Legislature(2023 - 2024)DAVIS 106
03/06/2024 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| HB266 | |
| HJR9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 110 | TELECONFERENCED | |
| *+ | HB 266 | TELECONFERENCED | |
| += | HJR 9 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 266-PERMANENT FUND DIVIDEND; ROYALTIES
6:20:26 PM
CHAIR CARPENTER announced that the next order of business would
be HOUSE BILL NO. 266, "An Act relating to the Alaska permanent
fund; relating to dividends for state residents; relating to the
use of certain state income; relating to contributions from
permanent fund dividends to the general and permanent funds; and
providing for an effective date."
6:20:36 PM
The committee took an at-ease from `6:20 p.m. to 6:23 p.m.
6:23:17 PM
REPRESENTATIVE ASHLEY CARRICK, Alaska State Legislature, as
prime sponsor, introduced HB 266 as an alternative and
sustainable dividend model. She paraphrased from the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
Alaska has long suffered from a volatile and uncertain
fiscal situation. Despite the efforts of many current
and previous members of the Alaska Legislature, these
issues persist. Resolving these longstanding fiscal
issues and preserving Alaska's economic future is a
top priority. The resolution of this perennial issue
will impact Alaska's current and future generations.
In 2018, the legislature took a decisive step toward
creating the components of a fiscal plan by passing SB
26, which established the mechanism to draw money from
the Permanent Fund. This stabilized our revenue stream
and helped fund government services. Since then,
earnings from the Permanent Fund now account for most
of our state's revenue. Despite its passage, SB 26 was
unfortunately incomplete, as it left us with
conflicting statutes relating to the Permanent Fund
and Permanent Fund Dividend (PFD) program. Since then,
the Legislature has continued to be deadlocked in
prolonged budget battles over the size of the PFD as
well as the amount to draw annually to balance our
state budget.
HB266 would provide a strong stabilizing mechanism for
our fiscal situation, allowing Alaskans and their
government to better resolve our persistent fiscal
issues by first resolving the conflicting statutes
surrounding the Permanent Fund and annual PFD
distributions. This bill designates where the money
for the dividend program comes from. More
specifically, this bill would decouple the dividend
from the Permanent Fund, instead designating all
revenue from royalties on mineral leases that is not
statutorily designated, or constitutionally dedicated
for other purposes toward annual dividend payments.
This money would then be utilized for yearly
dividends. This not only gives Alaskans a direct stake
in responsible resource development for our state, it
also reduces our reliance on the volatile revenue
stream from resource development by instead having its
resource revenue go directly into Alaskans pockets.
Different versions of this dividend reform concept
have been introduced as legislation over the years,
most recently as HB 202 in 2021. Additionally, this
bill adds the concept from HB 45 and gives Alaskans
the option to donate their dividend to the general
fund or the permanent fund if they choose.
Alaska is at a crossroads. We need to fix our
persistent fiscal issues and stop kicking the can down
the road. I hope you will join me in taking a decisive
step in the right direction toward resolving our
fiscal issues by supporting HB 266.
6:25:25 PM
STUART RELAY, Staff, Representative Ashley Carrick, Alaska State
Legislature, on behalf of Representative Carrick, prime sponsor,
paraphrased from the sectional analysis for HB 266 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1. AS 37.13.140(a)
Removes language relating to the income available for
the distribution of Permanent Fund Dividends [PFDs].
Section 2. AS 37.13.145(c)
Makes conforming changes due to the repeal of AS
37.13.145(b) in section nine and updates language to
conform with the decision in Wielechowski v. State.
Section 3. AS 37.13.145(d)
Makes conforming changes due to the repeal of AS
37.13.145(b) in section nine and updates language to
conform with the decision in Wielechowski v. State.
Section 4. AS 37.13.145(e)
Reaffirms the prohibition on overdrawing the percent
of market value (POMV) draw on the Permanent Fund.
This is necessary due to the repeal of AS 37.13.145(f)
in section nine.
Section 5. AS 43.23.025(a)
Makes conforming changes as a result of sections one
and seven.
Section 6. AS 43.23.028(a)
Makes conforming changes as a result of section one.
