Legislature(2023 - 2024)DAVIS 106
03/29/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 142 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 110 | TELECONFERENCED | |
HB 110-PERM FUND; XFER DIVIDEND PROG TO APFC
6:33:38 PM
CHAIR CARPENTER announced that the first order of business would
be HOUSE BILL NO. 110, "An Act relating to the Alaska permanent
fund; relating to permanent fund dividends and the dividend
fund; transferring the dividend program from the Department of
Revenue to the Alaska Permanent Fund Corporation; relating to
the duties of the Department of Revenue; relating to the duties
of the Alaska Permanent Fund Corporation; and providing for an
effective date."
6:34:04 PM
The committee took a brief at-ease.
[Chair Carpenter passed the gavel to Vice Chair McCabe.]
6:34:37 PM
CHAIR CARPENTER, as prime sponsor of HB 110, read the following
sponsor statement [included in the committee packet], which read
as follows [original punctuation provided]:
For almost thirty years, Alaskans could count on their
annual dividend checks as the state legislature
followed the law that directed the dividend to be paid
by a statutory formula. Since 2017, the permanent fund
dividend has been subjected to the budget process,
where the dividend competes with government spending
and cutting the dividend often becomes the deficit
reduction solution.
HB 110 returns the permanent fund dividend to a
statutory transfer and takes it out of the
appropriation process.
HB 110 ensures the growth of the permanent fund. HB
110 eliminates one of two potentially conflicting
sections of statute that calculate income available
for distribution from the permanent fund. The
remaining calculation of income available for
distribution from the permanent fund will be a five-
year average of five percent of market value of the
fund.
HB 110 preserves Governor Hammond's vision of the
dividend being the first call on the distribution from
the fund. The first call on the distribution will be
for the required payment of dividends of fifty percent
of the POMV draw.
HB 110 preserves the corpus of the permanent fund.
After the required dividend payment, the remainder of
the fifty percent POMV allowable draw, or the balance
of the earnings reserve fund, whichever is less, will
be available for government spending.
HB 110 transfers the administration of the permanent
fund dividend from the department of revenue to the
permanent fund corporation. The dividend fund will
therefore be transferred to the permanent fund
corporation.
While an amendment to Alaska's Constitution in needed
to enable a constitutional dedication of income from
the permanent fund, HB 110 makes the intent of the
legislature to pay a dividend by statute clear.
6:36:57 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, provided the sectional analysis of HB 110 [included in
the committee packet], which read as follows [original
punctuation provided]:
Sections 1-21
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 22
Removes the District Court's jurisdiction over review
of the constitutionality of the dividend payment.
Sections 23-28
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 29
Amends Public Finance statute to eliminate one of two
conflicting calculations for the income available for
distribution from the permanent fund earnings reserve
account. The income available for distribution from
the account is five percent of the average market
value of the fund (POMV) (permanent fund balance,
including the earnings reserve fund) for the first
five of the preceding six years.
Section 30
Requires the Permanent Fund Corporation to make the
annual permanent fund dividend payment without
appropriations. The dividend amount is calculated as
50 percent of the amount available for distribution,
or 50 percent of the five percent average POMV from
Section 29 but shall never exceed the balance in the
earnings reserve fund.
Section 31
Conforms the Amerada Hess language that does not allow
income from the settlement to be available for
distribution for the dividend or general fund.
Section 32
Allows the legislature to appropriate an amount from
the earnings reserve account to the state general fund
to spend on government.
Section 33
Limits the combined total transfer from the earnings
reserve fund to the dividend fund and to the general
fund to the lesser of 5% POMV and the balance of the
earnings reserve fund.
Section 34
Conforms the mental health trust language that does
not allow the net income from the trust to be
available for distribution for the dividend or the
general fund.
Section 35-45
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 46
Provides for a transition for the transfer of
administration of the dividend program to the
permanent fund corporation and transfers the balance
of the dividend fund to the permanent fund on July 1,
2024.
Section 47
Provides for an effective date of July 1, 2024.
6:39:27 PM
The committee took a brief at-ease.
6:39:50 PM
CHAIR CARPENTER, addressing the fiscal notes, pointed out the
Office of Management and Budget (OMB) component 981 would
allocate funds to the Permanent Fund Dividend (PFD) division.
