Legislature(2021 - 2022)DAVIS 106
08/23/2021 11:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB3004 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB3004 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB3004-APPROP: REVERSE OPERATING APPROP. VETOES
[Contains discussion of HB 3003.]
12:11:39 PM
CHAIR SPOHNHOLZ announced that the only order of business would
be HOUSE BILL NO. 3004, "An Act making appropriations for the
operating and loan program expenses of state government and for
certain programs; capitalizing funds; making capital
appropriations and supplemental appropriations; making
appropriations under art. IX, sec. 17(c), Constitution of the
State of Alaska, from the constitutional budget reserve fund;
and providing for an effective date."
12:12:28 PM
ALEXEI PAINTER, Director, Legislative Finance Division,
presented a PowerPoint titled "Update on Fiscal Summary,
Governor's Vetoes, and Reverse Sweep; Comparison of HB 3003 and
3004." He began his presentation with slide 4, "Short Fiscal
Summary - FY21/FY22 Budget," which displayed a summary of the
enacted budget after vetoes. He drew attention to line 7,
Agency Operations, which he said considers the effect of SB 55,
which shifted retirement funding from the Statewide Items line
to Agency Operations. He noted that the $100 million reduction
exists even after adding $73 million to the Agency Operations
undesignated general fund (UGF) under SB 55, and the Statewide
Items reduction is largely due to SB 55.
MR. PAINTER pointed out the Capital Budget on line 10, noting
that the full capital budget was not passed the prior year
because of the abbreviated legislative session due to the COVID-
19 pandemic; this year's capital budget is larger than recent
years due, in part, to the last abbreviated session as well as
additional projects. He then noted the governor's veto of all
but $8.5 million from the Permanent Fund dividend, which covers
administrative costs but not payment of the actual dividends.
MR. PAINTER concluded slide 4 with the note that there is a
surplus of $220.6 million before fund transfers, which total
$250 million from the American Rescue Plan Act of 2021 as well
as "some use" of the statutory budget reserve. After fund
transfers, he said, the surplus totals $536.6 million.
12:15:16 PM
REPRESENTATIVE STORY asked for information on the reduced
percent of market value (POMV) draw, as noted on line 3 of the
slide.
MR. PAINTER explained SB 26 established the first POMV draw, and
the first three years used a higher draw percentage of 5.25
percent, which decreased to 5 percent starting in FY 2022.
12:16:07 PM
MR. PAINTER presented slide 5, "Projected FY22 Fund Balances
With Reverse Sweep," which displayed a version of the fund
balance if a reserve sweep exists; he noted that there is
currently no reserve sweep. The constitutional budget reserve
(CBR) fund of -$536.6 million represents a deposit, he said, as
surpluses go into CBR; the CBR balance at the end of the year is
expected to be approximately $1 billion, with $330 million in
the statutory budget reserve fund, which represents vetoes by
the governor. The designated funds tracked in this report, he
said, are projected to total $1.675 billion at the end of FY
2022, assuming a reverse sweep.
12:17:13 PM
MR. PAINTER presented slide 6, "Projected FY22 Fund Balances -
Without Reverse Sweep," which displayed a version of the fund
balance if there is no reverse sweep, which is the current
situation. He said this version assumes that the only fund that
changes, resulting from how the sweep was conducted in FY 2020,
is the power cost equalization (PCE) endowment fund. There
would exist a larger balance in the CBR, a smaller balance in
the designated funds, and no starting balance in the other funds
undesignated reserves, because those amounts would be swept into
the CBR.
CHAIR SPOHNHOLZ asked whether the three-quarter vote threshold
would apply whether or not the reverse sweep exists.
MR. PAINTER replied in the affirmative.
12:18:33 PM
MR. PAINTER presented slide 8, "Summary of Governor's Vetoes."
There were $64.5 million in vetoes of legislative addition, of
which approximately $57 million is undesignated general fund
(UGF). He noted that some of the vetoes were for items funded
by the legislature at the statutory level, which were then
vetoed, such as community assistance. Partial veto of
legislative addition totals approximately $11.6 million, and was
largely comprised of vetoes to the Alaska Marine Highway System.
