Legislature(2021 - 2022)DAVIS 106
04/29/2021 11:30 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HJR6 | |
| HB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 6 | TELECONFERENCED | |
| *+ | HB 141 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 141-APPROPRIATION LIMIT; GOV BUDGET
12:23:57 PM
REPRESENTATIVE STORY announced that the final order of business
would be HOUSE BILL NO. 141, "An Act relating to an
appropriation limit; relating to the budget responsibilities of
the governor; and providing for an effective date."
12:24:07 PM
CHAIR SPOHNHOLZ, as prime sponsor, introduced HB 141. She
recounted the robust conversation that stemmed from the previous
presenters about the value of a spending cap and whether a
constitutional spending cap is the right approach as opposed to
updating the statutory spending cap. She pointed out that
throughout the entire history of Alaska, the current spending
cap has never been reached, as it was set in 1982 when oil
revenue was high. Further, the constitutional spending cap
allowed for changes based both on population and inflation. She
noted that she has been a strong advocate for a comprehensive,
sustainable fiscal plan for years, revealing that it was the
only reason she entered into public service. She shared a
personal anecdote about growing up in Alaska, emphasizing that
oil would not solve the state's fiscal problem. She added that
Alaska continues to have a structural gap that resulted in
spending over $16 billion from savings. The rainy-day fund is
essentially drained, she said, as there is only $1 billion in
the CBR. She explained that without spending from the ERA, the
state has no other funds left to send from; however, she
believed that spending from the ERA would be one of the largest
strategic risks to Alaska's future. She reported that for every
$1 billion spent from the ERA, $50 billion is lost annually in
available earnings to spend on both permanent fund dividends
(PFDs) and essential government services.
CHAIR SPOHNHOLZ stated that the government made significant
progress in 2018, when the legislature passed Senate Bill 26,
which allowed for the use of permanent funds to pay for
essential government services, such as public education, public
safety, road/marine highway maintenance operations, the court
system, and dividends. Essentially, Senate Bill 26 established
a cap on the amount of spending from the permanent fund, which
helps to preserve the critical asset that now provides about 65
percent of the state's unrestricted revenue. Further, she
shared her belief that a critical part of a comprehensive,
sustainable fiscal plan is new revenue, as Alaska's
constitutional obligations need to be met to provide for the
health, education, and public safety of Alaskans, as well as to
keep commerce flowing and to continue developing state resources
for the benefit of all Alaskans. She assured the committee that
revenue bills would be heard soon; however, she pointed out that
many of her colleagues have said they would be reticent to vote
on new revenue without addressing spending.
12:30:55 PM
CHAIR SPOHNHOLZ opined that state spending is too low. She
noted the infrastructure deficit of $22 billion, adding that the
state's UGF capital budget had averaged $123 million over the
last five years, which is too low to address Alaska's deferred
maintenance needs, she said. Additionally, she pointed out that
education funding has not been increased in years. She noted
that each year education funding is not increased to accommodate
inflation, it essentially operates as a cut. She concluded that
the state has real needs that must be paid for; however, she
argued that when oil prices were high, the state has spent a lot
of money on projects that don't always make sense, such as a
church in Anchorage, which was developed as a fish processing
plant that was paid for by government funds. She opined that
when oil was high and cash was flowing through Alaska, the state
did not save enough money. The House Special Committee on Ways
and Means has passed conservative fiscal policy designed to
protect the Alaska Permanent Fund from being overspent, but
fiscal policy that increases the amount of funds going to the
permanent fund also needs to be advanced, she posited. She
shared her belief that a constitutional spending cap should not
so tight that it would make it difficult to address Alaska's
strategic needs. Accordingly, HB 141 proposes a statutory
spending cap.
CHAIR SPOHNHOLZ acknowledged that the proposed legislation still
needs work. She pointed out that since introducing the bill,
challenges were identified that could be strategically dangerous
to the state if the spending cap were passed in its current
form, for example, the massive infusion of federal funds. She
reminded the committee that the legislature is using $700
million dollars in American Rescue Plan Act funds to offset
general funds in the current operating budget. She conveyed
that if the state were to set the spending cap based only on
state spending, a cliff in spending would materialize as a
result of offsetting general funds with federal funds. She
relayed that as currently drafted, HB 141 would base the
statutory spending cap on a three-year average. She recognized
that the bill could be made better to allow for more
flexibility, adding that she would be proposing changes to the
spending cap and encouraged committee members to do the same.
