Legislature(2019 - 2020)SENATE FINANCE 532
03/21/2020 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Economic Support for Alaskans Impacted by Covid-19 | |
| HB308 | |
| HB205 | |
| Presentation: Short and Long-term Impacts of Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| *+ | HB 308 | TELECONFERENCED | |
| += | HB 205 | TELECONFERENCED | |
CS FOR HOUSE BILL NO. 205(FIN)(Corrected) am(brf sup maj
fld)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; making
supplemental appropriations; and providing for an
effective date."
4:05:30 PM
Co-Chair Stedman discussed the agenda. He explained that
LFD had been invited to present an overview.
^PRESENTATION: SHORT and LONG-TERM IMPACTS OF BUDGET
4:06:30 PM
PAT PITNEY, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation "State of Alaska - Short and
Long-Term Revenue Impact and Impact on Budget Reserves"
(copy on file). She stated that the presentation was a
short slide deck that would illustrate the impact of the
decline in the price of oil, as well as the impact on the
POMV annual draw to the state.
4:07:04 PM
Ms. Pitney spoke to Slide 2, "Traditional (non-PMOV)
Revenue, FY19-FY29," which showed a line graph. She noted
that she would show three slides with graphs that were all
scaled the same. The graph on Slide 2 showed traditional
revenue, largely made up of petroleum revenue. She pointed
out that the state was under $3 billion in FY19 and
expected to be at $2 billion in fall 2020. The blue bar
showed the fall forecast. There were additional sources of
revenue from entities other than oil: marijuana tax, motor
fuel tax, and corporate income tax.
Ms. Pitney noted that the red line showed a $600 million
difference, on average, across the timeframe FY21 through
FY29, so the state had $600 million less coming in through
the traditional revenue streams. She said that the red line
was based on $40/bbl. She stated that the current price of
oil hovered close to $35/bbl. She relayed that assuming
$35/bbl oil on an inflation adjusted basis would result in
$700 million less; approximately $1.2 billion in
traditional revenue.
4:09:16 PM
Ms. Pitney discussed Slide 3, "POMV "Revenue, FY19-FY29,"
which showed a line graph. She explained that POMV took 5
percent of the permanent fund value on annual basis. She
related that the POMV was calculated by only drawing from
the fund the amount that, over time, the fund could
continue to grow at inflation, so the fund value was strong
for future generations. She said that at this point the
state had $2.9 billion from the POMV in FY19. She relayed
that the effects of the market were delayed in the POMV
because it was on a 5-year rolling average. At the peak,
the state would have $400 million less than expected from
the fall revenue source. She discussed the slow recovery
scenario:
Slow recovery: FY20 ending balance matches actual
balance as of 3/19/20. No growth in FY21, then 10
percent growth for 5-years, then 7 percent growth.
Peak impact of $700 million in FY26.
4:11:40 PM
Ms. Pitney reviewed Slide 4, "Total Revenue, FY19-FY29,"
which showed a line graph that combined traditional revenue
with the POMV revenue. She said that the fall revenue had
been expected to be $6 billion by FY29. She pointed out
that the red bar was at 40/bbl and steady recovery, plus
one draw with decent returns thereafter. She noted the $1
billion dollar difference at the peak of the decline in
FY26. She said that if the state took an additional year to
recover at $35/bbl, the difference was $1.5 billion less in
revenue per year. She highlighted that revenue would go
from $6 billion to $4.6 billion in the out years. She said
that the amazing figures was the cumulative impact on
revenue. Cumulatively, the gap between the fall forecast
and the $40/bbl plus steady recovery, was a cumulative $8
billion in revenue that did not exist in the states
revenue streams from what was considered last fall. She
added that if oil stayed at $35/bbl, the figure increased
to $11 billion. She stressed the significant differences in
the states fiscal situation over the last two-week period.
4:13:39 PM
Ms. Pitney showed Slide 5, "Scenario 1: $40/bbl, POMV
impact, Senate Finance Budget without Dividend, no
Stimulus," which showed a table using modest revenue
decline. She noted that the slide showed a modest, steady
recovery of the permanent fund. The UGF assumption
reflected a drop from $4.8 billion in 2020, to $4.4 billion
in 2022. The total spending, not counting supplementals,
was $4.3 billion; there were $360 million in supplementals.