The category of veto to match governor's proposed reduction,
totaling approximately $38 million, is comprised of items cut
from the budget passed by the legislature and includes Medicaid
and the Alaska Legal Services Corporation. The vetoes of
funding from a difference source than proposed by the governor,
totaling approximately $1 million; this category is largely
comprised of the veto of funds to the Alaska Mental Health
Trust. The vetoes in the category of other operating items were
largely in the area of the permanent fund dividend (PFD); the
legislature had proposed a smaller amount than proposed by the
governor, who then vetoed all but $8.5 million. The governor
also vetoed approximately $2 million in legislative per diem, he
said. The public school trust fund, he said, had been over-
appropriated by the legislature, so the governor vetoed some of
the funds in order to be consistent with the statutory formula.
12:22:14 PM
REPRESENTATIVE JOSEPHSON sought to clarify whether Mr. Painter
had stated that the legislature "inadvertently overfunded" the
education appropriation.
MR. PAINTER explained that the governor vetoed funding from the
public school trust fund, which is a dedicated fund in the
statehood compact. The trust fund is currently an endowment
with a draw limited to a percentage of market value (POMV), and
the legislature inadvertently appropriated more than the limit.
The statute specifies that the POMV draw is to pay for the
education formula as well as management fees, he said, so
management fees were vetoed by the governor with the expectation
that the UGF would make up the difference in funding.
12:24:07 PM
REPRESENTATIVE STORY commented that many items and services that
were cut were in areas in which the legislature worked to
improve Alaskans' quality of life.
12:25:01 PM
MR. PAINTER resumed his explanation of slide 8 with the capital
projects category of vetoes, which totaled approximately $331
million. He noted the vetoed federal funds, which were from
DOT&PF's budget designated to project acceleration, which would
provide flexibility. He clarified that the veto doesn't
necessarily mean Alaska loses $220 million in federal funds, but
that DOT&PF may have less flexibility than they would have
without the veto.
CHAIR SPOHNHOLZ pointed out that details on all vetoed items was
available on slides 27-31. Services such as public
broadcasting, emergency response system, children's services,
community assistance, Medicaid, and behavioral health treatment
were legislative additions, she said, but were vetoed by the
governor.
12:28:33 PM
REPRESENTATIVE PRAX asked where to find the presentation.
12:28:58 PM
REPRESENTATIVE STORY inquired about the increased cost of
materials and flexibility in the face of the vetoes.
MR. PAINTER replied that he can't offer insight into the
governor's reasoning for any particular veto.
12:29:43 PM
MR. PAINTER presented slide 10, "CBR Sweep Mechanism," which
read as follows [original punctuation provided]:
The CBR sweep provision was established in Article IX,
Section 17 of the Alaska Constitution:
(d) Repayment requirement "If an appropriation is
made from the budget reserve fund, until the amount
appropriated is repaid, the amount of money in the
general fund available for appropriation at the end of
each succeeding fiscal year shall be deposited in the
budget reserve fund. The legislature shall implement
this subsection by law."
MR. PAINTER noted that the legislature currently owes the CBR
fund approximately $11 billion from appropriations from the fund
that have not been repaid. He then presented slide 11, titled
"Reverse Sweep," which read as follows [original punctuation
provided]:
? The "reverse sweep" is an appropriation from the CBR
that returns swept funds back to the original subfund
or account. The "reverse sweep" is an appropriation
under art. IX, sec. 17(c), and requires a 3/4 vote to
pass.
? The sweep is effective at the end of a fiscal year
(June 30) and the reverse sweep is effective on the
first day of the following fiscal year (July 1).
MR. PAINTER noted that the language doesn't actually reverse the
sweep from the CBR fund, only from the funds and accounts under
it.
12:32:08 PM
REPRESENTATIVE JOSEPHSON asked whether or not the funds in the
general CBR fund are swept.
MR. PAINTER replied that the general funds that are not part of
sub-funds are swept, and that sweep is typically not reversed.
REPRESENTATIVE JOSEPHSON hypothesized about an amendment to HB
3003 to spend general fund dollars, and he asked why the money
specified in the amendment shouldn't be deemed "swept and
unavailable."
MR. PAINTER explained that if general fund dollars are to be
spent in FY 2022, it's FY 2022 revenue into the fund that's
being spent. If there is a post-transfer surplus in the fund,
he said, it can be spent; however, FY 2021 dollars cannot be
spent without a three-quarters vote.
