02/14/2017 03:30 PM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB48 | |
| SJR2 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 48 | TELECONFERENCED | |
| *+ | SJR 2 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 14, 2017
3:30 p.m.
MEMBERS PRESENT
Senator Mike Dunleavy, Chair
Senator David Wilson
Senator Cathy Giessel
Senator John Coghill
Senator Dennis Egan
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 48
"An Act creating a fund in the Department of Public Safety;
providing for payment of certain medical insurance premiums for
surviving dependents of certain police officers or firefighters
who die in the line of duty; and providing for an effective
date."
- HEARD & HELD
SENATE JOINT RESOLUTION NO. 2
Proposing an amendment to the Constitution of the State of
Alaska relating to an appropriation limit.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 48
SHORT TITLE: INS. FOR DEPENDS. OF DECEASED FIRE/POLICE
SPONSOR(s): SENATOR(s) COGHILL
02/03/17 (S) READ THE FIRST TIME - REFERRALS
02/03/17 (S) STA, FIN
02/14/17 (S) STA AT 3:30 PM BUTROVICH 205
BILL: SJR 2
SHORT TITLE: CONST AM: APPROPRIATION LIMIT
SPONSOR(s): STATE AFFAIRS
01/27/17 (S) READ THE FIRST TIME - REFERRALS
01/27/17 (S) STA, JUD, FIN
02/14/17 (S) STA AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR JOHN COGHILL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 48.
JORDAN SHILLING, Staff
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis of SB 48,
Version J.
JOAN WILKERSON, Assistant Attorney General
Civil Division
Labor and State Affairs Section
Alaska Department of Law
Juneau, Alaska
POSITION STATEMENT: Addressed SB 48 regarding survivor health
benefits.
DANIEL GEORGE, Staff
Senator Mike Dunleavy
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an overview of SJR 2.
JEREMY PRICE, State Director
Americans for Prosperity
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SJR 2.
BOB WILLIAMS, State Budget Solutions Representative
American Legislative Exchange Council
Gig Harbor, Washington
POSITION STATEMENT: Testified in support of SJR 2.
ACTION NARRATIVE
3:30:49 PM
CHAIR MIKE DUNLEAVY called the Senate State Affairs Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Wilson, Giessel, Egan, Coghill, and Chair
Dunleavy.
SB 48-INSURANCE FOR DEPENDENTS OF DECEASED FIRE/POLICE
3:31:22 PM
CHAIR DUNLEAVY announced the consideration of SB 48.
3:31:42 PM
SENATOR JOHN COGHILL, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 48, provided an overview of SB 48 as follows:
SB 48 is an answer to a problem that has been in the
building for some time and that is how to get
insurance benefits for survivors of police officers
and firefighters. Hearing those horrible times when
through no fault of their own, somebody is killed in
the line of action; there was a couple of different
ways to look at it, what we chose to do was to follow
the lead of the administration and try to figure out a
way to establish a fund that could be used by the
Department of Public Safety to take care of state
employees through that funding process.
So you will see in here the rules how that fund would
work and what the qualifications are. Currently the
surviving [beneficiaries lose services] immediately;
well, that's just not acceptable. Not only do you have
a devastating loss in your life, but also you find
yourself in this real awkward spot of asking for
something that you should be a natural matter of
course.
So this legislation has been a topic of some
conversation for the last year and certainly I felt
the pressure for it, the need for it, and the politics
of it quite frankly during the campaign season; but, I
made a commitment that if there's an answer we should
find it and this is the answer, the solution that
we've come up with that would continue medical
insurance coverage for the spouse and dependents, and
it gives some of the qualification timelines for that.
3:33:59 PM
JORDAN SHILLING, Staff, Senator John Coghill, Alaska State
Legislature, Juneau, Alaska, provided a sectional analysis of SB
48, Version J, as follows:
Section 1
Sec. 39.60.010 - Police officer and firefighter
survivors' fund established:
The police officer and firefighter survivors'
fund is established for the purpose of paying
medical insurance premiums for an eligible
surviving spouse or dependent child of a police
officer or firefighter.
The Department of Public Safety shall create two
separate accounts within the fund: a state
employee account and a municipal employee
account. The accounts can consist of legislative
appropriations, private donations, and municipal
contributions.
Sec. 39.60.020 - Powers and duties of the
commissioner:
Annually, the Commissioner of the Department of
Public Safety shall determine the amount of money
necessary to pay premiums to eligible surviving
dependents.
Sec. 39.60.030 - Payment authorized:
The Commissioner of the Department of Public
Safety may use money in the fund to pay medical
insurance premiums for eligible surviving
dependents.
