Legislature(2019 - 2020)SENATE FINANCE 532
07/27/2019 11:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB2001 | |
| HB2003 | |
| HB2001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB2001 | TELECONFERENCED | |
| + | HB2001 | TELECONFERENCED | |
| + | HB2003 | TELECONFERENCED | |
CS FOR HOUSE BILL NO. 2001(FIN) am
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; making
supplemental appropriations, reappropriations, and
other appropriations; making appropriations for the
operating and capital expenses of the state's
integrated comprehensive mental health program; and
providing for an effective date."
3:10:38 PM
CAROLINE SCHULTZ, STAFF, SENATOR NATASHA VON IMHOF,
reviewed the bill that would make operating and
supplemental appropriations. She turned to page 12 of the
legislation and highlighted the total unrestricted general
fund (UGF) appropriation of approximately $249 million. The
bill contained most of the operating items vetoed by the
governor that had been included in the operating budget
passed by the legislature. The bill also contained one
supplemental operating budget item of $800,000 for senior
benefits. She suggested referring to Legislative Finance
Division (LFD) transaction detail packets (copy on file)
that included vetoed items restored by the bill. An
additional LFD transaction detail packet (copy on file)
showed vetoed items that were not restored by the
legislation.
3:11:36 PM
AT EASE
3:12:40 PM
RECONVENED
Ms. Schultz clarified she was referring to two separate LFD
packets that showed a list of appropriations and fund
sources. One of the packets included vetoed items that had
been added back in HB 2001 and the other included a list of
vetoed items that had not been restored in HB 2001.
Co-Chair Stedman requested an overview of the packets.
Ms. Schultz complied. She reviewed that the legislature had
passed a budget of $4.4 billion and $379 million UGF had
been vetoed by the governor. After the vetoes, the enacted
budget had totaled roughly $4.056 billion. The bill would
restore $283 million UGF of the vetoed items. She offered
to review some of the items.
Co-Chair Stedman asked for a highlight of the restored
items.
Ms. Schultz relayed that the LFD packets were posted on
BASIS and available to the public. She detailed that
packets were divided alphabetically by department,
beginning with the Department of Administration. She
highlighted vetoed items restored by the bill such as,
public broadcasting, public communications, and funding for
the Office of Public Advocacy (OPA). She detailed that the
bill included about $2 million for public broadcasting and
$87 million GF for OPA. Page 2 pertained to the Department
of Commerce, Community and Economic Development and
included restored funding for the Alaska Legal Services
Corporation in the amount of $450,000 UGF.
Ms. Schultz turned to page 3 showing a list of vetoed items
added back for the Department of Education and Early
Development (DEED). Funds were added back for early
learning coordination; the Alaska State Council on the
Arts; the Mt. Edgecumbe boarding school; the Alaska State
Libraries, Archives and Museums Online with Libraries and
Live Homework Help programs; and the Alaska Commission on
Postsecondary Education. Restored items for DEED totaled
$13.9 million.
3:16:26 PM
Mr. Ecklund highlighted a couple of the larger items the
bill would restore funding for including $110 million for
the University and $30 million to capitalize the Community
Assistance Fund. He relayed that funding for many
additional items would be restored by the legislation.
Co-Chair Stedman asked for more detail for the public. He
noted that the legislation was a House bill and had gone
through the process in the House before arriving in the
Senate Finance Committee.
Ms. Schultz turned to page 9 of the LFD report showing
vetoed funding that would be restored by the legislation.
Page 9 pertained to the Department of Health and Social
Services and represented a fairly large portion of funding,
particularly in the Senior Benefits Program of $20.7
million UGF. Page 10 included a $50 million appropriation
for the Medicaid program and $27 million for Adult
Preventative Dental. The items reflected some of the larger
vetoed items restored by the legislation.
Mr. Ecklund turned to the Department of Law on page 11 and
highlighted funds restored for prosecutors and attorneys.
The bill would restore funding for the Court System
therapeutic courts and would provide raises to keep court
employees on par with other state employees.
Ms. Schultz moved to restored items within the Department
of Natural Resources on page 13. She noted that some items
that had received considerable public testimony had been
added back, including funding for the Division of
Agriculture Northern Latitude Plant Material Center, the
Agriculture Revolving Loan Program, and programs supporting
the state's farming industry.
