Legislature(2025 - 2026)GRUENBERG 120
03/24/2025 01:00 PM House JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| HB62 | |
| HB51 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 51 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 62 | TELECONFERENCED | |
HB 51-APPROPRIATION LIMIT; GOV BUDGET
1:08:38 PM
CHAIR GRAY announced that the final order of business would be
HOUSE BILL NO. 51, "An Act relating to an appropriation limit;
relating to the budget responsibilities of the governor; and
providing for an effective date."
1:09:12 PM
REPRESENTATIVE WILL STAPP, Alaska State Legislature, as prime
sponsor, presented HB 51. He paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
One of the most effective ways to ensure a stable
economy is to apply common sense solutions to complex
problems. An effective appropriation limit is the
first of many commonsense solutions that are both
uncontroversial and bipartisan.
This is not a new revelation. The State of Alaska had
already identified the potential for overspending and
imposed a constitutional appropriation limit in 1982,
and a statutory limit in 1986. However, that decision
was tied to the economy of the time. An economy that
was approaching peak oil production which allowed for
a reasonable limit that was adjusted for population
and inflation. The modern budget of Alaska has been
operating without an effective appropriation limit for
nearly 40 years, resulting in less than meaningful
control of our state spending. HB 51 aims to create a
statutory framework for how we limit appropriations.
AS 37.05.540(b) is the current statutory
appropriations limit which is based off appropriations
from the treasury made in a fiscal year and not
exceeding appropriations made by more than 5 percent
plus a change in population and inflation since the
beginning of the preceding fiscal year. Modeling shows
that this statutory appropriations limit has been
broken in past legislatures which could be attributed
to the volatile nature of the current statute.
The functional cap that is being proposed uses a
factor based upon a five-year trailing average of our
private sector economic performance. Specifically,
Real GDP minus government spending, which measures the
value produced within our borders. The five-year
averaging will moderate the effects of volatility,
leading to stability. This proposal would set a
spending cap roughly at current levels and would allow
flexibility in the case of unforeseen risks. A
spending limit tethered to GDP creates a constructive
link to our private sector and ensures that government
does not outgrow the private sector.
Spending limit reform is one of the subject matters in
which the 32nd Legislature's Comprehensive Fiscal Plan
Working Group unanimously agreed to be necessary in
2021. This legislation seeks to follow the
recommendations of the working group by proposing a
structured and flexible appropriations limitation to
ensure a prosperous future for Alaska.
1:12:11 PM
HENRY THOMPSON, Staff, Alaska State Legislature, on behalf of
Representative Stapp, prime sponsor, referred to a PowerPoint
presentation, titled "HB 51 Statutory Appropriations Limit
[hard copy included on the committee packet]. He began on slide
2, "Current Statutory Limit," which read as follows [original
punctuation provided]:
• Set in AS 37.05.540(b)
o Enactedin1986
o Includes similar language to the appropriations
limit set in Article IX of the Alaska State
Constitution
square4 "Appropriations from the treasury made in a
fiscal year may not exceed appropriations made
in the preceding fiscal year by more than five
percent plus the change in population and
inflation since the beginning of the preceding
fiscal year"
square4 The change in population is based on an annual
estimate by the Department of Labor & Workforce
Development
square4 Change in inflation is based on the Consumer
Price Index (CPI) Anchorage as prepared by the
US Bureau of Labor Statistics
MR. THOMPSON continued to slide 3, which showed a graph of
historical appropriations subject to the current statutory
limit. He highlighted the rapid fluctuations in spending,
adding that one benefit of an appropriation limit would be an
increase in government stability.
1:14:56 PM
MR. THOMPSON continued to slide 4, "HB 51," which read as
follows [original punctuation provided]:
• Establishes a new appropriations limit that is
based off a percentage from a 5 calendar year
trailing average of Real Gross Domestic Product
(GDP)
o Real GDP is calculated using Consumer spending,
Business Investment, Net Exports and does not
include government spending.
o Real GDP incorporates factors such as changes
in inflation and population which reflect
economic growth.
1:15:29 PM
MR. THOMPSON continued to slide 5, which featured a table
showing appropriations subject to, and excluded from, the limit.
Slide 6 showed a breakdown of data from 2002 to 2023, including:
Alaska gross domestic product (GDP), Alaska government GDP, GDP
less government, and Anchorage CPI. Slide 7 showed a
comparative graph of historical appropriations subject to the
existing statutory limit versus the proposed statutory limit.
He pointed out that the proposed spending limit is more
consistent as a result of the 5-year trailing average and the
GDP based formula.
1:17:57 PM
REPRESENTATIVE STAPP added that slide 7 encapsulates the goals
of the revised spending cap: a steady, controlled rate of growth
in operational and capital spending that meets Alaskans needs.
He suggested that in years of revenue surplus, pension
liabilities could be paid, savings could be deposited into the
Alaska Permanent Fund corpus, or other liabilities could be
paid. He reiterated that the metric is designed to avoid an
influx of spending in the "good years" that cannot be maintained
long term. He argued that everyone wins with a controlled
metric.
1:19:46 PM
MR. THOMPSON shared the sectional analysis for HB 51 [included
in the committee packet], which read as follows [original
punctuation provided]:
Section 1:
Amends AS 37.05.540(b) by changing the list of
appropriations subject to the limit as well as the
conditions that determine the appropriation limit.