Sec. 39.60.040 - Eligibility of surviving dependents
of police officers and firefighters for medical
insurance premiums:
A surviving dependent may apply to the
commissioner for payment of medical insurance
premiums. The commissioner will make a
determination of eligibility within 30 days of
receiving the application.
A surviving dependent is eligible if:
· At the time of death, the police officer or
firefighter was a year-round, permanent
full-time employee of the state or
municipality that has opted into this fund;
· At the time of death, the surviving
dependent was receiving employer-sponsored
medical insurance benefits;
· The proximate cause of the employee's death
is a bodily injury sustained or a hazard
undergone while in the performance and
within the scope of the employee's duties;
and
· The injury or hazard is not the proximate
result of willful negligence by the
employee.
A surviving spouse becomes ineligible upon
becoming eligible to receive major medical
insurance coverage by other means, or reaches 65
years of age - whichever comes first.
A surviving dependent child becomes ineligible
upon becoming eligible to receive major medical
insurance coverage by other means, or reaches 26
years of age - whichever comes first.
The commissioner shall pay the premium for the
level of medical insurance coverage existing at
the time of death, beginning the first month
following the date the dependent applied to the
fund. Payment of premiums will be made directly
to the medical insurance provider.
Sec. 39.60.050 - Municipal election to participate in
police officer and firefighter survivors' fund:
A municipality may elect to participate in the
fund. The commissioner shall determine the amount
and frequency of the municipality's required
contributions to the fund, based on the
anticipated cost. A surviving dependent is not
eligible for payments unless the municipality
opts into the fund.
Sec. 39.60.060 - Eligibility of municipal police
officers and firefighters:
A surviving dependent of a police officer or
firefighter who was employed by a municipality
may be eligible for payment if immediately after
the time of death the municipality elects to
participate in the fund, and, at the time of
death, the police officer or firefighter was
receiving employer-sponsored medical insurance.
Sec. 39.60.070 - Terms of agreement by municipality to
participate in fund:
An agreement between the commissioner and a
municipality must include a requirement that the
municipality contribute to the fund as needed, be
current with contributions, and comply with all
other rules and regulations.
Sec. 39.60.190 - Definitions:
Definitions for "child", "commissioner",
"department", "dependent", "firefighter", "fund",
"police officer", and "surviving spouse".
Section 2
AS 44.41.020 - Powers and duties of department (new
subsection):
The Department of Public Safety shall manage and
administer the fund in cooperation with the
Department of Administration.
Section 3
Uncodified law:
The commissioner of public safety may adopt
regulations necessary to implement secs. 1 and 2
of this Act. The regulations take effect under
the Administrative Procedure Act, but not before
the effective date of sections 1 and 2.
Section 4
Effective date:
Section 3 takes effect immediately.
Section 5
Effective date:
Sections 1 and 2 take effect July 1, 2017.
3:41:23 PM
SENATOR WILSON addressed volunteer firefighters and asked if
municipalities will be able to contribute into the proposed
fund.
MR. SHILLING replied as follows:
When you look at the definition of "firefighter" and
"police officer," under the bill as written now if the
individual that you are referring to is an employee of
the state or is an employee of a municipality that has
chosen to opt in and they are eligible under the other
provisions in the bill then yes, my guess is they
would be eligible for a benefit.
SENATOR WILSON noted page 4, line 15 in the bill as follows:
At the time of death, the police officer or
firefighter was eligible for and receiving employer-
sponsored medical insurance.
He opined that since the firefighters are volunteers they would
not receive the benefit.
MR. SHILLING asked Senator Wilson if the volunteers that he is
referencing are employees of a municipality.
SENATOR WILSON explained that the individuals are volunteers and
do not receive the full benefits of their fulltime counterparts.
MR. SHILLING explained that the bill as designed is for state
and municipal employees that are fulltime, permanent, and work
year-round.
SENATOR WILSON commented that volunteer firefighters risk their
lives just as much as a fulltime employee.
3:44:12 PM
SENATOR COGHILL stated that his office will find out what is
currently available to volunteers and the possibilities for
coverage under the proposed fund.
CHAIR DUNLEAVY opined that volunteer firemen would not qualify
under the bill as currently written if the volunteers are not
employees or employed by a municipality.
MR. SHILLING answered correct.
CHAIR DUNLEAVY asked what the practice has been since statehood
when a police officer or firefighters dies in the line of
service. He inquired if something has happened where benefits
have been diminished.
MR. SHILLING stated that there is currently a benefit provided,
but not for medical insurance premiums which is what SB 48
envisions. He opined that recent deaths may be the reason why
the issue has been brought forward. He recommended that the
Department of Law also address Chair Dunleavy's question.
