Legislature(2017 - 2018)BUTROVICH 205
03/06/2018 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB196 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 196 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
March 6, 2018
3:30 p.m.
MEMBERS PRESENT
Senator Kevin Meyer, Chair
Senator David Wilson
Senator Cathy Giessel
Senator John Coghill
Senator Dennis Egan
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Mike Shower
COMMITTEE CALENDAR
SENATE BILL NO. 196
"An Act relating to an appropriation limit; and providing for an
effective date."
- MOVED SB 196 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 196
SHORT TITLE: APPROPRIATION LIMIT
SPONSOR(s): FINANCE
02/19/18 (S) READ THE FIRST TIME - REFERRALS
02/19/18 (S) FIN
02/28/18 (S) STA REFERRAL ADDED BEFORE FIN
03/06/18 (S) STA AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR PETER MICCICHE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 196, provided an overview.
JEREMY PRICE, Alaska State Director
Americans for Prosperity
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 196.
MIKE ALEXANDER, representing self
Palmer, Alaska
POSITION STATEMENT: Testified in support of SB 196.
GARVIN BUCARIA, representing self
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SB 196.
MIKE COONS, representing self
Palmer, Alaska
POSITION STATEMENT: Testified in support of SB 196.
BETH FREAD, representing self
Palmer, Alaska
POSITION STATEMENT: Testified in support of SB 196.
KATHY WILLIAMS, representing self
Chugiak, Alaska
POSITION STATEMENT: Testified in support of SB 196.
MICHELLE SHOWER, representing self
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SB 196.
ACTION NARRATIVE
3:30:25 PM
CHAIR KEVIN MEYER 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, Coghill, Egan, and Chair
Meyer.
SB 196-APPROPRIATION LIMIT
3:31:01 PM
CHAIR MEYER announced the consideration of Senate Bill 196 (SB
196).
3:32:08 PM
SENATOR PETER MICCICHE, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 196, referenced the sponsor statement as
follows:
The State of Alaska relies on a single commodity to
fund more than 85 percent of our government services.
Today, with declining production and lower prices,
Alaska continues to face a significant budget deficit.
The Legislature has cut the operating and capital
budgets by over $3 billion in the last four fiscal
years but has continued to draw from our savings
accounts to fill the gap between revenue and
expenditures.
Senate Bill 196 sets a $4.1 billion statutory limit on
how much the Legislature can appropriate every year
with regard to agency operating budget expenses. The
limit would be adjusted annually for inflation. The
appropriation limit does not apply to appropriations
for the payment of permanent fund dividends, capital
projects, state debt obligations, and receipt
supported services such as receipts of the Alaska
Marine Highway System.
Alaska must control its spending in order to refill
our savings accounts and sustain the programs Alaskans
rely on in their everyday lives. Senate Bill 196 is
the needed framework to help guide the governor and
the Legislature through the budget making process.
Now is the time to pass an effective statutory
appropriation limit.
3:33:54 PM
He addressed previous legislative spending and referenced a
chart, "SB 196 Appropriation Limit vs. Appropriations" and
detailed as follows:
The Legislature did a fine job on significant savings
but when revenues were very high, we spent a dollar or
two as well. You have a chart provided from
Legislative Finance and there are two lines on that
chart: the blue line is the [Unrestricted General
Fund] (UGF) appropriation limit backing out, deflating
the value of $4.1 billion that we are spending today
down to FY1999 levels. The green line is starting at
the actual FY1999 spend and inflating with the
Anchorage [Consumer Price Index] (CPI). What we are
demonstrating there is had we had an appropriation
limit in place we would have spent approximately $15
billion less dollars which would mean we would still
have a [Constitutional Budget Reserve] (CBR) in place,
we would not be talking about reducing dividends, we
would be at a much more sustainable place in history
than we are today.
Why are we doing this now? We are doing this now
because as you can see the top spend was FY2013, we
have brought that down to levels that are closer to
the FY2008, FY2009 spending; however, if we don't set
an appropriation limit moving forward, we are going to
find ourselves in the same position.
3:35:31 PM
CHAIR MEYER asked Senator Micciche to explain what the green
line represents in the appropriation-limit chart.