Defines a calculation for an appropriation cap at 12%
of a 5-year trailing average of Real Gross Domestic
Product (GDP) (not including government spending).
O Exceptions [37.05.540(b)]
O Adds Appropriation of general obligation (GO)
Bond proceeds to exceptions list
O Adds payment of principal and interest on
revenue bonds to exceptions list
O Adds 'appropriations to a state account or fund
that requires a subsequent appropriation from
that account or fund as prescribed by law' to
exceptions list
O Adds 'appropriations to meet a state of
disaster declared by the governor as prescribed
by law' to exceptions list.
O Appropriation Limit Conditions [37.05.540(b)]
O Adds (Appropriations Not to Exceed) 12% of the
average Real GDP (not including government
spending) for the past 5 calendar years
immediately preceding the previous fiscal year.
O Removes Old cap of 5% more than last year + the
change in population and inflation since
beginning of preceding fiscal year.
O Removes language describing determination of
change in population based on annual estimate by
Department of Labor and Workforce Development.
O Removes language describing change in inflation
based on Consumer Price index (CPI) for all urban
consumers for Anchorage.
Section 2:
Adds a new subsection (h) to AS 37.07.020 which
requires a comparison of the governor's budget
requests, supplemental requests, and budget amendments
to the calculated appropriation limit.
Section 3:
Repeals AS 37.05.540(e) due to section 1 of HB 38
adding disaster response spending to the exceptions
list in subsection b.
AS 37.05.540(e) Notwithstanding other provisions of
this section, appropriations may be made from the
budget reserve fund needed by the governor to meet a
disaster. In this subsection, "disaster" has the
meaning given in AS 26.23.900.
Section 4:
Adds a new section to Uncodified Law of the State of
Alaska which ensures that the enactment of this act is
contingent upon the ratification of an amendment to
Article IX, Sec. 16 of the Constitution. The
constitutional amendment must establish an
appropriations limit that:
O Ensures appropriations from the treasury made
for a fiscal year not exceed an amount equal to a
percentage of the average value of real GDP of
the state over a 5-year trailing period.
O Excludes GO Bond proceeds, payment of principal
and interest on revenue bonds, appropriations to
a state account or fund that requires a
subsequent appropriation from that account or
fund as prescribed by law, and appropriations to
meet a state of disaster declared by the governor
as prescribed by law.
Section 5:
Sets an 'effective date' of July 1, 2025.
1:22:56 PM
CHAIR GRAY asked whether the state's funding needs decline when
revenue declines.
REPRESENTATIVE STAPP said that's not necessarily true.
CHAIR GRAY asked whether the state's needs fluctuate with
changes to the cost of oil and the stock market.
REPRESENTATIVE STAPP said it depends on how "need" and "want"
are defined.
CHAIR GRAY pointed out that if Alaska had more stable revenue,
it would allow the state to have a more stable funding plan. He
said he is opposed to tying spending to an irrational market,
which fluctuates with highly variable oil prices, etcetera.
REPRESENTATIVE STAPP argued that the chair is making a case for
HB 51, as the existing spending limit [ties spending to an
irrational market]. He added that by tying the state's spending
to real GDP, private sector growth could help bear the burden of
additional tax schemes.
1:26:23 PM
REPRESENTATIVE KOPP asked how restructuring the Alaska Permanent
Fund as an endowment fund would differ from the current
proposal.
REPRESENTATIVE STAPP said he would be amenable to including the
fund under the cap. He reiterated his belief that paying off
the retirement liability or reinvesting into the corpus would be
a better use of surplus. He acknowledged that
constitutionalizing the percent of market value (POMV) draw
would effectually act as a revenue cap on one funding source,
which he would not be opposed to with tweaks. He opined that
allocation of resources is the most important factor and
recommended the creation of a spending limit with "relief
valves" to guide the legislature's decision making.
1:29:32 PM
REPRESENTATIVE MINA asked how the bill relates to the HJR 1 and
how the bill differ from the legislation introduced last year.
REPRESENTATIVE STAPP said HB 51 is the same bill that was
introduced during the last legislative session prior to it being
amended. He reiterated that HB 51 is conditional on the passage
of HJR 1, as there is no reason for implementing a statutory
limit without a constitutional limit.
REPRESENTATIVE MINA asked why the spending cap is based on GDP.
She shared her understanding that most states do not base their
spending cap on GDP.
REPRESENTATIVE STAPP pointed out that "GDP less government
spending" is designed to avoid the notion of increasing
government spending to raise the spending limit. He said he
liked the use of real GDP because it would put emphasis on
private sector growth and long-term, fiscal discipline.
1:31:49 PM
REPRESENTATIVE UNDERWOOD asked whether erratic revenue streams
make a functional spending cap imperative.
REPRESENTATIVE STAPP agreed. He shared his belief that
volatility can be controlled with mechanisms.
1:32:45 PM
CHAIR GRAY referenced slide 7 and asked why the cap is needed if
historically, the state has saved billions of dollars.
REPRESENTATIVE STAPP responded historically, that's been the
exception, not the rule.
1:34:22 PM
[HB 51 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 51 Sponsor Statement Version A.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |
| HB 51.A.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |
| HB 51 Research Legislative Finance Modeling 2.18.25.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |
| HB 51 Research Presentation 2.18.25.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |
| HB 51 Sectional Analysis Version A.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |
| HB 51 FN OMB.pdf |
HJUD 3/24/2025 1:00:00 PM |
HB 51 |