Legislature(2023 - 2024)DAVIS 106
03/06/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB90 | |
| HJR7 | |
| HJR8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 90 | TELECONFERENCED | |
| *+ | HJR 7 | TELECONFERENCED | |
| *+ | HJR 8 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB 90-PERMANENT FUND DIVIDEND; $1000 DIVIDEND
6:01:55 PM
CHAIR CARPENTER announced that the first order of business would
be HOUSE BILL NO. 90, "An Act relating to income of the Alaska
permanent fund and the amount available for appropriation;
relating to appropriations from the earnings reserve account;
relating to the amount of the permanent fund dividend; and
providing for an effective date."
6:02:17 PM
REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, as prime
sponsor, presented HB 90.
6:02:41 PM
The committee took an at-ease from 6:02 p.m. to 6:06 p.m.
6:06:38 PM
REPRESENTATIVE FIELDS began a PowerPoint presentation [hard copy
included in the committee packet] titled, "HB 90: $1000
Permanent fund Dividend," on slide 1. He explained that the
impetus of HB 90 was made through conversations with his
colleagues, who told him that the main issue is not the
permanent fund dividend (PFD) amount, but rather its
predictability. He informed members that the first PFD check in
Alaska was $1,000 in 1982, and that is about what the state can
afford in the future without raising new taxes. Further, he
noted that $1,000 is similar than the historic average. He
acknowledged conversations in the legislature around capping the
PFD at $1,000, as some believe that the formula used in the 1982
distribution would become unaffordable. He said he wanted to
offer HB 90 as a no-tax option, in that it would give the state
a balanced budget and give Alaska residents PFD predictability.
He moved to slides 2 and 3 to review the creation of the PFD
program. In 1976, Alaska residents voted to establish the
permanent fund, with the intent of making Alaskans feel vested
in the program as stakeholders, and the fund would be protected
and not squandered. He moved to slides 4 and 5 and noted that
past oil volume was four times greater in 1982, and that the PFD
distribution formula worked well up until about 2012. He
further explained that at that time the state was experiencing
declining revenue and oil prices. He stated that Alaska has not
been able to afford the original formula in the last ten years,
and that the state will not be able to afford it without new
taxes.
6:10:22 PM
EVAN ANDERSON, Staff, Representative Zack Fields, Alaska State
Legislature, clarified that the data on slide 5 originates from
the permanent fund corporation, and that the percent change is
year over year.
6:10:42 PM
REPRESENTATIVE FIELDS returned to the presentation on slide 6 to
discuss legislative finance models. He reiterated that
dividends distributed via the 1982 formula will not be
affordable without new tax revenue. He said a 50/50 [percent of
market value (POMV) split] dividend is not affordable without
significant taxes, and that a 75/25 dividend split may be
affordable, but is dependent upon optimistic assumptions to
avoid taxes. He commented that the state would be able to
afford the PFD program that uses the formula prescribed in HB
90, which he said will give residents predictability with the
program, and the state would be able to maintain a low tax
regime. He stated that, while his own constituents are
comfortable with him voting for new taxes - if they are fair for
working people - he opined that the legislature won't raise
significant revenue, so HB 90 was presented.
6:12:14 PM
REPRESENTATIVE FIELDS moved to slide 7 to present fiscal
modeling done by the Legislative Finance Division, which he said
shows that HB 90 would be affordable if the state were to not
raise any new taxes. He moved to slide 8, which shows further
division modeling, but on the question of what the price of oil
would need to be in order to pay a $1,000 dividend. He said
that it is reasonable to anticipate oil prices to be at the
numbers show on the slide. On slide 9 he outlined the goals of
HB 90 to provide PFD predictability for Alaskans, fund services
consistent with constitutional intent, and to maintain low/zero
tax burden. He reiterated his understanding that the
legislature will not raise new taxes. He moved to slide 10 and
commended last year's energy relief check to residents, and
further, that the money is tax free. He moved to slide 11 and
noted that proponents of last year's vote on whether to hold an
Alaska constitutional convention had suggested putting the PFD
into the document; residents ultimately voted no on holding a
constitutional convention, which he said is an indication that
what is in the Alaska Constitution is broadly supported. He
stated that it is on the legislature to change PFD statute.