3:46:54 PM
JOAN WILKERSON, Assistant Attorney General, Alaska Department of
Law, Juneau, Alaska, responded that the survivor-health benefits
has been afforded before. She noted that the benefit is
exclusively available to families of Tier I employees.
CHAIR DUNLEAVY asked Ms. Wilkerson to address the recent issue
for the survivors' health benefits.
MS. WILKERSON stated that there is a void that needs to be
filled.
CHAIR DUNLEAVY asked Mr. Shilling to address how the fund is
funded.
3:49:30 PM
MR. SHILLING specified that on page 2, line 1, two separate
accounts are created where one is for the purpose of paying
benefits to state-employee survivors and the other is to pay
benefits to municipal-employee survivors. He detailed that
appropriations can be made into both accounts by the Legislature
as well as donations. He pointed out that the unique one is
under the municipal employee-survivor account where
municipalities, if opted in, can contribute money into the
account for the purposes of paying the benefit to eligible
dependents.
CHAIR DUNLEAVY noted that the language says the state or
municipality "may appropriate" and interpreted the wording as
meaning the state or municipality does not have to appropriate.
MR. SHILLING answered correct. He said the use of the word "may"
is pervasive throughout the bill and that is to ensure that
nothing is being done that creates a dedicated fund. He pointed
out that the money can be reappropriated by a future
legislature.
CHAIR DUNLEAVY asked what the estimated amount is to start the
fund.
MR. SHILLING replied that $70,000 is currently required for 3-
dependent families.
3:51:00 PM
At ease.
3:51:44 PM
CHAIR DUNLEAVY called the committee back to order. He asked Mr.
Shilling to readdress the fund's initial budget amount.
MR. SHILLING specified that the $70,116 fiscal note is split
among 3-dependent surviving families.
CHAIR DUNLEAVY asked if new funding would have to be
appropriated for future survivor-health benefits.
SENATOR COGHILL detailed that the commissioner will have to make
an assessment on an annual basis to make an adjustment for an
appropriation. He noted that Chair Dunleavy's question hit upon
one of the reasons why the bill in going with a fund approach
rather than an actuarial approach.
MR. SHILLING added that the Legislature could put in additional
money that was necessary for a fiscal year to front-load the
fund in order to accommodate for an untimely death.
CHAIR DUNLEAVY asked how the fund will be managed out of the
commissioner's office or the Department of Revenue.
MR. SHILLING replied that the bill has the Department of Public
Safety's commissioner managing the fund, but doing so in
cooperation with the Department of Administration.
SENATOR WILSON asked if consideration has been given to manage
the fund with a bit more oversite than just one individual.
3:54:39 PM
MR. SHILLING answered that the sponsor's office has talked about
what Senator Wilson addressed. He noted that the Senate State
Affairs Committee can add more oversite.
SENATOR WILSON addressed the "police" definition in the bill and
asked if Village Safety Police Officers (VPSOs) are also
covered.
MR. SHILLING answered no. He detailed that VPSOs are not
employees of the state. He added that VPSOs are not covered
under the state's Public Employees' Retirement System (PERS). He
noted that VPSOs have not been covered under previous iterations
of the bill as well.
CHAIR DUNLEAVY asked Mr. Shilling why the bill's approach is the
way to go. He noted that other ways are possible, including a
life-insurance policy approach.
MR. SHILLING disclosed that the approach originated from one of
the administration's working groups over the interim. He pointed
out that there were some issues with past approaches that
amended the PERS program. He set forth that the case-by-case
approach in the bill allows for more flexibility, allows the
Legislature to have more control, and provides more flexibility
to the municipalities who have the option of opting in.
3:56:49 PM
SENATOR COGHILL added that the approach in the bill is a
premium-payment method. He said the intent is not to be the
insurer, but to quickly get the survivors insurance. He set
forth that the flexibility provides for as immediate action as
possible. He admitted that one of the saddest things that his
office found out from the recent tragedies was that the
insurance stopped as soon as the deaths were certified and that
is why flexibility is needed at the commissioner's office to get
the premium in as soon as practical. He summarized that the
methodology in the bill is more nimble, but an annual
appropriation will be required.
CHAIR DUNLEAVY asked if the annual appropriation can vary
depending upon the unfortunate situation of having families in
need of insurance. He added that the appropriation could rise or
fall based on the number of dependents in a family as well.
MR. SHILLING answered yes.
3:58:15 PM
At ease.
3:58:43 PM
CHAIR DUNLEAVY called the committee back to order. He announced
that SB 48 will be set aside with notice for public testimony
for the committee's next meeting.
SENATOR COGHILL added that testimony from the Department of
Public Safety will be included in the next meeting as well. He
said he noticed a couple of places in the bill where changes
could be made to make the legislation better.
