  production levels of  what occurs                                                             
on  the  North  Slope.  That is  becoming  less  important  as  the                                                             
production  gets closer to  zero production.  If the state  seeks a                                                             
constitutional  amendment  that has  durability  50-100 years  from                                                             
now,  that issue  may not  exist. In  the meantime,  there is  more                                                             
volatility  in GDP than for  personal income,  which is more  so in                                                             
Alaska than in other states.                                                                                                    
2:45:34 PM                                                                                                                    
MR.  KING said  the five-year  average,  does  a lot  to solve  the                                                             
problem and  smooths out  volatility over  time. He explained  that                                                             
the modeling shows it does seem to reduce the volatility.                                                                       
2:46:04 PM                                                                                                                    
SENATOR  HUGHES asked  whether  due to  the greater  volatility  of                                                             
oil, it should  be based on a  ten-year rolling average  instead of                                                             
the five-year  average.  It could  be reconsidered  if the  economy                                                             
diversifies over time.                                                                                                          
2:46:28 PM                                                                                                                    
MR. KING  answered  that the  balance is  difficult with  smoothing                                                             
factors. The  longer the  smoothing factor is,  the less  it tracks                                                             
what is currently  happening. Ideally,  a spending limit  should be                                                             
connected  to what is currently  happening but  also does  not have                                                             
very high  swings. He characterized  it as  finding the sweet  spot                                                             
that smooths  out volatility  but not  so far  that it is  detached                                                             
from  the current  environment.  He opined  that  five years  would                                                             
provide  a better  balance  than 10  years because  situations  can                                                             
arise  in which  the economy  grows quickly  or  falls sharply.  It                                                             
would take  10 years  before the government  spending limit  caught                                                             
up  to  the  economy.  He  also  pointed  out  that  the  five-year                                                             
smoothing   provides  a   transition  period   into  dramatic   and                                                             
permanent  changes in the  economy. As Senator  Kiehl pointed  out,                                                             
government  should  perform  counter  cyclically.  The  legislature                                                             
would not  want the government to  be forced to drastically  reduce                                                             
spending  if the  economy  is facing  a  dramatic  decrease at  the                                                             
same  time.  That  smoothing  factor  detaches  somewhat  so  if  a                                                             
dramatic  fall in  the GDP  occurs, there  is  not a  corresponding                                                             
immediate  fall   in  the  requirement  for  government   spending.                                                             
Instead, it transitions to that new level, he said.                                                                             
2:48:17 PM                                                                                                                    
CHAIR  HOLLAND  advised  members  that  Mr. King  is  available  to                                                             
answer questions that arise.                                                                                                    
2:48:40 PM                                                                                                                    
SENATOR  HUGHES, with  respect to  the allowance  for disasters  or                                                             
disaster declarations  in SJR 301,  asked whether a sudden  drop in                                                             
the  economy would  allow the  state to  go outside  of the  limit.                                                             
She asked if  the disaster statutes  address a drastic drop  in the                                                             
SENATOR  HUGHES  recalled  concerns   were  raised  about  deferred                                                             
maintenance.  She  pointed  out  that no  new  highways  have  been                                                             
built  since the  70s.  She stated  that opening  up  areas of  the                                                             
state  can help  the economy.  She asked  whether  the sponsors  of                                                             
either  constitutional  amendment  might be  open  to an  amendment                                                             
that would  allow for  new infrastructure  if a windfall  occurred.                                                             
She acknowledged  that  Alaska is a  young state  so there is  need                                                             
for new infrastructure.                                                                                                         
2:50:38 PM                                                                                                                    
SENATOR  MYERS  responded  that  he  would  be  open to  it  if  it                                                             
required  a vote  of people.  He  said SJR  301 allows  for it  but                                                             
instead  of spending  it  requires  the state  to  issue a  general                                                             
obligation  (GO) bond, which  is not counted  towards the  spending                                                             
limit. There  is something  to be said  for spending current  funds                                                             
rather than borrowing.                                                                                                          
2:51:22 PM                                                                                                                    
SENATOR KIEHL  referenced Mr. Robinson's  response. SJR  301 states                                                             
that  the value  of real  GDP shall  not include  expenditures  for                                                             
government  spending. However,  it does  not differentiate  between                                                             
federal  or state  government  spending.  He recalled  that  during                                                             
the time  he spent serving  on the Juneau  Assembly, he  wanted the                                                             
US Coast Guard  to put fast response  cutters in the community  for                                                             
jobs,  infrastructure  and  maritime security  benefits.  He  asked                                                             
the  sponsors  of SJR  301  and  HJR 301  why  that  infrastructure                                                             
should  be excluded  from GDP since  it impacts  schools and  other                                                             
services when transient families reside here.                                                                                   