6:14:43 PM
MR. ANDERSON gave the sectional analysis to HB 90 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1: This section amends AS 37.13.140, which
defines net income of the Alaska Permanent Fund as
income of the earnings reserve account. This section
leaves unchanged the five percent Percent-Of-Market-
Value draw for appropriations, and it limits the
amount available for appropriation to no greater than
the balance in the earnings reserve account described
in AS 37.13.145.
Section 2: This section amends AS 37.13.145(b) to
authorize the legislature to appropriate funds from
the earnings reserve account to the dividend fund each
year and to pay out a dividend of up to $1,000 to each
eligible individual per fiscal year.
Section 3: This section amends AS 37.13.145(c) to give
the legislature the ability to appropriate additional
funds from the earnings reserve account to the
principal of the Permanent Fund in order to offset the
effect of inflation during that fiscal year.
Section 4: This section amends AS 37.13.145(d)
replacing the words "distribution" and "transfer" with
"appropriation" to conform with previous sections.
Section 5: This section amends AS 37.13.145(f), which
gives the legislature the authority to appropriate
funds from the earnings reserve account to the general
fund.
Section 6: This section amends AS 37.13.300(c), making
conforming changes to the statute that disallows the
legislature from including income from the mental
health trust fund in the funds available for
appropriation.
Section 7: This section makes a conforming change to
AS 43.23.025(a), which determines the value of the
permanent fund dividend.
Section 8: This section repeals AS 37.13.145(e), which
mandated a 50% draw on the earnings reserve account
for annual payments.
Section 9: This section provides for an immediate
effective date.
6:17:49 PM
MR. ANDERSON explained that HB 90 has an indeterminate fiscal
note. He said that setting one specific dollar amount in statue
could lead to budget surpluses and deficits; therefore, a fiscal
note [with a determined amount] could not be made.
6:18:35 PM
REPRESENTATIVE GROH thanked Representative Fields for bringing
HB 90 forward. He asked if the $1,000 figure was not inflation
adjusted, and whether there were no inflation adjustment
provisions.
REPRESENTATIVE FIELDS answered yes. He explained that he sought
to put forward the most fiscally conservative and predictable
dividend that he believes the state could offer, which is why
there are no inflation adjustment provisions. He shared that he
has no strong feelings on whether to add such a provision, but
he wanted a predictable figure, which he said is $1,000. He
clarified that the figures shown in past slides are not
inflation adjusted.
REPRESENTATIVE GROH shared that $1,750 would be the historical
average of the PFD, if using 2021 dollars. He asked for
Representative Field's "school of thought" on who should pay the
state's structural deficit.
REPRESENTATIVE FIELDS answered that in 1996 voters put the
permanent fund into the constitution and turned a non-renewable
resource into a renewable resource with the explicit intent of
funding services. He said that was a good idea, as too was when
the legislature established in statue a PFD program with the
intent of growing the fund. He said the data is clear that the
PFD has a positive impact on ameliorating poverty. He said
that, since Alaska has four times less oil coming through the
pipeline, it can't afford a 1982 formula dividend. Unless there
was higher oil revenue, oil taxes, or a substantial new form of
revenue, the state has to balance services and dividends; but it
should recognize that the most impacted would be the working
poor.
6:23:27 PM
CHAIR CARPENTER asked what would make the legislature follow a
statute that prescribes a $1,000 PFD, and further, what kind of
appropriation structure language is in HB 90. He inquired as to
how such a law would get the state in a stable environment
whether it still would be subject to appropriation.
REPRESENTATIVE FIELDS answered that if HB 90 is passed,
legislators can relay to their constituents that they are highly
likely to get a $1,000 PFD. He said it is likely that oil
prices will allow the state to afford the PFD, even if the price
dips below the projected average. He said that HB 90 maintains
the POMV spending cap law, which he supports.