3:59:35 PM
CHAIR DUNLEAVY announced he would hold SB 48 in committee for
future consideration.
3:59:42 PM
At ease.
SJR 2-CONST AM: APPROPRIATION LIMIT
4:01:58 PM
CHAIR DUNLEAVY called the committee back to order and announced
the consideration of Senate Joint Resolution 2, (SJR 2). He
explained that SJR 2 is a constitutional amendment appropriation
limit sponsored by the Senate State Affairs Committee. He
provided an overview of SJR 2 based upon his sponsor's statement
as follows:
In 1982, Alaska's voters enacted a constitutional
appropriation limit which can be found in Article IX,
Section 16. It has applied to every budget since FY84.
However, in practice the spending cap has grown too
high to matter during the budget process. For example,
the constitutionally calculated spending limit for
this year is $10.1 billion, while applicable state
spending is roughly $5.2 billion. Simply put, we could
double the budget today before bumping into the cap.
Unless we act to "reset" the spending limit, it will
remain powerless to curb future government spending
growth.
SJR 2 lowers the constitutional appropriation limit
amount, to bring it in line with the state's current
fiscal realty, and to respect the intent of voters who
chose to restrict the size of their government. It
ties the cap going forward to a percentage of the
annual change in population and inflation, to allow
for changing conditions in the state.
SJR 2 draws on the wisdom from experience since 1982,
and aims to close loopholes which allow for spending
to bypass the limit. It attempts to simplify the limit
so that it can be easily understood by budget and
policy makers, as well as ordinary citizens.
Alaskans are prepared to help get us through this
short-term fiscal situation, but do not want to give
government an open checkbook. One of the simplest and
most impactful ways we can structurally reduce and cap
government growth is through repairing the
constitutional appropriation limit to ensure it
functions, as the voters of Alaska intended when they
enshrined it in the Constitution not once, but twice.
The state's fiscal situation calls upon Alaskans to
make sacrifices and the people want assurances that
the size, spend, and growth of government will be kept
in check. SJR 2 may be the most crucial piece of
legislation that helps in accomplishing this goal.
4:06:24 PM
DANIEL GEORGE, Staff, Senator Mike Dunleavy, Alaska State
Legislature, Juneau, Alaska, provided an overview of SJR 2 as
follows:
SJR 2 is a timely conversation, it addresses a clause
in our constitution that for some time has not been
relevant to the discussion; but, given our current
predicament, it is an option to help us deal with our
fiscal situation as well as guide the state going
forward, and it's an opportunity to respect the intent
of the voters who enshrined this in the constitution
not once, but twice.
The way SJR 2 functions is it takes all state spending
and places it within a dollar-cap limit and that is
the way the existing Article IX, Section 16 reads, and
then it names and lists out the items that are outside
that limit.
MR. GEORGE disclosed that former legislators and staff from
former governors were contacted for input as well. He divulged
that former governor Hammond's staff members were contacted and
noted that the appropriation cap was originally Governor
Hammond's bill.
MR. GEORGE reiterated that SJR 2 takes all state spending and
places it within a limit and then lists each item that is exempt
from the limit. He noted that as Senator Dunleavy pointed out,
the legislation would be on the ballot in November of 2018.
4:09:01 PM
He presented to the committee an overview, "SJR 2,
Constitutional Appropriation Limit-Revision," and detailed as
follows:
· Article IX, Section 16 of Alaska's Constitution.
· In Alaska: An annual cap on appropriations which can be
enacted, which grows yearly by the increase in population
and inflation, and held binding by the constitution. Some
categories of appropriations are exempted.
· According to Alaska's OMB, "appropriation" is defined as,
"Statutory authorization to spend a specific amount of
money for a state purpose. Appropriations are often
subdivided into allocation in the appropriations bill.
Funds may not be spent without an appropriation made by
law."
He addressed page 3, "How Many States Have Limits?" as follows:
· Appropriation limits are part of a broader category of Tax
and Expenditure Limits (TEL).
· According to the National Conference of State Legislatures
(NCSL), as of 2010:
ƒ30 states operate under a tax or expenditure limit.
ƒ23 states have spending limits.
ƒ3 states have tax limits.
ƒ4 states have both spending and tax limits.
· Roughly half of these limits are constitutional, the other
half are statutory.
He noted that Alaska's appropriation limit is a state
appropriation limit that does not apply to municipalities or
local governments.
CHAIR DUNLEAVY pointed out that many municipalities have opted
for certain caps; for example, Anchorage has a tax cap and other
municipalities have to get a vote of the people to raise a tax.