She concluded by reiterating that the legislature needs to pass
a comprehensive sustainable fiscal plan that allows for adequate
funding of essential government services. She stated her belief
that advancing a meaningful statutory spending cap is an
important element of a broader fiscal plan.
12:35:22 PM
ROSE FOLEY, Staff, Representative Ivy Spohnholz, on behalf of
Representative Spohnholz, prime sponsor, presented a sectional
analysis of HB 141 [included in the committee packet], which
read as follows [original punctuation provided]:
Section 1: This section updates the existing
statutory appropriation limit found in AS 37.05.540(b)
to: update appropriations subject to this limit;
clarify which fiscal year appropriations are
attributed to; and provide a three-calendar year
average adjuster to the appropriation limit.
This bill includes appropriations for school bond debt
and state-declared disasters in the list of items that
fall outside of the appropriation limit. This section
also changes the calculation of the appropriation
limit to include all appropriations made for a fiscal
year, rather than in a fiscal year. This change
ensures supplemental appropriations are captured as
spending in the fiscal year for which they are
appropriated, regardless of the timing of the
appropriation. Finally, this section allows the limit
to be adjusted by the three-year average change in
population or inflation to smooth any drastic changes
that may occur in a single year. Using a calendar year
rather than a fiscal year aligns the appropriation
limit with the current data availability on population
and inflation figures.
Section 2: This section adds the calculation and
reporting of the appropriation limit to the
responsibilities of the Governor under the Executive
Budget Act in AS 37.07.
Section 3: This section repeals language related to
appropriations from the Budget Reserve Fund for
disasters, as this bill in Section 1 excludes spending
for declared disasters from the appropriation limit.
Section 4: This section notes that sections 1 and 2 of
the bill apply to appropriations that are effective in
FY23.
Section: This section contains transition language
clarifying that prior appropriations made for school
bond debt reimbursement and state-declared disasters
will not be included in the calculation of an
appropriation limit for the fiscal years 2023, 2024,
and 2025.
Section 6: This section establishes an effective date
of July 1, 2021.
12:37:18 PM
MS. FOLEY highlighted differences between HB 141 and the
governor's proposed legislation, HJR 6. First, HB 141 proposes
a statutory appropriation limit, as opposed to a constitutional
spending limit, to ensure that the spending cap works in
practice before amending the constitution. Second, HB 141
excludes school bond debt reimbursement from the appropriation
limit to treat it similarly to other state debt. Third, HB 141
refers to appropriations made "for" a fiscal year, while the
current statutory limit refers to appropriations made "in" a
fiscal year.
12:38:44 PM
REPRESENTATIVE PRAX asked whether it would be possible to put
the proposed legislation to an advisory vote of the people.
CHAIR SPOHNHOLZ noted that spending caps are popular. She
shared her belief that an updated spending cap would pass an
advisory vote. Nonetheless, she opined that it would be an
unnecessary effort and expense for the public to vote on a
statutory spending cap given that the legislature has the
authority to pass one.
12:40:23 PM
REPRESENTATIVE PRAX sought to confirm that HB 141 proposes to
exclude school bond debt.
CHAIR SPOHNHOLZ answered yes. She conveyed that it would be
excluded because voters across the state have voted to approve
school bond debt; therefore, the state should be required to
honor its obligations pertaining to school bond debt to local
communities.
12:41:10 PM
REPRESENTATIVE PRAX questioned whether that would continue for
new bonds.
MS. FOLEY noted that currently, there is a moratorium on new
school bond debt. Consequently, the exclusion in HB 141 would
apply existing school bond debt that was incurred when statute
allowed for state reimbursement of that debt.