Included in last years spending was a $1600 dividend,
which totaled $1.1 billion. She said that because of the
drop in revenue the division anticipated a $728 million
draw on the CBR, after $142 from the CBR for the capital
budget, and $172 million from the SBR for dividends. She
relayed that the year-end balance (June 30, 2020) for the
CBR was expected to be $1.5 billion. She furthered that
coming into 2020 with the current spending level,
additional capital budget items, and $100 million in
supplemental items, the state would have a $300 million
deficit (reflected on Line 12) without a dividend and
without any money towards stimulus. The CBR would be drawn
down to under $1.4 billion. She directed committee
attention to Line 18, which showed the CBR balance for FY20
through FY22. She noted the ERA balance on Line 20, which
was $16 billion in FY20, dropped to $12 billion in FY 21
and $10 billion in FY21, with lower returns into the ERA.
She said that under this scenario, assuming no stimulus and
no dividend, the deficit would be $500 million by FY22,
with a CBR balance below $1 billion. The ERA balance would
be 8.5 billion.
4:16:59 PM
Ms. Pitney referenced Slide 6, "Scenario 2: $40/bbl, POMV
impact, Senate Finance Budget $400/person Dividend, $100M
Stimulus," which showed the same table as the previous
slide with the assumption of a $400 dividend and $100
million in stimulus. She relayed that under the scenario,
FY 20 remained the same, FY21 brought the deficit to $700
million and the CBR was drawn below $1 billion. She noted
that there were no additional draws to the ERA beyond the
POMV. She said that in FY22 there would be a $500 million
deficit, before dividends or stimulus, which drew the CBR
under $600 million.
Ms. Pitney explained that given the tight cash flow
arrangement, drawing the CBR below $600 million would
require another cash flow solution for the state. She
thought that the $563 million was as low as the CBR should
drop unless another source of cash flow for the state was
discovered.
4:18:43 PM
Ms. Pitney discussed Slide 7, "Scenario 3: $40/bbl, POMV
impact, Senate Finance Budget $1000/person Dividend, $300M
Stimulus," which showed the same table as the previous two
slides, but with a $1000 dividend and $300 million in
stimulus. This scenario would result in a deficit of $1.2
billion, which would draw the CBR down to $600 million and
would require an ad hoc draw from the ERA. The draw could
be $276 million at $40/bbl. She pointed out that in the
next year, with no dividend and no stimulus, the deficit
would be $500 million and because the CBR was drawn down,
another ad hoc draw would be required on the ERA.
Ms. Pitney explained that for every billion dollars draw
out of the ERA, future annual POMV revenue was reduced by
$50 million. Future cash flows would be reduced, on top of
what was going to happen due to the market and oil price
crash.
4:20:32 PM
Senator Hoffman asked Ms. Pitney to review the deposits on
Line 14.
Ms. Pitney explained that the deposits on Line 14
represented oil tax settlements. She relayed that the $235
million was the amount already received in FY20, the
additional numbers were estimates based on Department of
Revenues forecast.
4:21:30 PM
AT EASE
4:23:11 PM
RECONVENED
Co-Chair Stedman informed the public that the committee
would now take up amendments on the operating budget.
Co-Chair Stedman MOVED to ADOPT Amendment 1 (copy on file):
DEPARTMENT: DCCED
APPROPRIATION: AIDEA
ALLOCATION: AIDEA
RESTORE: $110.3 AIDEA Receipts (code 1102)
EXPLANATION: Corrects funding inadvertently removed
DEPARTMENT: LAW
APPROPRIATION: Civil Division
ALLOCATION: Labor and State Affairs
DELETE: $400.0 UGF
ADD INTENT: It is the intent of the legislature that
when making reductions to outside counsel contracts,
the department use staff instead of outside contracts
whenever possible; and the department should not make
reductions to contracts if the contract is a possible
revenue generator.
Co-Chair Stedman OBJECTED for discussion.