Section 7. AS 43.23.045
Adds a new subsection (f) to designate 69% of all
mineral lease rentals, royalties, royalty sale
proceeds, federal mineral revenue sharing payments,
and bonuses by the state during the fiscal year for
the distribution of dividends.
Section 8. AS 43.23
Adds a new section with the following subsections. AS
43.23.135(a) requires the electronic PFD application
to allow Alaskans to donate their PFD in 25 dollar
increments to the general fund or the permanent fund
if they so choose. It allows increments to be between
25 dollars and the entire value of the PFD payment. It
also requires that applicants be notified that seven
percent of the value of the contributions to the
general or permanent fund under this section will be
used for the administrative costs of implementing this
section and that money from the dividend fund will not
be used for that purpose. AS 43.23.135(b) prohibits
agencies that claim PFD's on behalf an individual
under AS 43.23.015(e) to make contributions from that
individual's PFD to the general or permanent funds as
discussed in subsection (a). AS 43.23.135(c) specifies
that the option to donate a portion of your PFD under
this section is different than the Pick.Click.Give
option and shall be in a different section of the
electronic PFD application.
Section 9.
Repeals AS 37.13.145(b) and AS 37.13.145(f).
Section 10.
Effective Date This bill takes effect on July 1, 2024.
6:28:38 PM
REPRESENTATIVE CARRICK began a PowerPoint presentation of HB 266
titled "An Alternative and Sustainable Dividend HB 266" [hard
copy included in the committee packet]. She paraphrased from
slide 2, "WHO OWNS ALASKA'S RESOURCES?", which read as follows
[original punctuation provided]:
? Alaskas subsurface mineral rights are owned by
Alaskans collectively, not by Alaskans individually.
? From Governor Hammond:
? I believed the best, perhaps the only, way to
meet our constitutional mandate to manage our
natural resources for the maximum benefit of all
the people was to grant each citizen an ownership
share in Alaska's resource wealth to be used as
they, not the government, felt was for their
maximum benefit*."
? The Dividend is Alaskans individual share of our
collective revenues from our resource development.
REPRESENTATIVE CARRICK addressed slide 3, "THE CURRENT DIVIDEND
PROGRAM," which read as follows [original punctuation provided]:
? The current 1982 statutory formula, and all proposed
POMV formulas, are based off the performance of the
permanent fund itself rather than the direct
performance of resource development.
REPRESENTATIVE CARRICK explained that the graphs on slide 3
demonstrate the differentiation between the size of the
permanent fund dividend (lower graph) and petroleum revenue
including royalties (upper graph). She pointed out the long-
time volatility in the state's resource revenue versus the long-
time stability in the state's permanent fund. She noted that
while the dividend amount has fluctuated, an overall stable base
threshold has been maintained since the late 1970s.
REPRESENTATIVE CARRICK displayed slide 4, "OUR CURRENT FISCAL
SITUATION." She said the graph on the left shows the size of
Alaska's budgets since fiscal year 1981 (FY 81) and the graph on
the right shows the amount of money withdrawn from state savings
accounts since FY 14. Totaling over $19 billion, these
withdrawals have brought the state's savings accounts to
dangerously low levels, she warned, and action needs to be taken
to have a more stable fiscal situation.
6:31:24 PM
MR. RELAY spoke to slide 5, "SPECIFICS OF THE BILL," which read
as follows [original punctuation provided]:
? HB 266 gives Alaskans a direct stake in our resource
development while reducing budgetary volatility.
? It repeals the unsustainable 1982 dividend formula
and replaces it with a formula that designates all
royalty revenue not already constitutionally dedicated
or statutorily designated to the dividend
? This decouples more volatile revenue from our
budgeting process allowing for greater stability in
annual budgeting.
? Additionally, it allows Alaskans the ability to
contribute portions of their dividend to the general
fund or to the permanent fund if they choose.
? Allows for potentially larger annual dividend
payments.
MR. RELAY recalled that a bill similar to HB 266, House Bill 202
introduced in 2021 by now-Senator Merrick, designated only 30
percent of royalties. He posited that since HB 266 ties the
dividend directly to resource development, Alaskans could
possibly receive higher dividends with increased development,
providing an incentive to develop additional resources to ensure
a higher dividend payout.