12:33:34 PM
MR. PAINTER advanced to slide 12, "State Implementing Sweep was
Found Unconstitutional," which read as follows [original
punctuation provided]:
? AS 37.10.420 was intended to implement the sweep.
? The Supreme Court in Hickel v. Cowper found this
statute unconstitutional in 1994.
? Since then, the executive branch has had to
implement the sweep without statutory guidance. The
list of sweepable funds has been driven by legal
interpretations of Hickel v. Cowper.
? The legislature could pass a new statute that
attempts to define which funds are sweepable, but
absent this or a court case the administration's
interpretation is operative.
CHAIR SPOHNHOLZ called on Ms. Wallace to provide further
explanation of the 1994 legal decision that found the statute
unconstitutional.
12:34:53 PM
MEGAN WALLACE, Director, Legislative Legal Services, Legislative
Affairs Agency, explained that discussion in the case centered
on article IX, section 17(b), which is the provision within the
CBR constitutional amendment that dictates when the legislature
can access the funds with a simple majority vote, as well as
defining what it means have an amount available for an
appropriation. The statutes passed by the legislature had
attempted to define the amounts; the court struck down the
legislature's definition. In another statute, she said, the
same definition was used; because the definitions were the same,
she said, subsection(b) was struck down by the Alaska Supreme
Court.
12:36:54 PM
MR. PAINTER presented slide 13, "How the Sweep Works," which
read as follows [original punctuation provided]:
? The Department of Administration's Division of
Finance (DOF) accountants calculate the sweep while
preparing the Annual Comprehensive Financial Report
(ACFR). The sweep represents unreserved, undesignated
fund balances of the general fund subfunds.
? DOF accountants calculate the sweep in September as
the ACFR is prepared yet the amount of the sweep is
posted in the financial records as of the end of the
fiscal year (June 30th).
After the ACFR is prepared (historically by the end
of October), the ACFR is audited by the legislative
auditor. The sweep amount is adjusted as necessary.
12:38:26 PM
MR. PAINTER progressed to slide 14, titled "Changes in
Interpretation for FY19 Sweep," which read as follows [original
punctuation provided]:
? Starting with the FY19 sweep, the administration
expanded the scope of the sweep to include additional
funds.
? Most significantly, the sweep was expanded to
include the Power Cost Equalization (PCE) Fund and the
Higher Education Investment Fund.
? While this added only a few new funds, it greatly
increased the affected balances: in FY20, those two
funds accounted for $1.4 billion out of the $1.5
billion swept to the CBR.
MR. PAINTER presented slide 15, "Impact of Litigation on Sweep
Interpretation," which read [original punctuation provided]:
? The Alaska Federation of Natives brought a lawsuit
against the administration challenging the
sweepability of the PCE Fund.
? On August 11, a Superior Court ruled in favor of the
plaintiffs, finding that PCE should not be subject to
the sweep because, although it was available for
appropriation, it was not part of the general fund.
? The Superior Court decision also indicates that
other funds that are statutorily established outside
the general fund should not be swept, although this is
not directly ordered.
? LFD is reviewing the sweepable funds list to
determine whether other funds should be reclassified,
although it is up to the administration to reclassify
them in the absence of further litigation.
Most notably, the Statutory Budget Reserve
likely should not be subject to the sweep under
this ruling based on statutory language that
places the fund as a "separate fund in the state
treasury" rather than in the general fund (see
footnote 77 of the decision). This fund has long
been considered sweepable.
The Higher Education Fund was established in
the general fund and would not be affected by
this ruling.
12:40:06 PM
CHAIR SPOHNHOLZ asked Ms. Wallace to discuss the sweep how much
discretion the administration has regarding what is sweepable,
as well as how the sweep has historically been defined.
12:40:49 PM
MS. WALLACE explained that the PCE fund had not been swept
during previous administrations; under the Dunleavy
Administration, however, former Attorney General Kevin Clarkson
determined the fund was sweepable. She pointed out that Hickel
v. Cowper, 874 P.2d 922 (1994), is the only Alaska Supreme Court
decision on the topic, so there is not much legal guidance to
make determinations about appropriations. The more recent
Anchorage Superior Court decision found that the PCE fund was
not part of the general fund, and the legislature has the
constitutional authority to create funds outside of the general
fund. The language specifically says that the legislature has
expressly created many funds and accounts in the general fund
for various purposes, she said, and noted several examples of
separate funds; the Anchorage Superior Court decision provided
further explanation regarding which funds are sweepable.
