Legislature(2021 - 2022)DAVIS 106
02/15/2022 11:30 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Cost of Health Care to State Operations | |
| Presentation(s): the Cost of Child Abuse and Neglect in Alaska | |
| HB259 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | HB 259 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 259-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
12:27:25 PM
CHAIR SPOHNHOLZ announced that the final order of business would
be HOUSE BILL NO. 259, "An Act relating to use of income of the
Alaska permanent fund; relating to the amount of the permanent
fund dividend; relating to the duties of the commissioner of
revenue; relating to funding for state aid for school districts,
the state boarding school, centralized correspondence study, and
transportation of pupils; and providing for an effective date."
12:27:46 PM
The committee took a brief at-ease.
[During the at-ease, Chair Spohnholz passed the gavel to
Representative Josephson.]
12:28:53 PM
REPRESENTATIVE JOSEPHSON noted those who are available to answer
questions.
12:29:32 PM
CHAIR SPOHNHOLZ, as prime sponsor of HB 259, paraphrased the
sponsor statement [included in committee packet], which read as
follows [original punctuation provided]:
For nearly a decade, Alaska has suffered structural
budget deficits that have impacted every facet of the
state. In 2018, the legislature achieved great
progress through the passage of the percent of market
value (POMV) draw on the permanent fund's earnings,
which 1) resolved two thirds of our deficit, 2)
provides stable and predictable revenues to the state,
and 3) caps the amount spent from the Permanent Fund
annually to 5% of the Permanent Fund's total value
during the first five of the last six years. As a
result, our state's revenue situation has dramatically
improved. However, the uncertainty of one its largest
annual expenditures, dividends from the Permanent Fund
(PFDs) for Alaskans, continues to hinder the fiscal
health of our state, strains the legislature's ability
to meet its constitutional obligations, stands in the
way of many other important policy efforts, and
creates fiscal uncertainty for Alaskans.
HB 259 proposes to solve this impasse by rewriting the
formula for PFDs as a percentage of the POMV draw,
which provides significant and growing PFDs, stable
and growing funding for public education, (one of a
few constitutionally mandated state funding items),
and other essential government services.
This legislation splits the annual POMV draw from the
Permanent Fund as follows:
• 25% to dividends, which would produce a $1,302
dividend in FY24 that would increase each year after
that as the fund's value grows.
• 75% available in unrestricted general funds for
essential government services split as follows:
o 50% to the public education foundation formula and
pupil transportation, and;
o 50% to general fund for funding other essential
state services like public safety, road maintenance,
the court system, state match for federal
infrastructure funds, and more.
This designated funding stream for public education is
critical because when adjusted for inflation, in FY22
the state spends $500 less per child to educate
Alaska's children than we did in FY2008. We are no
longer doing more with less; we are simply doing less
with less and our educational outcomes are starting to
reflect that. In addition to providing predictable
PFDs and stable funding for other essential state
operations, the statutory split of the POMV draw
proposed by this legislation ensures Alaskan schools a
stable and growing fund source so we can invest our
state's greatest natural resource our kids.
12:33:58 PM
CHAIR SPOHNHOLZ began the PowerPoint presentation, titled "HB
259; Update Permanent Fund funding for Dividends, Education, and
other Essential State Services" [hardcover included in committee
packet]. She began on slide 2 and spoke to the headlines
provided, which related to education funding. She advanced to
slide 5 and pointed out that Article 7, Section 1 of the Alaska
State Constitution outlines the state's obligation to public
schools. She offered her understanding that the permanent fund
is a stable source of income, and that oil and gas is a volatile
source. She said the graph on the slide 6 depicts a history of
the state's per-capita unrestricted general fund (UGF) revenue.
She moved to slide 7 to detail the impact of dividend formulas
to Alaska's budget past fiscal year 2023 (FY 23). She discussed
which formulas would provide the state with a budget surplus
12:38:06 PM
CHAIR SPOHNHOLZ moved to slide 8, which read as follows
[original punctuation provided]:
HB 259: Rewrites the Dividend Formula and Creates a
Stable and Growing Dividend for Alaskans
The 5% Percent of Market Draw from the Permanent Fund
will be split as follows:
25% to dividends, producing a $1,301 dividend in
FY24.
75% UGF available for essential government services
50%* to the public education fund for foundation
formula and pupil transportation
50% to general fund
CHAIR SPOHNHOLZ guided members through a diagram on slide 9 that
details how HB 259 works. She moved to slide 10 to present a
graph of what dividends would be under 259 past FY 24. She
moved to slide 11, which showed UGF spending in the
administration's proposed FY 23 budget. She explained that a
statutory dividend would be more than what the state spends in
UGF for operations.
