HOUSE JOINT RESOLUTION NO. 23 Proposing amendments to the Constitution of the State of Alaska relating to the Alaska permanent fund. 2:17:10 PM Co-chair foster indicated the committee would be hearing public testimony on HJR 23. He reminded testifiers that testimony was limited to 2 minutes. He gave the bill sponsor the opportunity to make comments before opening up public testimony. REPRESENTATIVE PAUL SEATON, SPONSOR, relayed that in the previous public testimony hearing there was some misinformation. He noted there was a fact sheet that had been distributed to all of the Legislative Information Office. He read the fact sheet: The Permanent Fund includes two portions the Principal and the Earnings Reserve Account (ERA). Once money is deposited into the Principal, it cannot be appropriated out. The ERA is available for appropriation by any Legislature for any purpose at any time by simple majority vote. As of January 31, 2018, the balance of the Principal is $49.2 billion and $16.8 billion for the ERA for a total "value" of $66 billion. As it is now in law (not the constitution), the PFD is based on the average "earnings" over the past 5 years of the fund, with 50% of that amount going to the PFD. The Percent of Market Value (POMV) proposes to base the PFD on the total "value" of the fund versus the "earnings" of the fund. CS HJR 23 (otherwise referred to as the CS) proposes a POMV draw of 4.75 percent. The total draw would come from the ERA since the Principal cannot be touched. 33 percent of this draw ($813 million) would be used for PFD and 67 percent ($1.65 billion) for essential public services. This would result in a PFD this October of approximately $1,258 per qualified Alaskan. Facts about the Permanent Fund and the CS:  Alaskans would vote on this resolution in November if the CS passes both the House and the Senate.  The PFD is only in law (Alaska Statute) and not in the Alaska Constitution.  The current formula for calculating the PFD was passed in 1982.  The Principal of the Permanent Fund cannot be spent.  The PFD is currently paid from the ERA (and the same for the CS).  The ERA can be used for any purpose. If the ERA goes away, so does the PFD.  Alaskans have never voted to constitutionalize the PFD.  Without protection, future Legislatures can appropriate the full amount of the ERA, draining the fund, and thus eliminating the PFD.  CS HJR 23 would protect the ERA by limiting appropriations to a sustainable level of 4.75 percent annually.  The Legislature "shall" appropriate the 4.75 percent draw to the general fund.  The Legislature "may" appropriate 33 percent of the 4.75 percent draw to dividends, leaving 67 percent for public services.  "Shall" implies mandated, and "may" implies subject to appropriation by the Legislature. Mandating the amount or percentage to PFD will likely trigger lawsuits.  The total fund is estimated to earn 6.5 percent annually, so the amount for the PFD under the CS would increase over time. Co-Chair further explained that a House Joint Resolution on a constitutional amendment had to go before the people at the first general election following a resolution passing by a two-thirds vote of the House and the Senate. It did not require any action by the governor. It would appear on a general election ballot if passed. Co-Chair Foster reiterated that if the resolution were to pass by two-thirds of both bodies, it would go to a vote of the people. Representative Thompson asked if the committee would only be hearing people that had not already testified. Co-Chair Foster responded affirmatively. Co-Chair Foster OPENED Public Testimony. ^PUBLIC TESTIMONY 2:23:30 PM GEORGE PIERCE, SELF, KASILOF (via teleconference), opposed HJR 23. He believed the resolution would change the payout forever. He thought the resolution was a raid of the Permanent Fund (PF) and the Permanent Fund Dividend (PFD). He rejected the idea of the legislature being able to spend more that the percentage. He advocated for looking out for Alaskans. He did not believe the legislature could be trusted. He urged members to avoid changing the constitution. 2:25:38 PM TIM FEDERICO, SELF, ANCHORAGE (via teleconference), spoke in opposition of HJR 23. He thought the bill was out of sync with the people of Alaska. He wanted to see the budget cut to the bones. He spoke about the money the legislature was paid. He mentioned waste within various departments. He commented that commercial fisheries were actually subsidized by the state. He suggested saving money in the school system by having only one administrator. He thought government was out of control. 2:29:04 PM BRENDA RHODES, SELF, ANCHORAGE (via teleconference), spoke against HJR 23. She thought the state needed to return to the original dividend formula. She urged members to return to the task of figuring out a fiscal plan. She thanked the committee. 