He noted that the term "appropriation" is used in the same
breathe as "revenue limit;" the two terms are slightly
different, but the effects are they are trying to have the same
effect and that is to limit the growth and size of government.
MR. GEORGE continued on page 3 and addressed the 23 states that
have spending limits as follows:
Of the states that have tax expenditure limits,
roughly half are constitutional in nature and the
other half are statutory; Alaska has both as you may
know. The constitutional limit in 1982 and then the
statutory limit was enacted by the Legislature in
1986, the same year that the constitutional limit was
up for a revisit. When the bill passed the Legislature
and went to the voters, it was known that they would
revisit the limit in four year; so they know it would
be on the ballot again in four years and have a chance
to look at it and see how it was doing and see if they
liked it or not. The Legislature passed the statutory
limit knowing full well that the constitutional limit
may or may not exist later on, but the statutory limit
would exist regardless.
4:12:02 PM
CHAIR DUNLEAVY emphasized that SJR 2 is not something new to the
people of Alaska, and they had a say on an appropriation limit
decades ago. He acknowledged that Alaskans did want to constrain
the Legislature and the size of government.
MR. GEORGE addressed page 4, "How Did We Get Our Appropriation
Limit?" and detailed as follows:
Historical Context:
· Trans-Alaska Pipeline System (TAPS) completed,
first oil flowed June 20, 1976.
· Alaska Permanent Fund established by voters
November 2, 1976.
· From FY79 to FY82, Alaska's total budget tripled,
going from $1.08 billion to $3.21 billion. For
reference, the FY06 budget was $3.29 billion.
· Alaska was facing a challenge of plenty at the
time and there was a robust dialog about the need
for an appropriation limit that took place in the
early 80s.
MR. GEORGE pointed out that Alaska's budgets have grown in quick
bursts over the years.
SENATOR COGHILL noted that in the constitution there is
reference to the inflation rate. He asked if dollar amounts
addressed by Mr. George are in real dollars or in inflated
dollars.
MR. GEORGE replied as follows:
The "Unrestricted General Revenue/Budget History"
graph referenced on page 4 is in nominal dollars that
are not adjusted. If you were to turn this into real
dollars, you see that blip around the early 80s, it
would look nearly as high as the top of the chart on
the right hand side of the 2000s. So what they were
facing was, and if you were to look at it in real
terms per capita, it's very significant. There's a
whole presentation that Legislative Finance has put
together on this.
SENATOR COGHILL commented on nominal dollars versus adjusted
dollars and specified as follows:
This is just a context we need to kind of keep in
front of us because we are going to be asking them to
think about how it would look in the adjusted dollars
along the way and yet it just shows that stark reality
of the huge volume of dollars that have come and gone.
4:15:11 PM
MR. GEORGE addressed page 5, "How Did We Get Our Limit?" as
follows:
Timeline:
· July 15, 1981: Legislature passed Governor
Hammond's SJR 4 in a special session.
· November 2, 1982: Voters enshrined the amendment
limiting appropriation increases in the Alaska
constitution, passing Ballot Measure 4 with a 61
percent to 39 percent tally.
· November 4, 1986: Voters reaffirmed the amendment
in a planned revisit, passing 71 percent to 29
percent.
Later Fiscal Measures:
· 1986: Statutory Appropriation Limit.
· 1991: Statutory Budget Reserve Fund.
· 1991: Constitutional Budget Reserve Fund.
MR. GEORGE noted that Governor Hammond in 1981 addressed the
larger budget and called a special session for a fiscal
guarantee regarding the state's future for by asking for an
appropriation limit, via SJR 4, to go before the Legislature.
CHAIR DUNLEAVY pointed out that the chart that Mr. George
referenced shows that each time the people of Alaska had an
opportunity to vote on an appropriation limit they reaffirmed it
and did so by larger numbers. He opined that a baseline "spend"
that was actually more constrained with less of an incline would
have resulted in billions of more dollars in savings accounts
and the budget issue that the Legislature has been grappling
with for the last two or three years would not be as large as it
is today. He set forth that SJR 2 draws on the past and present
to chart the course for the future that is much more fiscally
sustainable for Alaskans.
4:17:12 PM
MR. GEORGE addressed page 6, "Why SJR 2 Was Brought Forward," as
follows:
· The appropriation limit in Article IX, Section 16
is in need of repair; it has soared out of reach
and failed to impact any spending since its
enactment:
ƒFY17 budget was $5.2 billion, while the
limit was $10 billion.
· The limit may never come into play again unless
it is reset.
· The intent of the voters should be respected and
there should be a meaningful appropriation limit.
4:18:10 PM
At ease.
4:18:52 PM
CHAIR DUNLEAVY called the committee back to order.