12:42:11 PM
CHAIR SPOHNHOLZ concluded the PowerPoint on slide 12, which
featured a chart that outlined how HB 259 would create a stable,
growing fund source for Alaska's public education.
12:43:48 PM
MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State
Legislature, presented a sectional analysis of HB 259 [included
in the committee packet], on behalf of Representative Spohnholz,
prime sponsor, which read as follows [original punctuation
provided]:
Section 1: Amends AS 14.17, if the amount appropriated
under section six of the bill is not sufficient to
satisfy foundation formula funding for K-12 education,
the remaining need may be met via appropriation by the
general fund.
Section 2: Amends AS 37.13.140, to ensure the amount
available for appropriation may not exceed the balance
of the earnings reserve account. Repeals the old
formula for calculating permanent fund dividends.
Section 3: Creates a statutory split of the annual
point of market value (POMV) draw as follows: 25% to
the dividend fund for distribution for PFDs and 75% to
the general fund. Of the 75% distributed to the
general fund, no less than 50% may go to the public
education fund for state aid to school districts to
satisfy the foundation formula.
Section 4: Amends AS 37.13.145(c), clarifying that an
appropriation is required to move funds from the
earnings reserve account to the principal of the
permanent fund for purposes of inflation proofing.
Section 5: Amends AS 37.13.145(d), relating to the
Amerada Hess settlement funds, which are not included
in the calculation of the POMV, to clarify that the
POMV draw is appropriated, not transferred.
Section 6: Adds a new subsection providing that at
least half of the portion of the POMV draw distributed
to the general fund (75%), may go to the public
education fund for state aid to school districts to
satisfy the foundation formula. In the case that this
portion of the POMV for education exceeds the minimum
amount required by the formula, the excess may be
distributed directly to school districts according to
the same formula.
Section 7: Amends AS 37.13.300(c), relating to income
from the mental health trust fund. This section is a
conforming change referencing the calculation for the
POMV under AS 37.13.140(b).
Section 8: Amends AS 37.14.031(c) relating to the
requirement that the Alaska Permanent Fund Corporation
calculate the net income of the mental health trust
fund annually on the last day of the fiscal year,
excluding any unrealized gains or losses. This is a
technical change removing the a [sic] reference to
language that already exists under this section.
Section 9: Amends AS 43.23.025(a), clarifying that
funds must be appropriated to the dividend fund,
rather than transferred as current statute provides.
Section 10: Repeals AS 37.13.145(e) and (f). These
sections prohibited appropriations from the earnings
reserve account to the general fund that exceed funds
available for appropriation. This language was moved
to AS 37.13.140 under sections two and three of the
bill by the legal drafter.
Section 11: Effective date of July 1, 2023.
12:48:21 PM
TOM KLAAMEYER, President, National Education Association of
Alaska, began invited testimony. He said the pandemic
exacerbated existing problems in Alaska's education system;
annual risk of pink slips due to state budget fights; class
sizes, and essential student services, such as counselors. He
reported that, according to a Newsweek article, 55 percent of
educators are considering leaving the profession sooner due to
the effects of the pandemic. He said that, in Alaska, turnover
is driven by several factors: the worst retirement in the
country; annual risks of pink slips, flat funding, and rising
class sizes. He stated that he is excited about the impact HB
259 would have on schools, as it seeks to resolve the state's
fiscal crisis. He said recent analysis done by the Economic
Policy Institute showed that, since the pandemic began, the
state's public education workforce went down by 17.5 percent,
and that, since 2008, the same workforce has fallen by 20
percent.
12:54:40 PM
REPRESENTATIVE PRAX asked about teachers not in social security
system, how that happened, and whether it can be undone.
MR. KLAAMEYER answered that the decision was made in 1951 when
retirement was considered adequate, and they felt they didn't
need social security. He explained that a school board could
authorize a vote to opt back in, or it could occur via statewide
vote, which requires approval of the governor. He stated that
there is no definitive answer currently.
12:56:53 PM
LISA SKILES PARADY, PhD, Executive Director, Alaska Council of
School Administrators, began invited testimony. She emphasized
the state of crisis and the critical need to provide predictable
reliable revenue for schools, per the proposed legislation.
Early notification of funding is critical to allow districts to
plan accordingly with more certainty. She concluded by
referencing Dr. Weiss, who indicated that her district had the
greatest education staff turnover and recruitment crisis in
history. She indicated that the problem is worse in Alaska
because of its reliance on recruitment from the Lower 48, which
is also experiencing workforce shortage. Dr. Parady cited a
study on increased education spending and the implications over
20 states. She said she is encouraged by the committee's
consideration of HB 259.
1:05:24 PM
REPRESENTATIVE PRAX agreed that everyone wants to see stability.
He asked what the incentive is to consider new ideas, like
incorporating the Internet, if the focus is on guaranteed
funding.