2:52:56 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN responded that  the reason to seek  federal                                                             
infusions  is not solely  related to direct  spending, but  for the                                                             
stimulus  effect on  commerce. He  stated his goal  was to  measure                                                             
the  beneficial  or  detrimental  effects  on  the  private  sector                                                             
2:53:33 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN  responded  that the  state  does not  have                                                             
direct control  over federal  decisions on  where to place  fighter                                                             
planes.   However,  the   state   can  monitor   and  guide   state                                                             
appropriations  based  on  the  indirect  effects  it  has  on  the                                                             
private  sector  economy.  The  military  spending  in  communities                                                             
provides a private sector bump in communities.                                                                                  
2:54:10 PM                                                                                                                    
SENATOR  KIEHL pointed  out  that this  approach  does not  provide                                                             
funding to educate the children of military members.                                                                            
REPRESENTATIVE  KAUFMAN pointed  out that it  consists of  the best                                                             
way to measure  but to also consider  the factors, such  as what is                                                             
being  sampled and  the length  of the  time lag to  smooth it  out                                                             
and  if it  is 12  or  14 percent.  He  reviewed those  factors  in                                                             
models  to  see  the  effects.  He  offered   his  view  that  this                                                             
adequately rolls  in the dynamics  of the economy. The  state would                                                             
not  want  to  gauge state  spending  on  federal  spending  for  a                                                             
building.   Instead,  the   state  should   measure  the   economic                                                             
activity created locally by that federal decision.                                                                              
2:55:48 PM                                                                                                                    
SENATOR  MYERS  pointed  out  there are  four  components  of  GDP.                                                             
Senator   Kiehl  is   asking  whether   the   third  component   of                                                             
government spending,  which is federal  spending in Alaska,  should                                                             
qualify as  government spending  or if it  should be considered  as                                                             
an  export. In  some ways  it has  the  same effect  as an  export,                                                             
which  is to  bring in  funds from  outside the  economy. He  asked                                                             
Senator  Kiehl whether  he  was alluding  to  amending  SJR 301  on                                                             
line  5, which  currently reads,  "shall not  include  expenditures                                                             
for  government  spending."  It  would   read  "shall  not  include                                                             
expenditures for state government spending."                                                                                    
SENATOR KIEHL agreed conceptually it was.                                                                                       
2:56:36 PM                                                                                                                    
SENATOR  MYERS said  he would  want to  consider  this further.  At                                                             
first  blush, it  seemed  like a  decent clarification  because  as                                                             
Representative  Kaufman  cautioned,   this  resolution  should  not                                                             
base  government   spending  on  how  well  government   is  doing.                                                             
Instead,  government  spending  should be  based  on how  well  the                                                             
rest of  the economy  is doing.  The effect  that federal  spending                                                             
has  is to  provide an  injection  into the  state.  Thus it  makes                                                             
sense to treat it differently, he said.                                                                                         
2:57:23 PM                                                                                                                    
MR.  KING  pointed  out  that there  is  a  feedback  mechanism  in                                                             
government  spending  to  have it  tied  to  GDP. He  assumed  that                                                             
government  spending  was  being  excluded  due  to  that  feedback                                                             
mechanism.  Representative  Kaufman  is correct  that  big  federal                                                             
projects  provide a  multiplier  effect even  if the  spend is  not                                                             
included. It  gets captured  in GDP so there  is a connection,  but                                                             
it  is   not  1:1.  The   Bureau  of   Economic  Analysis   in  its                                                             
disaggregation  of  GDP  does separate  state  and  local  spending                                                             
from federal  and military  spending. Thus,  if there was  a desire                                                             
to exclude  state and local  spending but  not federal spending  it                                                             
is possible  to  do so.  However, it  is not  possible to  separate                                                             
state  spending  out  since  state   and  local  spending  must  be                                                             
2:58:48 PM                                                                                                                    
SENATOR MYERS said he was happy to bring SJR 301 forward.                                                                       
2:58:32 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN  said  what  is  important  is to  find  an                                                             
awesome  indicator  and apply  it  correctly  to provide  a  steady                                                             
hand on  the rudder  so the state  can operate  more smoothly  with                                                             
better  results.  If it  is  not this  model,  it will  be  because                                                             
members found a better one, he said.                                                                                            
[SJR 301 was held in committee.]                                                                                                
3:00:51 PM                                                                                                                    
There  being no  further  business to  come before  the  committee,                                                             
Chair Holland  adjourned  the Senate  Judiciary Standing  Committee                                                             
meeting at 3:00 p.m.                                                                                                            

Document Name Date/Time Subjects
SJR 301 _ Sponsor Statement.pdf SJUD 9/3/2021 1:30:00 PM
SJR 301 Table 2_State comparison state tax and expenditure limits.pdf SJUD 9/3/2021 1:30:00 PM
SJR 301_Sectional Analysis.pdf SJUD 9/3/2021 1:30:00 PM
SJR 301 Table 1_Real Alaska GDP Private Industry Only compared to State UGF.pdf SJUD 9/3/2021 1:30:00 PM