MR. GEORGE addressed page 7, "Why SJR 2 Was Brought Forward,
Continued," as follows:
· During the 2016 interim, Senator Dunleavy asked Legislative
Finance Division (LFD) to review the existing Statutory and
Constitutional Appropriation Limits.
· LFD responded with analysis and also provided a look at
problems associated with the state's spending limits, and
recommendations for ways to assist in developing a workable
loophole-proof as much as possible with a spending limit
that would:
ƒSuppress the growth of government ring revenue
surpluses,
ƒAddress rapid burning of reserves during revenue
shortfalls.
· Staff worked with LFD, Legal Services Division, and
individuals involved in the creation of the existing
appropriation limit, to craft a revised appropriation limit
for Alaska.
He addressed page 8, "Key Elements of SJR's Revision to the
Constitutional Appropriation Limit," as follows:
· Simplicity in presentation:
ƒVoters must be able to clearly understand the
limit; it must not be so complex or wonky that it
cannot be easily explained.
ƒSJR 2 was designed to simplify the existing
limit.
· Sophisticated in function:
ƒBorrows from lessons learned following implementation
of the 1982 limit.
ƒOMB's Division of Strategic Planning wrote a paper in
1986 which characterized the 1982 limits as, "Complex,
because it has be. Like all legislation, it was
designed to strike a balance between accomplishing
something in a particular way, yet simultaneously
preserving the flexibility to respond to unforeseen
events and changing circumstances."
He addressed page 9, "Basics of SJR 2" as follows:
· Would need to pass during the 30th Legislature, prior to
the November 2018 General Election:
ƒConstitutional Amendments and Conventions: AS
15.50.030, placing proposition on ballot. The
lieutenant governor shall direct the director to place
the ballot title and proposition on the ballot for the
next statewide general election held after the
amendment proposed by the Legislature or held 120 days
after the amendment proposed by a constitutional
convention. If there is insufficient time to permit
the proposition to be placed on the regular ballot by
the director, the lieutenant governor shall direct the
director to prepare a separate ballot for the
proposition.
· Effective Date: Under AS 15.50.060, would become effective
30 days after certification; this means SJR 2 would be
effective for the FY2020 budget, contemplated in early
2019.
4:21:27 PM
CHAIR DUNLEAVY commented as follows:
Once again, we are going through a time where we may
be asking the people of Alaska for the first time in
decades to contemplate a tax, contemplate some
reconfiguration of the permanent fund, and the
feedback I've been getting from constituents is they
want to pull together and get Alaska to get through
this period of time; but, the very concern about once
we get through this period of time is it's going to be
an "open checkbook" and is it going to be their
checkbook that's open for any future increases in
taxes, any future reconfigurations of the permanent
fund. The feedback that I'm getting from constituents
is they want to keep government constrained and as
small as possible so that they can keep as much money
in their pockets. I had a discussion with many
constituents that believe we should be sure that we
have adequate public safety, good roads, good schools,
their concerns are some of the other things that may
have spent our money on in the past, they would like
us not to go back to that spending where when we get
money, we spend it for the most part, we save a little
bit, but we spend it for the most part; they want to
be assured as we move forward they are going to be
able to retain as money in their pockets and the state
will have adequate funds to deliver basic services.
4:23:22 PM
MR. GEORGE addressed page 10, "Basics of SJR 2, Continued,"
regarding spending exempt "outside" the limit appropriations
made as follows:
· The Alaska Permanent Fund;
· Payment of Permanent Fund Dividends;
· Meet a state of disaster declared by the governor as
prescribed by law, AS 26.23.020;
· State general obligation or revenue bond proceeds;
· Obligations under State general obligation bonds and
revenue bonds;
· Money received from the federal government;
· Reappropriation of a previous unobligated appropriation;
· Expenditure by a state agency to provide internal services,
or to provide services to another agency, and another state
agency has also received an appropriation of the same
money.
· Money held in trust by the state for a particular purpose;
· Money receive by the state from a source other than the
state or federal government that is restricted to a
specific use by the terms of a gift, grant, bequest, or
contract;
· Revenue of a public enterprise or public corporation that
issues revenue bonds;
· Money deposited into the Constitutional Budget Reserve
(CBR), back to the funds and accounts from which the money
came, "reverse sweep;"
· State savings account or fund as prescribed by law;
· Dedicated funds.
CHAIR DUNLEAVY addressed general obligation bonds and revenue
bonds. He noted that revenue bonds have revenue attached to
service those bonds.
4:27:19 PM
MR. GEORGE addressed page 11, "What Is Inside and Outside the
Limit?" as follows:
· Permanent Fund Dividends:
ƒExisting limit: outside;
ƒNew limit: outside.