Ms. Schultz highlighted that $1 billion of the 5.25 percent
of market value (POMV) structured draw from the Permanent
Fund Earnings Reserve Account (ERA) had been vetoed by the
governor. The funds had been restored in the numbers
section of the legislation.
3:20:01 PM
Mr. Ecklund added that the bill would restore the transfer
of $5.4 billion from the ERA to the corpus of the Permanent
Fund. Additionally, it would restore $198 million for 25 to
50 percent of royalty deposits (that were not made in the
corpus of the Permanent Fund) for FY 18 and FY 19.
Co-Chair Stedman asked for verification that the transfer
of funds from the ERA to the corpus of the Permanent Fund
was internal. He noted that the legislature had the ability
to appropriate funds from the ERA with a simple majority
vote, but it could not access the corpus of the fund
without a public vote.
Mr. Ecklund agreed that the restoration was a transfer of
funds that occurred via appropriation.
Co-Chair Stedman clarified that the legislature was not
spending the funds. The action would place the funds in a
constitutionally protected "lock box."
3:21:14 PM
Senator Hoffman remarked that normally the Power Cost
Equalization (PCE) fund was funded in the operating budget.
He explained that initially the governor had included an
allocation in the operating budget to fund PCE with general
funds. He detailed that the legislature had disagreed with
the action. He asked for verification the issue had been
addressed in the capital budget.
Mr. Ecklund replied in the affirmative. He elaborated that
an affirmative supermajority vote (required for use of the
CBR) on the capital budget would take care of the issue.
Senator Hoffman asked for verification the action would
include the appropriations from the earnings of the PCE
fund.
Mr. Ecklund agreed.
3:22:16 PM
Senator Olson looked at the Village Public Safety Officer
(VPSO) program on page 14 of the LFD packet and asked about
vetoed funding that would be restored by the legislation.
Mr. Ecklund replied that $3 million had been vetoed from
the VPSO program. He detailed that if the funds were
restored, the money could be used to hire additional VPSOs.
Additionally, there was intent language in various budgets
to use some VPSO funds to increase VPSO pay in order to
recruit and retain officers.
Senator Olson asked if there was a change in the funding
source.
Mr. Ecklund answered that the proposal to use general funds
had not changed.
Senator Micciche commented that the bill combined SB 2001
with House bills. He asked why the legislation did not use
Senate numbers for the University. He remarked that the
House number [for the University] was approximately $65
million higher.
Co-Chair Stedman replied that it was the number in the
final operating budget passed by the legislature.
3:24:14 PM
Senator Micciche felt that combining the two [bills] meant
the legislature was reliving a past experience. He observed
there had obviously been negotiations with the House, but
he wondered if there had been negotiations with the
administration on the restorations. He did not support all
of the restorations. Additionally, he noted there were a
couple of items he believed were important that had been
left out of the restorations. He shared that the current
bill was not what he would support. He asked about the
logic of adding all of the items back in.
Co-Chair Stedman replied that the committee was in
possession of the House bill; the next step would be to
adopt a committee substitute (CS) that would combine both
House bills under consideration by the committee. At that
point, the committee would undergo the amendment process.
He clarified that the committee was not finished with its
action and was laying the two subject matters on the table
to have a discussion.
3:26:02 PM
AT EASE
3:27:30 PM
RECONVENED
Co-Chair Stedman relayed that a CS had been disseminated.
Co-Chair von Imhof MOVED to ADOPT the committee substitute
for CSSB 2001(FIN)am, Work Draft 31-LS1103\I
(Wallace/Caouette, 7/27/19).
Co-Chair Stedman OBJECTED for discussion.
Co-Chair Stedman asked Mr. Ecklund to explain changes in
the CS that combined HB 2001 and HB 2003.
Mr. Ecklund complied. He explained that the CS combined HB
2001 and HB 2003 with one exception. He detailed that on
the House floor an amendment had been adopted that would
add $5 million to the Alaska Marine Highway System (AMHS),
which was beyond the vetoed restoration. The AMHS
appropriation had been left out of the CS, which
constituted the only change from the two bills the
committee had just reviewed. [Note: see 3:31 p.m. for
correction.]
Co-Chair Stedman asked for clarification. He asked if the
$5 million for AMHS was included in the CS.
Mr. Ecklund replied in the negative. He relayed it was the
only change from the two bills previously described for the
committee. He reiterated his previous explanation. [Note:
see 3:31 p.m. for correction.]