6:33:55 PM
REPRESENTATIVE CARRICK explained that the chart on slide 6,
"PROJECTED ROYALTY DIVIDEND SIZE," shows the fiscal model put
together by the Legislative Finance Division for HB 266. She
related that per this fiscal model, the FY 25 dividend would be
$1,822, while the projected 75/25 POMV dividend for FY 25 is
just over $1,300. With this model, she added, there would be a
budget surplus through FY 28.
REPRESENTATIVE CARRICK specified that the graph on slide 7,
"PROJECTED BUDGET AND REVENUE OUTLOOK," prepared by the
Legislative Finance Division, looks at the revenue impact of the
dividend formula under HB 266. The bill itself is revenue
neutral, it doesn't increase royalty rates, oil and gas taxes,
or draws on the permanent fund or any other form of state
revenue. This model constitutes a budget surplus through FY 28,
she reiterated, which gives the legislature additional time to
address questions about state revenue and diversifying the
state's economy.
REPRESENTATIVE CARRICK summarized her presentation with slide 8,
WHY IS HB 266 IMPORTANT?" She said a benefit of HB 266 is that
it would tie the dividend formula to the direct performance of
resource development rather than the performance of the fund
itself, returning the dividend to its original intended purpose
of compensating Alaskans for their subsurface rights. The bill
would decouple volatile state revenue from the annual budget
process, she said, allowing the state to have a more predictable
budget cycle, a fiscally responsible dividend, and budget
surpluses through FY 28. She reiterated that the proposed
formula incentivizes greater resource development to satisfy
Alaskans' dividend needs. Lastly, she continued, the bill
incentivizes potentially a more robust tax structure or
conversation about natural resource development projects and tax
structure to meet Alaskans' dividend needs. The bill doesn't
specifically increase royalty rates or draw on permanent fund or
on any other sources of revenue, rather it provides a new
mechanism and new formula for the dividend.
6:37:02 PM
CHAIR CARPENTER said he appreciates the sponsor's outside-the-
box thinking and different approach than other bills the
committee has seen. He noted Governor Hammond's quote and
inquired about the governor's thoughts on the purpose of the
dividend itself.
REPRESENTATIVE CARRICK offered her understanding that the
original purpose of the dividend from Governor Hammond's
perspective was to help provide some stability for individual
Alaskans, compensate for subsurface rights, and make available a
program that would provide for Alaskans into the future.
MR. RELAY stated that the quote is from Governor Hammond's book
Diapering the Devil in which the governor discusses that there
is a component of the dividend as described by Representative
Carrick as well as a component of the dividend creating a
certain level of protection for the fund itself with Alaskans.
6:39:25 PM
REPRESENTATIVE MCCABE agreed and added that Governor Hammond's
idea was that should the legislature try to spend the corpus,
the permanent fund itself, Alaskans would rise in anger to stop
the stealing of their dividends. He maintained that while the
idea has merit, it isn't working well given the legislature's
actions over the last eight years. He said he likes HB 266 and
the idea of tying the permanent fund dividend to resource
development because maybe then the state's resources would be
developed as per the state's constitution.
REPRESENTATIVE CARRICK concurred that resource development would
be a consequence of HB 266 because Alaskans would have a direct
stake in promoting natural resource development. She allowed
she will get "dinged" by her constituents for pushing this
forward, but said she thinks it is a worthwhile conversation
along with conversation within the legislature about how to
allow industries to work and develop in Alaska.
6:41:51 PM
REPRESENTATIVE GROH stated that the permanent fund dividend has
many purposes and has achieved many good things, but now the
original formula isn't stable. He asked whether Representative
Carrick has contemplated a royalty trust where Alaskans would
each own individual shares of the state's interest in an oil
field.
REPRESENTATIVE CARRICK replied she hasn't thought about that
concept but thinks it is intriguing and worth looking at.
REPRESENTATIVE GROH suggested that it would be useful to provide
a precisely stated statement of how 69 percent was chosen.
REPRESENTATIVE CARRICK responded that under current statute 31
percent [of royalty revenue] is designated general funds. The
previous iteration of HB 266 only took a portion of the rest of
the undesignated general fund (UGF) to provide for a new
dividend formula. She said the dividend is critically important
to Alaskans and because oil revenue is volatile and therefore
revenue from royalties is volatile, her perspective for HB 266
was to take as much as is possible to take that isn't already
statutorily designated for other purposes.