SENATOR MICCICHE explained as follows:
The blue and the green line are Anchorage CPI overlaid
on the spend. The blue line is deflating from current
spend at $4.1 billion down to what it would have been
in FY1999. The green line is inflating from what we
actually spent in FY1999 to where we would be today
had we had this in place in FY1999. Today, we would be
spending about $3.2 billion or $3 billion as opposed
to the $4.1 billion we are spending if we would have
retained that discipline through that period of time.
So, it's just two ways to look at it, either way we
would have avoided those high spending years between
FY2007 and FY2015 when we started reducing, and that
number between the blue line and the red line would be
in savings right now had we observed an appropriation
limit.
He summarized that the "Appropriation Limit versus
Appropriations" chart shows how the Legislature could have
avoided the high spending years between FY2007 and FY2015 with
an appropriations limit. He noted that the area on the chart
between the red and blue lines would currently be the amount in
savings had the Legislature observed an appropriation limit.
CHAIR MEYER asked Senator Micciche how he arrived at the $4.1
billion number as the starting point.
SENATOR MICCICHE replied that $4.1 billion was the previous
year's Unrestricted General Fund (UGF) spend.
CHAIR MEYER asked how emergencies will be dealt with.
3:37:25 PM
SENATOR MICCICHE replied that emergencies are excluded and will
be addressed in his sectional analysis for SB 196 as follows:
• Section 1: Removes the reference to the current statutory
appropriation limit.
• Section 2: Statutory Appropriation limit:
o Unrestricted General Fund appropriations may not
exceed $4.1 billion.
o Adjusts for inflation using known inflation data.
o Inflation adjustment is based on the Consumer Price
Index for Anchorage prepared by the United States
Bureau of Labor Statistics.
o Appropriation Limit excludes appropriations:
square4 To the Alaska Permanent Fund;
square4 For Permanent Fund Dividend payments;
square4 For payment of Debt obligations of the state
(e.g. - General Obligation Bonds and Certificates
of Participation);
square4 Capital projects.
o Defines:
square4 Capital project;
square4 Program Receipts;
square4 Unrestricted general fund.
• Section 3: Repeals current statutory appropriation limit
language.
• Section 4: Effective date of July 1, 2018.
He noted that the current statutory appropriation limit has
never been triggered and has not been effective.
CHAIR MEYER asked Senator Micciche to address how emergencies
will be dealt with.
SENATOR MICCICHE replied that there are going to be occasional
supplemental issues that traditionally have been dealt with by
the Legislature. He said the hope is the Legislature will
consider the previous year's supplemental when defining the
following year's spend to remain within the spending limit. He
asserted that the goal is to "keep the pressure on" in the
upcoming years for a balanced budget with growth that is lower
than the governor's 2.25 percent inflation rate that is based
upon the Anchorage CPI. He noted that the actual inflation is
generally below the 2.25 CPI rate. He summarized that the rate
is appropriately adjusted annually on cost changes in the
state's largest city rather than, "Just plugging in an inflation
rate that is static out of the air."
3:40:10 PM
CHAIR MEYER responded that he is concerned with the possibility
of the supplemental getting so large that it is used to get
around the spending cap.
SENATOR MICCICHE replied that a growing supplemental budget is
one of the reasons to instill discipline on future spend. He
said an appropriation limit will highlight the Legislature's
need to contain costs; for example, Medicaid and other health
and social service programs that are growing exponentially well
above the inflation rate.
CHAIR MEYER recognized Senator Shower for being in attendance.
SENATOR WILSON noted that the committee has heard different
spending limit legislation, one constitutional and one
statutorial. He pointed out that there are bills in the other
body with appropriation limits ranging from $4.1 billion to $4.5
billion. He asked Senator Micciche how he arrived at his $4.1
billion appropriation limit.
SENATOR MICCICHE explained that the appropriation limit is based
on the previous year's budget. He said the proposed
appropriation limit is a starting point and the committee's job
is to determine if the rate is the best starting point. He
emphasized that the most important issue is controlling the
growth rate versus the exact starting point. He summarized that
his goal is for an appropriation that is realistic and as low as
possible.