He stated that transferring the permanent fund program from the
Department of Revenue (DOR) to the Alaska Permanent Fund
Corporation (APFC) would result in a reduction of $8.5 million
in fiscal year 2024 (FY 24). He read the analysis to the fiscal
note [included in the committee packet], which read as follows
[original punctuation provided]:
This bill transfers the duties of administering the
Permanent Fund Dividend (PFD) program from the
Department of
Revenue to the Alaska Permanent Fund Corporation
(APFC). This includes determining the value of each
dividend and the
payment of each dividend. The bill also moves the
Dividend Fund to APFC as a separate fund within the
Corporation. This
fiscal note assumes the Permanent Fund Dividend
Division moves from the Taxation and Treasury
appropriation to the
Alaska Permanent Fund Corporation appropriation.
CHAIR CARPENTER explained the second DOR fiscal note, OMB number
109. He said that there are asterisks in the space for FY 24,
which represents that the figure is indeterminate. He read the
analysis of the second fiscal note [included in the committee
packet], which read as follows [original punctuation provided,
with some formatting changes]:
HB 110 seeks to make several changes to the state's
permanent fund dividend program (PFD program). Among
these is transfer of the management of the PFD program
from the Commissioner of the Department of Revenue to
the Executive Director of the Alaska Permanent Fund
Corporation. This fiscal note pertains only to this
element of HB 110.
An important dynamic to understand is that the
Department of Revenue is an integral part of the
administrative enterprise of the State of Alaska. The
Alaska Permanent Fund Corporation (APFC) is a
quasi-public corporation that is almost entirely
segregated from the State's administrative enterprise.
As a division in the Department of Revenue, the
Permanent Fund Dividend Division (PFDD) is reliant on
certain services provided by multiple state agencies,
including the Department of Revenue, Office of
Information Technology, Division of Finance, Division
of Shared Services, and the Criminal Investigations
Unit. Removing PFDD from the State's administrative
enterprise would require APFC to replicate the
administrative infrastructure on which the PFD
Division currently relies.
While this is not an impossible transition project, it
is a project that would require substantial resources,
planning and care in project execution. APFC would
need to create and provide IT, cybersecurity,
accounting, and administrative support and
infrastructure to PFDD. Since PFDD maintains the
confidential personal and banking information of most
Alaskans, the highest degree of care must be taken
during the transition to ensure the information
remains secure and its integrity maintained.
At this time, APFC's assessment of the costs of this
project are necessarily rough estimates, and therefore
this fiscal note is indeterminate. To achieve any
degree of accuracy in budgeting for the costs of such
a project, APFC would likely need to procure a project
manager experienced in major data and system
transition and implementation. APFC estimates the cost
of a project manager to scope this project and prepare
a project plan would be approximately
$100,000-$250,000.
The following is a summary of projected costs that
APFC can currently envision that would be in addition
to the current budget of PFDD.
IT Costs
Replace Office of Information Technology Functions.
PFDD currently budgets $200.0 Inter-Agency for OIT
support services. APFC estimates incremental costs of
$409.0 to add four new positions to cover all core IT
services (user administration, helpdesk, cloud server
administration etc.):
$217.0 Personal Services. Two helpdesk positions (IT
Specialist) needed to match a doubled workforce.
$392.0 Personal Services. Two infrastructure positions
(IT Specialist) needed to match a doubled workforce
and manage the new workload in Azure and cloud
administration.
Licensing for SQL servers, Windows workload servers,
M365 cloud Software as a Service licensing, Azure
services and Data Storage.
PFDD currently budgets $111.7 Inter-Agency to OIT for
licenses and IT infrastructure. APFC estimates
incremental costs of $109.0 Services.
Network. PFDD currently pays $15.0 for network access.
APFC anticipates a doubling of its current network
cost from $12.0 to $24.0. This would represent a
savings of $3.0. Horizon Virtual Desktop Interface
licensing. APFC anticipates a doubling of its current
costs. This would be an incremental cost of $90.0
Services.
PFDD Workstations.
APFC would add PFDD to its three-year refresh cycle.
APFC estimates an incremental cost of $300.0
Commodities.
PFDD Applications Security.
PFDD has a number of applications: Dividend
Application Information System (DAIS), Revenue
Permanent Fund Information System (RPFI), and the
ILINX imaging system. APFC would need to evaluate each
application for security as well as determination
whether to locate the application in the Microsoft
Azure Cloud. APFC does not have a cost estimate at
this time for this item.
PFD Application Portal.
PFDD currently relies on the OIT myAlaska portal to
manage online applications and identity verification.
APFC would need to replicate a secure and resilient
portal to replace myAlaska. APFC does not have a cost
estimate at this time for this item.
PFDD Applications Upgrade.
APFC anticipates a need for a rebuild of PFDD
applications into a contiguous and agile ecosystem. A
goal here is increased security, increased automation,
improved PFD application processing time, and enhanced
flexibility on PFD distribution. APFC does not have a
cost estimate at this time for this item.