3:29:36 PM
AT EASE
3:31:18 PM
RECONVENED
Co-Chair Stedman stated that in the haste of assembling
some of the documents there had been some confusion. He
asked Mr. Ecklund to restate his previous testimony related
to a $5 million appropriation for AMHS that had been added
in the House. He remarked it was the only change in the
legislation; all other items had been included in the
operating budget.
Mr. Ecklund corrected his previous testimony related to the
appropriation. He explained there had been a $5 million
appropriation added on the House floor that exceeded a veto
restoration. He clarified that the appropriation had been
maintained in the CS. He elaborated that it had required
adjusting the dividend appropriation amount by $5 million.
Co-Chair Stedman asked why the adjustment was necessary.
Mr. Ecklund replied the adjustment was necessary in order
to minimize withdrawal from savings.
Co-Chair Stedman added the adjustment was also necessary in
order to have a balanced budget.
Mr. Ecklund agreed. He noted that the proposed funding
source for HB 2002 was CBR direct.
3:33:03 PM
Senator Wilson requested a brief overview of page 17,
Section 8, which was important for his constituents. He was
interested in the total amount and fund sources related to
the Permanent Fund.
Mr. Ecklund asked if Senator Wilson was concerned about the
entire section or specifically about the dividend
appropriations in the section.
Senator Wilson answered that he was interested in an
overview of the fund sources for the PFD and in the amount
each Alaskan would receive.
Mr. Ecklund turned to page 17 and noted the first few
appropriations were 25 percent royalty paybacks and did not
impact the current dividend. The appropriation amounts for
the PFD were $172,200,000 from the SBR and $896,470,000
from the General Fund, which would result in a PFD of
approximately $1,600.
Co-Chair Stedman WITHDREW his OBJECTION. There being NO
further OBJECTION, Work Draft 31-LS1103\I was ADOPTED.
3:35:48 PM
AT EASE
3:43:31 PM
RECONVENED
Co-Chair Stedman communicated that the adopted CS included
a PFD of roughly $1,600. He noted an amendment sponsored by
Senator Shower was being disseminated.
3:44:41 PM
Senator Shower MOVED to ADOPT Conceptual Amendment 1 (copy
on file):
Insert a new subsection in Section 8, pages 17 and 18
of this bill to read:
The amount necessary, when added to the appropriations
made in (f) and (g) of this section to fund the total
amount authorized under AS 37.13.14S(b) for transfer
by the Alaska Permanent Fund Corporation on June 30,
2019, estimated to be $875,330,000, is appropriated
from the earnings reserve account (AS 37.13.145) to
the dividend fund (As 43.23.04S(a)) for the payment of
permanent fund dividends and for administrative and
associated costs for the fiscal year ending June 30,
2020.
Co-Chair Stedman OBJECTED for discussion.
Co-Chair Stedman acknowledged that the following committee
members requested to be added as cosponsors on Conceptual
Amendment 1: Senator Olson, Senator Wilson, Senator
Micciche, and Senator Wielechowski.
3:46:04 PM
Co-Chair Stedman requested an explanation of the amendment.
Senator Shower explained that Conceptual Amendment 1 would
take an extra draw from the ERA to increase the dividend to
the statutory amount of roughly $3,000.
Co-Chair Stedman rephrased that the amendment would result
in a PFD of $3,000 and would increase the ERA draw to $875
million, which would exceed the 5.25 percent statutory
draw. He noted there were ample funds in the ERA of
approximately $18 billion to $19 billion.
3:47:08 PM
AT EASE
3:47:47 PM
RECONVENED
Senator Wilson vocalized his support for a full dividend.
He saw the proposal as a way to have a compromise on many
of the issues the legislature had been addressing during
its second special session. He hoped they could get things
back on track for the state and to help change some of the
credit ratings. He believed the job market had been up in
the past few months. He stated his understanding that if
the legislature passed an appropriation bill with a full
dividend, the bill would supersede current law, meaning SB
26 would not be violated.
Co-Chair Stedman clarified that the ultimate ruling
document was the state constitution. There were statutes
the legislature could pass, modify, or change with a
majority vote and the governor's signature. When the
legislature acted on an appropriation bill that may be
contradictory to statute, it had the authority to override
statute; however, changing the constitution took a vote of
the people. The 5.25 percent POMV draw rate from the ERA
was currently in statute. He remarked that some legislators
hoped the rate would eventually be in the constitution,
which would make it impossible to exceed the draw rate
without a vote of the people. He continued that it was in
the legislature's authority to pass the amendment in the
legislation legally. He thought there was confusion in the
public about the pecking order of the constitution and
statute. He clarified that the constitution ruled. He
stated that the amendment was legitimate and germane.