PETE ECKLUND, STAFF, SENATOR BERT STEDMAN, spoke to
Amendment 1, which he described as a technical clean-up
amendment.
Co-Chair Stedman WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
4:25:12 PM
Co-Chair Stedman MOVED to ADOPT Amendment 2 (copy on file):
Agency: Environmental Conservation
Project:
Village Safe Water and Wastewater Infrastructure
Projects
Village Safe Water and Wastewater Infrastructure
Projects: Expansion, Upgrade. and Replacement of
Existing Service
Amount:
$20.900,000 Federal Receipts (1002)
$4.832.000 GF/Match (1003)
$200.000 Stat Desig (1108)
Village Safe Water and Wastewater Infrastructure
Projects: First Time Service Projects
Amount:
$31,350.000 Federal Receipts (1002)
$7.248.000 OF/Match (1003}
$300.000 Statutory Designated Program Receipts (1108)
Agency: Commerce, Community & Economic Development
Project:
Alaska Energy Authority - Rural Power Systems Upgrades
Amount:
$12,500.000 Federal Receipts (1002)
$5,000,000 Unrestricted General Funds (1004)
APPROPRIATION: National Petroleum Reserve
ADD: NATIONAL PETROLEUM RESERVE - ALASKA IMPACT
GRANT PROGRAM. The amount received by the National
Petroleum Reserve-Alaska special revenue fund (AS
37.05.530(a)) under 42 U.S.C. 6506a(l) or former 42
U.S.C. 6508 by August 31, 2020, estimated to be
$13,100,000, is appropriated from that fund to the
Department of Commerce, Community, and Economic
Development for capital project grants under the
National Petroleum Reserve - Alaska impact grant
program.
EXPLANATION: Fund the NPRA receipts, per the
Governor's requested level.
Co-Chair Stedman OBJECTED for discussion.
Mr. Ecklund explained that Amendment 2 had three
components. The first part would add the water and sewer
projects across the state. The second part would add
funding for rural power system upgrade to DECCED. The third
was $13.1 million for the National Petroleum Reserve Alaska
Impact Grant Program.
Co-Chair Stedman WITHDREW his OBJECTION.
4:26:45 PM
Senator Olson stated that there was a name missing from the
list of co-sponsors on the amendment.
Senator Bishop wanted to be a co-sponsor of the amendment,
as well as Senator Wielechowski and Senator Wilson.
There being NO further OBJECTION, Amendment 2 was ADOPTED.
4:27:32 PM
Co-Chair Stedman MOVED to ADOPT Amendment 3, 31-GH2197\O.4
(Bruce, 3/21/20) (copy on file):
Page 74, following line 23:
Insert a new subsection to read:
"(d) The sum of $680,000,000 is appropriated from the
general fund to the dividend fund (AS 43.23.045(a))
for the payment of permanent fund dividends and for
administrative and associated costs for the fiscal
year ending June 30, 2021."
Reletter the following subsection accordingly.
Page 97, lines 29 - 30:
Delete "secs. 21(a), (b), and (d)"
Insert "secs. 2l(a), (b), (d), and (e)"
Co-Chair Stedman OBJECTED for discussion.
Mr. Ecklund explained that the purpose of the amendment was
to pay a $1000 dividend in October.
Co-Chair Stedman understood that each qualified Alaskan
would receive a $1000 dividend.
Co-Chair von Imhof OJBECTED. She believed that paying a
large dividend at this point had serious fiscal
consequences. She asserted that the focus should be on
paying stimulus money and Covid-19 associated money
directly to the people who truly needed it for food
security, energy assistance, and supplemental UI benefits.
Senator Wielechowski thought the amount was woefully
inadequate. He said that people have been ordered out of
work and he supported the recently passed UI legislation.
He lamented that Alaska had the lowest unemployment
replacement wage in the country. He argued that the $1000
dollars was far below what was required in statute and was
inadequate for the current crisis Alaskan were
experiencing.
Senator Bishop agreed with Senator Wielechowski's comments
- to a point. He was afraid the proposed dividend was the
last one Alaskans would receive for a while. He was
concerned that future generations would not benefit in the
same was as past and current generations.