Finance and Investment Costs
Modifications to Accounting System.
Consulting time will be required to export and import
data files. APFC estimates one-time incremental costs
of $20.0 Services.
Align Accounting Positions for Management of the PFD
Fund.
Investment management of the PFD Fund would have to be
done under a different asset allocation with separate
reporting and tracking of expenses. The PFDD
accounting positions would need to be aligned with the
APFC accounting positions. APFC estimates an
incremental cost of $50.0
Personal Services.
Financial Audit.
APFC would assume the responsibility to obtain an
independent audit of PFDD and the PFD Fund. APFC
estimates incremental costs of $75.0 Services.
Other Costs
Office Rent.
APFC does not anticipate any changes to PFDD's
Anchorage and Fairbanks office space. To the extent
that removal of PFDD from the State's administrative
enterprise requires relocation of PFDD out of the
State Office Building, there may be incremental costs
for rent, moving and office build-out. APFC does not
have a cost estimate at this time for these items.
6:50:38 PM
REPRESENTATIVE GRAY, having reviewed the second fiscal note,
expressed the opinion that moving the PFD program from DOR to
APFC would be extraordinarily difficult, expensive, and risky
for the Alaska public. He questioned whether the proposed
legislation could accomplish the intent without moving the
program.
CHAIR CARPENTER responded that dividends would continue to be
paid from DOR; however, the bill would solve a political problem
by stabilizing the way the state carries out dividend
distributions. It would take the dividend out of the
appropriation process and change the way the legislature manages
the PFD program. He said that the proposed legislation would be
moving the program "one step further away" from the legislature
and the executive branch. He explained that this would be done
by sequestering the fund under the purview of APFC.
CHAIR CARPENTER said there are many unknowns in the fiscal note,
and the "headspace" is about $8 million from the first fiscal
note, which he explained would be the savings generated from DOR
and available for the costs to move the permanent fund program
to APFC. As to the costs above the $8 million, he said, this is
currently unknown and will be unknown until the fund transfer is
underway. He reiterated that the policy aim of HB 110 would be
to solve the political equation by removing the PFD program from
the legislative and executive processes and have the program be
a function of APFC; thus, APFC would annually cut checks to
Alaskans and the state. He pointed out that to carry out the
change, there would need to be a constitutional amendment which
repeals Wielechowski v. Alaska, 403 P.3d 1141, (2017). He spoke
to the section of HB 110 which would remove jurisdiction of the
lower courts. He said this would send the message that the PFD
program issue needs to be solved without the legislative,
executive, or judicial branch being involved.
6:55:16 PM
REPRESENTATIVE GROH expressed the understanding that HB 110
would remove district court jurisdiction over the
constitutionality of the dividend payments; therefore, lawsuits
could only be held in the superior court. He questioned whether
Section 22 of the proposed legislation would be a "messaging
section."
CHAIR CARPENTER responded in the affirmative, explaining that
the constitution prevents the legislature from directing the
superior court or supreme court on their jurisdiction. However,
he said, Section 22 would be more than just "messaging," as it
also conveys that no case could be brought into the lower courts
against the state for how the state is managing the APFC
dividend program. He offered that this would not likely happen;
nonetheless, it would send a message from the legislature to the
courts that all three branches of the government are separate
from the PFD program and the legislature, "so that we stop
fighting over that money."
REPRESENTATIVE GROH referred to language within the sectional
analysis which relates that APFC would be required to make the
annual PFD payment without appropriations. He expressed the
understanding of this intention; however, he pointed out that
the sponsor statement relates that an amendment to the state's
constitution is needed to enable a constitutional dedication of
income from the permanent fund. He questioned whether the
language is sending the wrong message, in that, the intent of
what the legislature wants to do would require a constitutional
amendment in order to require annual payments of dividends
without legislative appropriation.
CHAIR CARPENTER explained that a constitutional amendment would
be presented both as a resolution and an accompanying bill, and
this would constitutionalize and dedicate the PFD program
outside of the appropriations process.
REPRESENTATIVE GROH expressed concern that moving the PFD
program from DOR and into APFC would confuse or divide the
fund's mission by adding an additional function of paying PFDs
to APFC.
CHAIR CARPENTER related that members of APFC have indicated it
would be a new role, but doable.
7:00:59 PM
VICE CHAIR MCCABE announced that HB 110 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0110A.PDF |
HW&M 3/27/2023 6:00:00 PM HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB110-DOR-APFC-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
|
| HB110-DOR-PFD-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB0142A.PDF |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| W&M Foundation for Discussion Power Point 3.29.2023 Slide.pdf |
HW&M 3/29/2023 6:00:00 PM |