DR. PARADY said that the Internet is also an area of
instability, as most outer reaching rural areas still lack
Internet, and encouraged considering the equity involved. She
said that no increase in the base student allocation (BSA) and
the lack of inflation proofing put the state in a difficult
position.
1:09:20 PM
REPRESENTATIVE JOSEPHSON commented that adequate funding is not
consistent with having new ideas.
1:09:57 PM
The committee took an at-ease from 1:09 p.m. to 1:11 p.m.
1:11:12 PM
LON GARRISON, Executive Director, Association of Alaska School
Boards, read the written testimony from the Association of
Alaska School Boards [included in committee packet], which read
as follows:
The Association of Alaska School Boards is in support
of HB 259. AASB's Delegate Assembly has several long-
standing resolutions supporting the elements of this
legislation. These include:
• Belief Statement #B.7 EDUCATIONAL PROGRAMS AND
FUNDING AS TOP PRIORITY,
• Resolution #2.1 SUSTAINED, RELIABLE AND ADEQUATE
STATE FISCAL PLAN AND EDUCATIONAL FUNDING FOR ALASKA'S
STUDENTS THROUGH A NON-VOLATILE FUNDING SOURCE
• Resolution #2.2 URGING EARLY, ADEQUATE, EQUITABLE,
AND PREDICTABLE FUNDING OF PUBLIC EDUCATION
• Resolution #2.14 PUPIL TRANSPORTATION
• Resolution #2.23 FUNDING FOR SCHOOLS BY ESTABLISHING
THE BASE STUDENT ALLOCATION IN ADVANCE
• Resolution #2.50 INFLATION-PROOFED BASE STUDENT
ALLOCATION (BSA) INVESTMENTS
Each year school board members and education advocates
plead for education funding. And you routinely remind
yourselves and the public of your constitutional
responsibility contained in Alaska's constitution.
Article 7, Section 1 requires your support and funding
of a public school system. And you have never failed
to fund education, however, the Base Student
Allocation has not been increased from the current
$5,930 since FY 17. Six years with no increase seems
disingenuous to expect constant improvement in
instruction and increasing standardized test scores.
Utilities, supplies, transportation, fuel, salaries,
maintenance, freight, food, instructional materials,
communications, Internet, and a myriad of other
supplies and services necessary for operating a school
system have all increased. It seems as if the cost for
everything has increased. About the only thing that
hasn't increased is the BSA. The proposed new language
in HB 259 has provisions that address those times when
the formula draw does not meet the BSA and also when
the formula draw goes beyond the BSA need. This seems
to be a responsible solution.
The proposed language in HB 259 would remove education
from competition with all other appropriations and
fulfill the responsibility of Article 7, Section 1 of
Alaska's Constitution. The legislature could then
concentrate on the remainder of other services that
provide for Alaska's citizens and make our state such
a wonderful place to live and raise families.
HB 259 directly addresses several recommendations of
the Legislative Fiscal Work Group. Creating a workable
and reasonable solution to funding the PFD will remove
that ongoing debate and allow the legislature to focus
on public policy affecting all Alaskans. Additionally,
it would provide that stable funding source for
education and allow districts to concentrate on
educational innovation to improve student outcomes
rather than continually reducing programs due to
erosion of the buying power of a flat funded Base
Student Allocation.
AASB encourages your support of HB 259 as a way of
further support Alaska's public school system and
Alaska's future through the education of its young
people.
REPRESENTATIVE JOSEPHSON announced that HB 259 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 259 Fiscal Note, OMB.pdf |
HEDC 2/4/2022 8:00:00 AM HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259 Sponsor Statement v. A.pdf |
HEDC 2/4/2022 8:00:00 AM HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259 Sectional Analysis v. A, 2.14.22.pdf |
HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259 Letters of Support, 2.14.22.pdf |
HW&M 2/15/2022 11:30:00 AM |
HB 259 |
| ACT Presentation, the costs of child abuse and neglect, 2.15.22.pdf |
HW&M 2/15/2022 11:30:00 AM |
|
| Alaska Kids Count Policy Solutions 2020.pdf |
HW&M 2/15/2022 11:30:00 AM |
|
| Economic Cost of Child Abuse 2019.pdf |
HW&M 2/15/2022 11:30:00 AM |
|
| HB 259 Presentation, 2.15.22.pdf |
HW&M 2/15/2022 11:30:00 AM HW&M 2/22/2022 11:30:00 AM |
HB 259 |
| HB 259 Letters of Opposition, 2.14.22.pdf |
HW&M 2/15/2022 11:30:00 AM |
HB 259 |
| OMB Health Care Costs Presentation, Corrected, 2.15.22.pdf |
HW&M 2/15/2022 11:30:00 AM |