MR. RELAY added that currently 25 percent of all royalty revenue
is constitutionally dedicated to the permanent fund and 6
percent is statutorily designated to [he believes] education, so
[HB 266] would be all other royalty revenue.
6:46:41 PM
REPRESENTATIVE GRAY asked what the next dividend would be if
royalties were changed from $5 per barrel to $8 per barrel.
MR. RELAY answered that that would be about a 30 percent
increase so it would be roughly a dividend of $2,358.60.
REPRESENTATIVE GRAY inquired about why the Pick.Click.Give
provision was included.
REPRESENTATIVE CARRICK replied that she co-sponsored another
legislator's bill about Pick.Click.Give to the state government.
She said she thought it was a concept that could fit into a
dividend bill as an option for how Alaskans could choose to use
their dividends.
6:48:30 PM
REPRESENTATIVE GROH noted HB 266 is about royalties and asked
whether it is accurate to say that royalties are set as a matter
of contract between the state and oil producers and not a matter
of taxes that the legislature could change.
REPRESENTATIVE CARRICK confirmed that that is her understanding
as well.
6:49:28 PM
CHAIR CARPENTER drew attention to Section 7 which states, "(f)
Each fiscal year, the legislature may appropriate to the
dividend fund an amount equal to 69 percent of all mineral lease
rentals, royalties, royalty sale proceeds, federal mineral
revenue sharing payments, and bonuses received by the state
during that fiscal year." He questioned whether, as drafted,
the legislature would be obligated to make the appropriation
from those sources of revenue. He asked whether it would be
fair to say that a formula is being set up by which to define a
sum of money and then the appropriation power of the legislature
would decide which account to pay it from.
REPRESENTATIVE CARRICK responded she would get back to the
committee but that typically when Legislative Legal Services is
asked to draft a dividend formula bill the word "may" is used
because that is what has been used in the past. She
acknowledged that her personal intent would not be to offer an
option to the legislature, so she would be comfortable with
changing that.
CHAIR CARPENTER offered his understanding that the sponsor's
intent is to ensure that the dollars coming in from this list of
royalties and such would go to the dividend payment as opposed
to any other source of revenue from which the state could make
appropriations.
REPRESENTATIVE CARRICK confirmed that that is her intent.
6:51:44 PM
REPRESENTATIVE MCCABE asked whether the list of sources in
Section 7 (f) would include the lease payments that certain
mines are currently paying to the Mental Health Trust for the
lands that they're on.
REPRESENTATIVE CARRICK answered that she doesn't know and will
get back to the committee with an answer.
6:53:05 PM
CHAIR CARPENTER announced HB 266 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB110CS(WAM)-DOR-PFD-3-1-24.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 110 |
| HB110CS(WAM)-DOR-APFC-01-10-24.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 110 |
| HB 266.Version B.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266.SponsorStatement.Version B.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266.SectionalAnalysis.VersionB.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266 Backup.LFD Fiscal Modeling 2024.03.02..pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266 House Ways and Means Presentation.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266-DOR-PFD-3-1-24 Fiscal Note.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HB 266-DOR-APFC-3-1-24 Fiscal Note.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 266 |
| HJR009A.PDF |
HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| HJR 9 sponsor statement.pdf |
HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| HJR 9 sectional analysis.pdf |
HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| 2020-01-APFC-Resolution-POMV-Support.pdf |
HW&M 3/11/2023 9:00:00 AM HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| PF_TwoAccountgraphic.pdf |
HW&M 3/11/2023 9:00:00 AM HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| PF_singleaccount_graphic.pdf |
HW&M 3/11/2023 9:00:00 AM HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| 2003-05-APFC-Resolution-POMV.pdf |
HW&M 3/11/2023 9:00:00 AM HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| HJR009-OOG-DOE-3-1-24 Fiscal Note.pdf |
HW&M 3/6/2024 6:00:00 PM |
HJR 9 |
| CSHB 110 v.H.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 110 |
| HB 110 - New CS v. H vs. v. R Summary of changes.pdf |
HW&M 3/6/2024 6:00:00 PM |
HB 110 |