2:30:03 PM ELLA LUBIN, SELF, SITKA (via teleconference), spoke in favor of HJR 23. She believed that the resource wealth came from public land which all Alaskans shared and deserved to reach the benefits. She thought it was in the state's best interest to maintain the PFD so that it continued to be a benefit - sustaining Alaska and a benefit for young people. She spoke about being a lifelong Alaskan and having benefited from receiving PFD's. She noted that the PFD was a vital income source for many Alaskans. She provided a statistic by Institute of Social and Economic Research (ISER). She mentioned the importance of constitutionalizing the PFD. She referred to the PF as a "rainy day account" and that Alaska's rainy day was the present day. She thanked the committee. Representative Ortiz asked if Ms. Lubin had participated in the recent DDF [Drama, Debate, and Forensics] competition. Ms. Lubin responded in the positive. Representative Ortiz commented that she was likely as effective as her sisters. 2:32:10 PM GARY MCDONALD, SELF, ANCHORAGE (via teleconference), spoke against HJR 23. He thought the full dividend should be given to the people of Alaska. He thanked the committee. 2:33:00 PM LAURA BONNER, SELF, ANCHORAGE (via teleconference), supported the concept of enshrining the PFD in the Alaska Constitution. She argued that because paying the PFD was only in statute, current or future legislatures could opt not to pay the PFD. However, she preferred the first proposed version of the bill over the work draft submitted by the House Finance Committee. She suggested the work draft could be amended to be more acceptable to Alaskans. She recommended changing the verbiage in Section 2(c) from "may" to "shall." She also recommended adding the words, "at least" or changing to a higher percentage. She hoped the resolution continued to move through the legislative process. She thanked the committee for re-opening public testimony. Vice-Chair Gara agreed with Ms. Bonner that the word should be "shall." He thought the sponsor wanted the word "shall pay." However, the legislature received legal advice that the word "shall " could not be used in the constitution. He also appreciated the "at least" language suggestion. Ms. Bonner had read the legal opinion and understood the possibility of constitutional issues. 2:36:18 PM LIZ VAZQUEZ, SELF, ANCHORAGE (via teleconference), opposed HJR 1. The resolution did not protect the PFD. It would be up to the legislature to determine the amount of the dividend or whether it would be distributed at all. She provided a brief history about the fund. She relayed that the makers of the PF set up the PFD in order to ensure the people had a voice about how the fund was spent. She thought HJR 23 reflected the opposite of what the makers intended. She spoke of the current economic recession and the challenges the state faced. She thought HJR 23 would inflict greater damage by tampering with the PFD. She encouraged members to vote against the resolution. 2:40:20 PM Vice-Chair Gara commented that the previous year's budget was lower than the last year that she had been in the legislature. He relayed that the legislature had been told by the legal department that "shall" could not be used in the constitution. The word "may" could be used. He wondered if she had a legal opinion on the issue. Ms. Vasquez was interested in seeing the legal opinion. Co-Chair Foster relayed that the opinion could be found online. Vice-Chair Gara clarified that it was the express testimony from the lead legislative attorney. He was still looking into the issue. He thought committees were trying to find something more enforceable than what was currently in statute. Representative Wilson asked in a constitutional amendment whether Ms. Vasquez would use the formula that had worked, or whether she would use a Percent of Market Value (POMV) giving less to Alaskans. Ms. Vasquez would have to look at some of the opinions of the economists. She thought the 4.75 percent draw was too aggressive. She noted the variable returns on the fund. Representative Wilson asked if Ms. Vasquez would enshrine a percentage as outlined in the resolution of 66/33 or use the current calculation. Ms. Vasquez would keep the 50/50 split. She added that the POMV might work. However, the suggested percentage might be too aggressive and could potentially hurt the fund in the long run. She would have to study the historical yield. 2:45:16 PM FRED STURMAN, SELF, KENAI (via teleconference), opposed HJR 23. He wanted to see a 50/50 split. He thought additional reductions were necessary. He recommended closing the DMV. He thought several things could be cut. He opposed taking the PFD. He spoke to having children in college. He thought additional cuts were necessary and encouraged legislators to be focusing on the important stuff. 2:47:36 PM JASMINE LEVEMIA, SELF, PETERSBURG, spoke in support of HJR 23. She supported constitutionalizing the PFD. She wanted to see the PFD continue to support future generations. 2:49:20 PM Co-Chair Foster CLOSED Public Testimony. HJR 23 was HEARD and HELD in committee for further consideration. 2:50:04 PM AT EASE 2:51:41 PM RECONVENED Co-Chair Foster called the meeting back to order. He relayed that the committee would not be hearing HB 285 and HB 286. Amendments for HJR 23 were due by 5:00 p.m. in the current afternoon. Representative Wilson emailed all finance members the written testimony she had received. HB 285 was SCHEDULED but not HEARD. HB 286 was SCHEDULED but not HEARD.