12:41:53 PM
REPRESENTATIVE SCHRAGE, in response to Representative Prax's
question regarding the advisory vote, emphasized that the public
elected legislators to make decisions for the state rather than
opine on the issues. He shared his belief that having a
spending cap with no function is problematic, as it is so high
that it would never limit spending. However, he pointed out
that that the statutory dividend formula has been overridden and
asked what role a statutory spending cap would play if the
legislature could essentially ignore it.
CHAIR SPOHNHOLZ believed that there could be merit in
considering a constitutional spending cap in the future;
however, putting something so politically popular to a vote of
the people before testing it could be risky. Instead, she said
she supported updating the statutory spending cap to ensure that
it works before amending the constitution in a way that could
create unintended consequences. She explained that the current
statutory spending cap is largely ignored, as presently, there
are no reporting requirements. She noted that HB 141 includes a
requirement that the administration report on how their budget
meets the proposed spending cap.
12:46:53 PM
REPRESENTATIVE SCHRAGE acknowledged the merit and flexibility
that this proposal offers. He suggested that another solution
would be to limit the available revenue. He pointed out that a
spending cap utilizes prior spending to dictate current spending
rather than looking at available funds. He opined that
constitutionalizing the POMV would provide stability to revenues
while serving as a spending cap by limiting the revenue
available for appropriation. He asked whether a spending cap
would be necessary if available revenues were limited.
CHAIR SPOHNHOLZ pointed out that presently, the state has a
functional spending cap because the state spent through its
savings and lacks enough revenue to offset the budget. She
expressed her hope that the legislature would force more revenue
into the permanent fund to create a sustainable fiscal plan
moving forward. She emphasized that she would not support a
spending cap without a broad-based revenue measure, as new
revenue could create a risk of unfettered spending on
unnecessary projects. Further, she explained that she is
agnostic on the three-year moving average, adding her belief
that the floor is the problem with the bill in its current form.
She opined that without the influx of federal funding, the
three-year average would make more sense because adjustors could
be changed to allow for more growth. Alternatively, the
committee could amend the bill and establish a new floor for the
spending cap. Regardless of the policy direction, she advised
that the solution should be statutory to allow for the
legislature to respond to important issues as they arise.
12:53:14 PM
REPRESENTATIVE PRAX expressed his support for the idea [of a
spending cap] while noting that he preferred it in the form of a
constitutional amendment. Nonetheless, he believed a statutory
cap would be a step in the right direction.
12:54:24 PM
REPRESENTATIVE STORY discussed the idea of resetting the floor
rather than implementing a three-year average; additionally, she
highlighted the needs of Alaskan communities. She asked the
bill sponsor how the backlog of deferred maintenance and other
exclusions would be addressed.
12:56:30 PM
MS. FOLEY relayed that in its current form, HB 141 puts all
capital spending under the appropriation limit and provides no
exclusions for deferred maintenance or extraordinary capital
needs. She suggested that a percentage of the cap could be
devoted to capital if it were the will of the committee. She
concluded that there are plenty of ways to exclude spending that
the legislature wishes to prioritize.
CHAIR SPOHNHOLZ said she shared Representative Story's concerns.
cited Bill Popp's testimony from a previous hearing about making
strategic investments in communities to ensure that Alaska is an
attractive place to live, work and play. She shared a personal
anecdote. She reiterated that the bill is imperfect in its
current form and welcomed specific feedback about ways to amend
and improve the legislation to allow for strategic investment in
the state.
1:00:13 PM
REPRESENTATIVE STORY [announced that HB 141 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 6 HWAM OMB Presentation 4.29.21.pdf |
HW&M 4/29/2021 11:30:00 AM |
HJR 6 |
| HJR 6 Hearing Request Letter.pdf |
HW&M 4/29/2021 11:30:00 AM |
HJR 6 |
| HJR006-1-2-021821-GOV-N.PDF |
HW&M 4/29/2021 11:30:00 AM |
HJR 6 |
| HJR 6 Approp. Limit, Excess Revenue TL.pdf |
HW&M 4/29/2021 11:30:00 AM |
HJR 6 |
| HB 141 Sponsor Statement.pdf |
HW&M 4/29/2021 11:30:00 AM HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Sectional Analysis.pdf |
HW&M 4/29/2021 11:30:00 AM |
HB 141 |