6:24:50 PM
REPRESENTATIVE MCCABE inquired about the use of "may", which he
noted occurs on page 2, lines 12 and 19, and on page 3, line 16
of the proposed legislation.
REPRESENTATIVE FIELDS deferred to Legislative Legal and Research
Services.
6:25:46 PM
EMILY NAUMAN, Director, Legislative Legal Services, Legislative
Agencies and Offices, explained that HB 90 - as well as other
bills to be presented tonight - are drafted as they are in order
to be consistent with Wielechowski v. Alaska. She said the case
held that appropriation for PFDs is not mandatory, and that the
legislature is free to appropriate any amount for PFDs in any
given year; therefore, changing the language from "shall" to
"may" makes the language consistent with that holding. Further,
even as the statutes are drafted now with the word "shall", the
legislature is still free to appropriate any amount for the PFD.
REPRESENTATIVE MCCABE asked, "Then why do we even need this?"
Acknowledging that the legislature is free to appropriate
however it likes, he asked whether inserting "shall" rather than
"may" might make a future legislature less able to circumvent
the language.
MS. NAUMAN answered, "I don't believe so." She pointed out that
the current language states "shall" and the legislature
nonetheless has chosen to not appropriate the amount prescribed
in statute.
6:27:44 PM
REPRESENTATIVE FIELDS relayed that he is alright with using
"shall" within the bill.
6:28:15 PM
REPRESENTATIVE FIELDS, asked about slide 5 and his previous
comments regarding the figures not being inflation adjusted,
acknowledged that the data on slide 5 is a typo and the historic
PFD average should be about $1,750.
REPRESENTATIVE MCKAY said that if the PFD were to be "held
flat," it would be eroded. He shared that this conversation
reminds him of the 1994 vote, in that Alaska residents had voted
not to use the permanent fund to balance the state budget.
REPRESENTATIVE FIELDS commented that he would be in support of
inflation indexing.
6:30:40 PM
CHAIR CARPENTER said it would be helpful to see inflation data
on past PFD payments.
6:30:59 PM
REPRESENTATIVE GRAY commented that he likes the idea of doing
energy rebate disbursements, namely because they are tax free.
He asked how high the state can spend on energy rebate
disbursements.
REPRESENTATIVE FIELDS responded that while the argument could be
made to disburse a $100 PFD and then disburse the rest of the
revenue to residents as an energy rebate check, he is unsure as
to whether the Internal Revenue Service (IRS) has provided
guidance on such an action.
6:31:41 PM
CHAIR CARPENTER suggested that the committee confer with the IRS
in getting an answer to the last question.
6:31:54 PM
REPRESENTATIVE MCCABE suggested the committee investigate "hold
harmless" provisions. He offered the understanding that Alaska
pays the federal government a certain amount of money based on
the PFD for people that would normally have to pay tax on it but
do not. He said if the state renamed the PFD for hold harmless
portions, the savings would be $20 million.
CHAIR CARPENTER added that both the energy rebate and hold
harmless are going to have a tangential impact on the decisions
the legislature makes around the PFD, so research on the topic
will be done and shown to the committee.
6:33:01 PM
REPRESENTATIVE GROH stressed that there are people that would
lose money by receiving the PFD if there were no hold harmless
provisions, under certain circumstances.
REPRESENTATIVE FIELDS answered that he is aware of hold harmless
but not that element of the legislative history.
6:33:49 PM
CHAIR CARPENTER announced that HB 90 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0090A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Sponsor Statement.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - Sectional Analysis.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| Historical average dividend since 1982.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - WM Bill Hearing Presentation 3.6.23.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HJR007A.PDF |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sponsor Statement HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sectional Analysis HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR 7 Fiscal Note.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR008A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| Sponsor Statement HJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| SectionalAnalysisHJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| HJR 8 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| ISER Presentation Economic Impacts of Fiscal Options and Uncertainty - Dr Guettabi.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| UAA Business Enterprise Institute Presentation - Christi Bell.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| Bicameral Permanent Fund Working Group Report With Title Page, 20 January 2020.pdf |
HW&M 3/6/2023 6:00:00 PM |