· General Obligation Bond Proceeds (State):
ƒExisting limit: inside, unless in Capital Budget and
approved by voters;
ƒNew limit: outside, universally.
· General Obligation Bond Principal Repayment (State):
ƒExisting limit: outside;
ƒNew limit: outside.
· General Obligation Bond Interest Repayment (State):
ƒExisting limit: outside;
ƒNew limit: outside.
· Municipal Debt Service:
ƒExisting limit: outside;
ƒNew limit: inside.
· Revenue Bond Proceeds:
ƒExisting limit: outside;
ƒNew limit: outside.
· Revenue Bond Debt Service:
ƒExisting limit: inside;
ƒNew limit: outside.
· Money held in trust by the State for a particular purpose:
ƒExisting limit: outside;
ƒNew limit: outside.
· Revenues of public enterprise or public corporation of the
State that issues revenue bonds:
ƒExisting limit: outside
ƒNew limit: outside.
· Federal receipts:
ƒExisting limit: outside;
ƒNew limit: outside.
· Reappropriatons:
ƒExisting limit: outside, per attorney general opinion;
ƒNew limit: outside, explicitly.
· I/A Services and Duplicate Appropriations:
ƒExisting limit: implied outside;
ƒNew limit: outside, specified.
· Gift, grant, bequest, or contract, restrict money from
neither Feds or State for a specific use:
ƒExisting limit: implied outside;
ƒNew limit: outside, specified.
· CBR reverse-sweep:
ƒExisting limit: not contemplated;
ƒNew limit: outside.
· To a state savings account, as prescribed by law
(designated in the statutory bill), which require further
appropriation in order to spend. (Statutory Budget Reserve
(SBR), CBR):
ƒExisting limit: implied outside;
ƒNew limit: outside, specified.
· Dedicated funds (per Constitutional definition):
ƒExisting limit: outside, with exceptions;
ƒNew limit: outside.
· Appropriations from other than the Treasury:
ƒExisting limit: outside;
ƒNew limit: inside.
· Appropriations into the Permanent Fund:
ƒExisting limit: outside;
ƒNew limit: outside.
· State Capital Budget:
ƒExisting limit: inside, unless valid and approved by
voters as prescribed by law;
ƒNew limit: inside, generally.
· Disaster (when declared by governor, as provided by law):
ƒExisting limit: outside;
ƒNew limit: outside.
MR. GEORGE noted that one significant item which was not spelled
out in the original limit was municipal debt service that
includes: transportation, infrastructure, bonds that are on the
local level, and school debt reimbursement; those are approved
on a municipal-wide basis. He explained that the state, under a
statute that dates back to 1971, has made an annual
appropriation in most years to offset or pay the municipalities
for those costs. He said as a policy call, the way SJR 2 works
is it takes all state spending, except for the items in the
exclusions, and puts them on equal footing with one another so
that they compete for scarce resources under equal footing. He
detailed that SJR 2 would take municipal-debt reimbursement and
place it within a limit; that doesn't mean it wouldn't be paid,
it's just that it would have to compete with other items.
4:28:33 PM
He addressed page 12, "The Built-In Growth Formula" as follows:
· The mechanism which adjust the appropriation cap annually
is a critically important element.
· The existing limit's formula adjusts the spending cap by
100 percent of the cumulative change in population and
inflation; this led to a trajectory for the limit which
quickly became unattainable.
· If the formula in 1982 had been set at 50 percent of the
cumulative change in population and inflation, the limit
would have cutoff the mountain of spending for FY06 to
FY15.
CHAIR DUNLEAVY concurred with Mr. George that if SJR 2 was in
place, the appropriation spikes from FY06 and beyond would not
have occurred. He asserted that billions of dollars would have
been put into savings that the state would have today; that's
one of the major points of trying to revise the appropriation
limit. He set forth that the state will come into more revenue
over time and noted recent oil discoveries occurring on the
North Slope as well as an oil-price rebound. He said being
prepared for the future will allow the state to save more of the
added revenue.
4:30:56 PM
MR. GEORGE addressed page 13, "Further Policy Considerations" as
follows:
· Flagged spending items for further examination:
ƒRevenue bond debt service; specifically, whether this
exemption should be limited to bonds that generate
sufficient revenue, or anticipated reductions, to
cover debt service.
ƒUnrestricted federal funds, approximately $7.4 million
in FY18.
ƒReappropriations and scope changes.
ƒUniversity receipts, Designated General Funds (DGF) or
other.
ƒAppropriations to a state savings account, as
designated by law; statutory clarification needed, CBR
or SBR.