4:30:34 PM
Senator Olson lamented that businesses were losing revenue
and families continued to have expenses to pay. He found
that the dividend amount was wanting but was a good first
step in getting money to Alaskans.
Co-Chair Stedman WITHDREW his OBJECTION.
Co-Chair von Imhof MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Hoffman, Wilson, Olson, Stedman
OPPOSED: Bishop, Wielechowski, von Imhof
The MOTION PASSED (4/3). There being NO further OBJECTION,
Amendment 3 was ADOPTED.
4:32:02 PM
AT EASE
4:34:12 PM
RECONVENED
Co-Chair Stedman stated that there was a conceptual
amendment brought to the committee by Senator Wielechowski.
Senator Wielechowski MOVED to ADOPT Conceptual Amendment 4:
An emergency PFD of $1,000 payable to each individual
who is eligible to receive a 2020 Permanent Fund
Dividend to be appropriated from the Earnings Reserve
Account to the dividend fund payable on June 15, 2020.
Co-Chair Stedman OBJECTED for discussion.
Co-Chair Stedman summarized that the conceptual amendment
was for an additional $1000 dividend from the ERA to be
paid out June 15, 2020.
Senator Wielechowski offered rationale for the amendment.
He explained that the COVID-19 virus had caused an
unprecedented unemployment, which was not likely to end
soon. The conceptual amendment would provide a payment out
of the ERA for every man, woman, and child who was eligible
for a 2020 dividend. He was worried for the people in his
district, in which there were many low-income people that
worked in restaurants, hotels, gyms, and were struggling.
He thought the amount of money in the amendment was small
considering the magnitude of the crisis. He expressed great
concern for the financial hardships and suffering of the
people of Alaska.
4:37:55 PM
Senator Wilson asked whether the amendment applied to the
2020 application process.
Co-Chair Stedman stated in the affirmative.
Senator Wielechowski thought the amendment was better to
base off the applicants that were due by March 31, 2020.
th
Giving until June 15 would allow a determination of who
was legitimately eligible.
4:38:59 PM
Co-Chair von Imhof asked Senator Wielechowski to check
whether the governor had extended the application period
for a PFD.
Senator Wielechowski stated if there had been an extension,
he would be happy to amend his amendment.
4:39:41 PM
Senator Olson believed that the communities he represented
could use the additional funds sooner rather than later.
Co-Chair Stedman thought there was clearly a need for
relief for citizens across the state. He thought the
federal government was targeting May and June for
assistance. He considered that the severity of the economic
downturn could extend into 2021. He did not believe that
the virus and its effects would only last several months.
He felt that the severity of the draw to support the
amendment was not prudent at this time.
Co-Chair Stedman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Wilson, Olson, Wielechowski
OPPOSED: Hoffman, Bishop, von Imhof, Stedman
The MOTION to adopt Conceptual Amendment 4 FAILED (3/4).
4:43:21 PM
AT EASE
4:43:41 PM
RECONVENED
Co-Chair Stedman checked in with committee members to
determine whether anyone needed further explanation of the
amendments.
Co-Chair von Imhof MOVED to report SCS CSHB 205(FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
SCS CSHB 205(FIN) was REPORTED out of committee with two
"do pass" recommendations and five "amend" recommendations.
Co-Chair Stedman explained that the bill would move next to
the Senate Rules Committee and then it would move to the
Senate Floor.
4:45:29 PM
AT EASE
4:47:45 PM
RECONVENED
Co-Chair Stedman relayed that there would be a 9:00 am
meeting the following morning, but he expected a delay.
There was a floor session scheduled for 11:00am. He
anticipated the committee would meet at 1 PM. He thanked
everyone for coming to work on a Saturday and stressed that
the committee was on an expedited schedule to get ahead of
the virus and keep people safe.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 308 Work Draft v. U.pdf |
SFIN 3/21/2020 9:00:00 AM |
HB 308 |
| 032120 LFD HB 205 Presentation SFIN .pdf |
SFIN 3/21/2020 9:00:00 AM |
HB 205 |
| HB 308 Work Draft v. U Explanation of Changes.pdf |
SFIN 3/21/2020 9:00:00 AM |
HB 308 |