3:42:20 PM
CHAIR MEYER pointed out that Senator Wilson was referring to SJR
2, a constitutional amendment with a $4.3 billion appropriation
limit. He remarked that he likes Senator Micciche's bill better
because the appropriation limit is almost a $500 million
reduction from where the budget is now. He noted that the
governor proposed $4.6 billion.
SENATOR MICCICHE answered that Chair Meyer was correct. He said
he was uncomfortable with the current level of UGF spend,
excluding dividends. He asserted that the Legislature's job,
particularly during the state's difficult times, is to ensure
that costs are realistically covered at a starting point as low
as possible. He noted that SB 196 is a committee bill that is
supported by the Senate Finance Committee with the hope that the
legislation gets through the system this year.
3:44:13 PM
CHAIR MEYER opened public testimony.
3:44:24 PM
JEREMY PRICE, Alaska State Director, Americans for Prosperity,
Anchorage, Alaska, testified in support of SB 196. He said SB
196 is dovetail-legislation that will act as a brake on spending
increases. He disclosed that Americans for Prosperity has a
history with spending limitations in Anchorage and noted a
successful ballot initiative that restored a tax-cap in 2016. He
addressed similar statewide spending-limit initiatives that
showed similar 3:2 voting approval as the Anchorage ballot
initiative. He noted that a recent statewide poll showed that 60
percent of Alaskans support a state-spending cap. He summarized
that a clear majority of Alaskans support limitations on
spending.
CHAIR MEYER concurred with Mr. Price that he hoped the
constitutional amendment bill makes it as well. He noted that
the approval-hurdle is much higher for a constitutional
amendment versus a statutory bill.
3:47:41 PM
MIKE ALEXANDER, representing self, Palmer, Alaska, testified in
support of SB 196. He opined that the spending cap should be
lower than $4.1 billion.
3:48:58 PM
GARVIN BUCARIA, representing self, Wasilla, Alaska, testified in
support of SB 196. He suggested that the Senate not pass the
2019 budget unless the other body and the governor reduce their
spending.
3:50:46 PM
MIKE COONS, representing self, Palmer, Alaska, testified in
support of SB 196. He suggested that the state stop spending and
start paying off its debt.
3:53:24 PM
BETH FREAD, representing self, Palmer, Alaska, testified in
support of SB 196. She opined that the state spends more than
its population represents.
3:55:42 PM
KATHY WILLIAMS, representing self, Chugiak, Alaska, testified in
support of SB 196. She said the legislation is the responsible
thing to do.
3:57:03 PM
MICHELLE SHOWER, representing self, Wasilla, Alaska, testified
in support of SB 196.
3:58:28 PM
CHAIR MEYER closed public testimony.
SENATOR COGHILL referenced page 2 in the bill and referenced AS
37.05.545(c)(3) as follows:
"Unrestricted general fund" means money deposited in
the state treasury that has not been dedicated or
designated for use by the Constitution of the State of
Alaska or by law; "unrestricted general fund" does not
include program receipts or reappropriations.
He asked if the restrictions for the UGF will make for a "big
hole in the wall."
SENATOR MICCICHE explained that the intent is to make sure money
that is truly UGF is not encumbered for some other
"constitutional" or "other use" and is the reason for the
separation from where the spending cap does not apply. He said
money that is encumbered could be a past appropriation or some
other use that the Legislature is not foreseeing. He emphasized
that he does not see a work-around scenario and summarized, "UGF
is UGF in agency operations and I think that is a fairly clear
delineation."
SENATOR COGHILL explained that he is suspicious of "designated
funds" that are not designated. He noted that the Legislature
designates a fund to do a purpose; however, the Legislature
always says in its appropriations that the fund is not a
dedicated fund. He pointed out that the appropriated money could
go to things other than what the money was intended for. He
explained as follows:
I was trying to get the hospitals to ramp up their 9-
1-1 readiness and improve their trauma rating; we took
some money and we put it into a fund dedicated to that
issue, but it was a non-dedicated fund, it had to be
dedicated to that issue, but general fund had to be
appropriated on an annual basis.