ƒDedicated fund; example, Fish and Game Fund currently
inside the limit, the introduced bill would place all
dedicated funds outside the limit. Note: dedicated
fund are not the same as designated funds.
ƒCapital budget; this is an obvious loophole if placed
outside the limit.
· Pressure-relief valve:
ƒA method to exceed the appropriation limit, whether it
be through referral to voters, legislative super-
majority, or otherwise.
He addressed the pressure-relief valve and noted its use in
emergency situations. He disclosed that states have abused the
pressure-relief valve by annually declaring an emergency as a
way to get around their appropriation limit, or to declare a
particular appropriation is outside the limit.
4:32:39 PM
CHAIR DUNLEAVY commented as follows:
This is a bill that we are going to really take our
time and do it right because once again, changing
something in the bill or adding something really needs
to be scrutinized and evaluated to see if it stays
within our parameters of being simple and effective.
What we don't want to do is end up where the folks in
1982 ended up and that was they wanted a spending
limit, it went through the process, we know how the
process can be with bills with amendments and changes,
and what came out the other end was a spending limit,
and if the trajectory of "spend" was kept at that
trajectory, that baseline, it probably would have
constrained us, but the reality was we would have to
spend about $10 billion.
He noted that even if SJR 2 passed during the current year, a
vote would not occur for another year. He asked Mr. George to
verify the ballot date.
MR. GEORGE replied November 2018.
CHAIR DUNLEAVY welcomed invited testimony on SJR 2.
4:35:08 PM
JEREMY PRICE, State Director, Americans for Prosperity,
Anchorage, Alaska, testified in support of SJR 2. He said the
existing cap, established at $2.5 billion in 1982, would be over
$10 billion after inflation and population growth adjustments.
He noted Alaska has come close to exceeding the appropriation
limit in FY09 and FY13. He pointed out that spending increased
dramatically from $3 billion in FY04 to $8.7 billion in FY13. He
asserted that spending increases dramatically when government
revenue is high. He said the challenge to keeping spending under
control is when times are good.
MR. PRICE opined that the majority of Alaskans have not changed
their opinion since the early 1980s on limiting state spending.
He asserted that now is the perfect time to enact the limit on
appropriations because state spending has been declining for the
last few years. He referenced the Municipality of Anchorage and
the state of Colorado as examples of governing bodies with
taxing and spending caps. He noted that Anchorage recently spent
excess taxes, but Colorado issued refunds to taxpayers. He
disclosed that Colorado has refunded $2 billion to taxpayers
since 1992.
He set forth that the lessons learned in Anchorage and Colorado
can be applied to Alaska by:
1. Not allowing an appropriations cap to be suspended.
2. Making language of the spending cap "water tight" so future
legislators will not be able to "poke holes" in it.
He opined that the majority of Alaskans are largely supportive
on limits to keep government from growing excessively.
4:43:34 PM
BOB WILLIAMS, State Budget Solutions Representative, American
Legislative Exchange Council, Gig Harbor, Washington, disclosed
his background and noted that he served five terms in the
Washington State Legislature where he worked on tax and spending
limits.
He set forth that the purpose of spending limits is to provide
the fiscal discipline necessary during strong periods of revenue
growth. He concurred that a budget is overextended when a strong
limit is not set during revenue growth.
He said the main benefits from SJR 2 are as follows:
· Makes government more accountable;
· Forces discipline over budget and tax practices;
· Makes government more efficient;
· Makes government think of creative ways to generate
revenues;
· Controls the growth of government;
· Forces government to evaluate programs and prioritize
services;
· Raises questions about the advisability of some functions
provided by government.
· Helps citizens feel empowered and results in more taxpayer
satisfaction.
· Helps diffuse the power of special interests.
MR. WILLIAMS concurred with Mr. Price that a tax and spending
cap must stay "watertight." He noted that some states without
watertight caps have put in exceptions to get around caps. He
suggested that consideration also be given to budget reform
where the process is changed to an outcome-performance-based
budgeting.
4:46:25 PM
CHAIR DUNLEAVY. He said he believed SJR 2 is one of the most
important pieces of legislation and tool that all Alaskans are
going to be looking at moving forward. He asserted that
legislators work for the people of Alaska and have to remember
that. He opined that Alaskans were fortunate enough for decades
to have a large amount of oil revenue and the paradigm has
changed. He set forth that the people legislators represent are
owed their say prior to the Legislature making decisions on
taxation or changes in the permanent fund or other revenue
enhancements and tell legislators what they are looking at in
terms of size of government.
CHAIR DUNLEAVY announced he would hold SJR 2 in committee for
future consideration
4:48:23 PM
There being no further business to come before the committee,
Chair Dunleavy adjourned the State Affairs Standing Committee at
4:48 p.m.