3:50:47 PM
Senator Hoffman shared that he had been in several
discussions that were germane to the issue. He detailed
that SB 26 limited the draw from the ERA to the General
Fund to 5.25 percent. The amendment did not ask that the
money go from the ERA to the General Fund. He noted the
amendment bypassed the General Fund and directed the money
to the PFD source. He believed the amendment complied with
SB 26.
Senator Hoffman continued that the committee had discussed
the issue and it had been verified by David Teal
[Legislative Finance Division director].
Co-Chair Stedman believed there was legal interest in the
subject matter. He observed it was less than clear cut, but
there was no ambiguity that the amendment was germane. He
noted the issue highlighted by Senator Hoffman was yet to
be thoroughly defined. He referenced the existence of the
Wielechowski v. State case [related to the Permanent Fund].
He stated that the legislature had the appropriating power
of the dividend.
3:52:35 PM
Co-Chair von Imhof opposed the amendment. She found it
fascinating that people looked for ways to rationalize
their behavior. She remarked on ways people rationalized
getting around state law. She underscored that math was
math. She noted there was $18 billion in the ERA. She
stressed that the legislature had set up a 5.25 percent
draw to take from the ERA for any purpose once a year. She
remarked that a 5.25 percent draw had been a stretch. She
emphasized that taking any additional money, regardless of
the time of year, violated SB 26 and the recommendations by
experts (including Callan Associates) that it would erode
the Permanent Fund Dividend over time by taking extra
draws. She reiterated her opposition to the amendment. She
stated the CS was a balance and compromise. She highlighted
that a $1,600 PFD was larger than the average in the last
40 years. The legislature had left $91 million in the
governor's vetoes intact. She supported the bill in its
current form. She reiterated that the amendment would erode
the value of the Permanent Fund by $875 million.
3:54:38 PM
Senator Micciche supported the amendment. He understood the
math and could not disagree with it. He noted it was
another case where it was necessary to choose which statute
to break. His district had been clear about its desire for
a full dividend. He believed the dividend was unsustainable
and he supported additional cuts to try to average the
cost. He wanted a durable solution in perpetuity. He did
not want to make a quick reduction at present and to have
the people of Alaska decide they had been shortchanged. He
believed the amendment rebuilt some of the angst from
reduced dividends in the past and allowed the legislature
to sit down in the coming months to discuss the real math
and possibility of reducing the budget, what a dividend
could look like, and how Alaskans could agree with their
legislators on a fair shake for their PFD.
Senator Micciche noted the importance of the topic
discussed by Senator Wilson. He remarked that the
legislature had already been down the "this road." He
believed they were back considering everything on the table
and trying to figure out how to move forward. He thought it
would take a compromise. He stressed that the capital
budget and federal matching funds were at risk. He believed
the legislature needed to work with the governor to fund
necessary services, a PFD, and to bring in important
federal dollars for capital projects. He reiterated his
support for the amendment. He thought it was important to
keep the issue on the table in order to arrive at a true
compromise recognizing all caucuses and regions in the
state.
3:57:08 PM
Senator Wilson supported the amendment. He thought that if
numbers "of our count" really mattered, the numbers he had
drafted from LFD showed that the governor's vetoes would
leave enough funds in the CBR for another year or so, the
ERA draw would be lower, and there would be a larger
balance in the budget reserve account. He understood that
some people felt the budgets were social contracts - he did
not necessarily agree or disagree. The legislature wanted
to fund certain items within the appropriation. He stated
that if the legislature wanted more sustainable, long-term
growth, it would allow the accounts to grow by accepting
the governor's vetoes. He noted that was not the case. The
legislature felt that some of the services were valuable to
the people. He was committed to fight for the service until
it was possible to educate people on the cash flows of the
state. He supported the amendment, but agreed it was
necessary to fix the problem of taking from reserves in the
future. He stated if legislators only cared about the
numbers, they would have a different conversation about the
other contents in the CS.
3:58:42 PM
Senator Bishop opposed the amendment. He shared he did not
intend to talk about numbers but would talk about people.