Under this language I just wondered if that would
create all of these funds to get a free run at
appropriations. So, you might want to put that under
your hat and think about it a little bit.
4:02:56 PM
SENATOR MICCICHE conceded that "games have been played" but
explained that the intent is to eliminate the potential to shove
things off as a Designated General Fund (DGF) for items
dedicated by the constitution. He explained as follows:
The example we use on DGF is the university. We don't
want to discourage them if they try to cover their
cost by increasing student cost which is a direct-user
fee, but it is DGF. We want them to have the
flexibility to do that, but that is not included in
this appropriation. Even in the case that you gave
about creating a fund for emergency response on an
annual basis, that happens to be UGF and that will be
a part of this spending limit.
He said the Legislature is always going to have to remain
diligent for tricks in the budgeting process. He conceded that
more time will have to be spent to make sure no one is trying to
create a work-around on an appropriation limit.
4:04:46 PM
CHAIR MEYER noted a testifier's comments on bringing down the
appropriation limit. He asked Senator Micciche is he wanted to
stay at $4.1 billion.
SENATOR MICCICHE replied that he agreed with the testifiers that
would like to bring the appropriation limit down as low as
possible. He asserted that passing SB 196 would be like planting
a seed and said, "You are never going to have a tree without
planting a seed or sapling."
He referenced the appropriation-limit chart and reiterated that
exercising the discipline in an appropriation limit in FY1999
would have resulted in the CBR having $10 billion or more. He
summarized as follows:
The more important aspect of passing this, if we try
to negotiate the budget within this bill, I feel
there's no chance of getting it across the finish line
and that's our first priority. We may not get to the
number we want this year, but it will provide the
discipline to remain on target in the future.
4:06:27 PM
SENATOR COGHILL recalled a statute that addressed a "spending
triage priority" for prioritizing spending and recommend that
the statute be referenced with a spending limit.
SENATOR MICCICHE agreed with Senator Coghill and commented as
follows:
We have to start somewhere and the only problem we are
having with getting out on 90 days and having both
sides shake hands in absolute agreement is something
called priority differences. We are attempting to
address priorities that are constitutional at the
lowest cost possible and others have perhaps a
different view on those priorities and we are hoping
to agree in the statutory 90 days that we have in
front of us, but that is always a challenge.
I think the first approach is a statutory spending
limit. Perhaps we are successful in a constitutional
spending limit, and then we will take that priority
battle back here next year on what we can do in that
very situation and I don't know that's a possibility
that we don't run into. If we run into another
significant reduction in oil prices, if for some
reason we are challenged on production in the future,
there are many issues, returns to the Permanent Fund,
there are many reasons why we are going to have to
look at that prioritization.
I hope that we do move into that direction and I hope
that we can find some agreement between the various
side majority-minority, House-Senate, and arrive at
some sort of consensus in the future.
4:09:28 PM
CHAIR MEYER said he saw no reason to hold up SB 196 anymore. He
noted that Senator Coghill has additional information to pass on
to the Senate Finance Committee for making the appropriate
adjustments.
SENATOR COGHILL remarked that he is always glad to be good
counsel to the Senate Finance Committee.
CHAIR MEYER disclosed that a lot of e-mail testimony was
received from constituents on SB 196. He noted that the fiscal
note for the bill is zero.
4:10:31 PM
SENATOR GIESSEL moved to report SB 196, version: 30-LS1022\J
from committee with individual recommendations and attached zero
fiscal note.
4:10:44 PM
CHAIR MEYER announced that there being no objection, the motion
carried.
4:10:59 PM
At ease.
4:12:59 PM
CHAIR MEYER called the committee back to order.
4:13:36 PM
There being no further business to come before the committee,
Chair Meyer adjourned the Senate State Affairs Standing
Committee at 4:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB196 Sponsor Statement.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |
| SB 196 Version J.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |
| SB196 Sectional Analysis.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |
| SB 196 Fiscal Note.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |
| SB 196 Support Emails received SSTA 3.6.18.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |
| SB 196 Approp Limit Graph.pdf |
SSTA 3/6/2018 3:30:00 PM |
SB 196 |