He considered the amendment and the amount taken from the
ERA. He stressed that the legislature had talked for five
years about how to proceed and it had come a long way with
SB 26, albeit not all the way. He underscored that $12
billion had been spent along the way. He stated they were
still "jawboning" and were about to spend close to $1
billion out of the $18 billion [in the ERA]. He pointed out
that real people were losing their jobs and homes. He
reiterated his opposition to the amendment.
4:00:07 PM
Senator Olson supported the amendment. He thanked the
sponsor of the amendment and Co-Chair Stedman for allowing
the sentiment of the collective constituents who were
looking at the legislature with a fair amount of disdain.
He believed the amendment would redeem the legislature in
the eyes of many constituents in terms of what legislators
had been sent to Juneau to do.
4:00:55 PM
Co-Chair Stedman noted that Senator Wielechowski was online
and had the opportunity to comment and vote on the
amendment.
Senator Wielechowski supported the amendment.
Co-Chair Stedman opposed the amendment. He was concerned
about the propensity to draw from savings. He detailed that
over $10 billion had been drawn from the CBR. He noted that
the last large pot of money was the ERA and it was too easy
to overdraw. He noted that regardless of what statutes said
or did not say, the investment performance could only
produce so much. He pointed out that inflation "is a thief
that robs us in the night." He cautioned that if they did
not keep track of performance and inflation and the
portfolio was overdrawn, it would erode the future value of
the fund for the decedents in perpetuity. He did not
believe it was worth it. He thought there had been a good
run with the oil boom in the last 30 to 40 years. He
believed it was important to leave the portfolio intact as
much as possible for their grandchildren's children.
Co-Chair Stedman did not want to overdraw the ERA because
it was too difficult to make the hard budget decisions
dealing with budget reductions and/or telling constituents
there was not enough money to run AMHS and pay a $3,000
PFD. He noted it was necessary to make choices and he chose
to default to the future generations of Alaska, with the
knowledge that the state's forefathers had done the same
when they established the Permanent Fund for future
generations.
Co-Chair Stedman MAINTAINED his OBJECTION to Conceptual
Amendment 1.
4:03:35 PM
A roll call vote was taken on the motion.
IN FAVOR: Micciche, Olson, Shower, Wielechowski, Wilson
OPPOSED: Hoffman, Bishop, von Imhof, Stedman
The MOTION to ADOPT Conceptual Amendment 1 PASSED (5/4).
There being NO further OBJECTION, it was so ordered.
Co-Chair Stedman relayed that the motion had been approved
and the PFD would be approximately $3,000 in the
legislation. He asked members if there were any additional
comments on the bill.
4:04:07 PM
Senator Micciche thanked Co-Chair Stedman for the clean
amendment process. He did not know what would happen on the
Senate floor. He believed there would be additional vetoes
[by the governor], which the legislature would have to deal
with later. He noted it was another process altogether. He
relayed that he did not support all of the veto
restorations in the bill. He also believed there were a
couple of items that had not been restored that he believed
were important to Alaskans. He was amenable to letting the
bill continue through the process.
Co-Chair Stedman asked Senator Wielechowski if he had any
comments on the bill.
Senator Wielechowski replied in the negative. He supported
passage of the legislation.
Co-Chair von Imhof MOVED to REPORT SCS CSHB 2001(FIN), as
amended, from committee. There being NO OBJECTION, it was
so ordered.
SCS CSHB 2001(FIN) was REPORTED out of committee with one
"do pass" recommendation, four "amend" recommendations, and
two "no recommendation" recommendations.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 072719 SB2001 Work Draft v.E Explanation.pdf |
SFIN 7/27/2019 11:00:00 AM |
SB2001 |
| SB 2001 work draft version E.pdf |
SFIN 7/27/2019 11:00:00 AM |
SB2001 |
| 072719 7 27 19 Short Fiscal Summary.pdf |
SFIN 7/27/2019 11:00:00 AM |
HB2001 |
| 072719 HB2001 Included TransDetail.pdf |
SFIN 7/27/2019 11:00:00 AM |
HB2001 |
| 072719 HB2001 Vetoes not restored TransDetail.pdf |
SFIN 7/27/2019 11:00:00 AM |
HB2001 |
| 072719 work draft version I HB2001.pdf |
SFIN 7/27/2019 11:00:00 AM |
HB2001 |
| HB 2001 Conceptual Amendment 1 - Shower.pdf |
SFIN 7/27/2019 11:00:00 AM |
HB2001 |