12:45:50 PM
CHAIR SPOHNHOLZ emphasized the importance of considering policy
and fiduciary responsibilities, and she noted that the Higher
Education Investment Fund (HEIF) is now sweepable. The failure
of the reverse sweep, she said, now means that funds in HEIF,
which have outperformed the CBR, are now swept into the CBR. In
2017, she said, the HEIF earned over 12 percent in interest,
while CBR earned approximately 1.83 percent; the sweep of HEIF
into CBR means the investment from the general fund in higher
education will be increased.
12:47:16 PM
REPRESENTATIVE EASTMAN asked whether management of CBR is at the
legislature's discretion, and whether there are any proposals to
improvement the management.
CHAIR SPOHNHOLZ replied that "everything" is at the
legislature's discretion.
12:47:44 PM
MR. PAINTER pointed out that there is a statute that governs the
management of CBR which states that when the balance of CBR is
needed within five years for deficit management, the goal is
preserving cash through conservative management. When there
exists a balanced budget or a surplus, he said, CBR can be
invested more aggressively.
CHAIR SPOHNHOLZ added that there had been details described by
Alaska Permanent Fund Corporation (APFC) Chief Executive Officer
(CEO) Angela Rodell explaining why the rules-based framework is
so important; it's known how much money is needed for both state
operations and dividend payments, so APFC is able to invest as
aggressively as possible while still meeting its obligations.
12:49:27 PM
REPRESENTATIVE JOSEPHSON asked how managers handle the "chaos"
of a reverse sweep with respect to investment funds.
MR. PAINTER reported that the administration was trying to
gradually transition the portfolio to match CBR, rather than
engaging in a mass sell-off which would result in a loss of
value, then transition back in the case of a reverse sweep.
REPRESENTATIVE JOSEPHSON expressed that such maneuvers can't be
"seamless."
CHAIR SPOHNHOLZ expressed that Mr. Painter just described some
of the potential consequences of such transitions.
12:50:59 PM
REPRESENTATIVE PRAX asked whether funds taken from CBR would
still be available for appropriation for other purposes.
CHAIR SPOHNHOLZ asked Representative Prax whether he was asking
whether the funds would be swept back into the higher education
fund from CBR in the case of a reverse sweep.
REPRESENTATIVE PRAX responded, "Correct."
CHAIR SPOHNHOLZ asked, "Would they be available for
appropriation?"
REPRESENTATIVE PRAX answered yes.
12:51:53 PM
MR. PAINTER deferred to Ms. Wallace
12:52:06 PM
MS. WALLACE explained that funds are available for appropriation
by the legislature once they've been reversed back into the
original account; any funds affected by the reverse sweep,
returning to the higher education fund from CBR, would remain
available for legislative appropriation out of the higher
education fund and would potentially be subject to a sweep in a
subsequent fiscal year.
12:53:24 PM
REPRESENTATIVE PRAX wondered whether the fact that the funds are
still be subject to appropriation could affect the investment
strategy of those funds.
CHAIR SPOHNHOLZ pointed out that, hypothetically, such a
situation could happen at any time. She said the point of
setting up the funds was to designate funding to a specific
purpose, and that having a longer time horizon for the use of
funds would allow for more aggressive investment. Conservative
investment would allow for more cash on hand, she said, thus
less wealth would be generated from the funds.
REPRESENTATIVE PRAX said in times of fiscal stress, designated
funds are exposed to a greater risk of appropriation to a
different use.
12:55:00 PM
REPRESENTATIVE STORY asked how to protect the Higher Education
Investment Fund.
MR. PAINTER replied that the fund was established by statute in
the general fund; if it were not, it would not be subject to the
sweep.
12:56:10 PM
MR. PAINTER resumed his presentation of slide 15, pointing out
that the Statutory Budget Reserve (SBR) is listed specifically
as separate from the general fund, which indicates that it
should not be swept, thought it has historically been considered
sweepable.
12:57:01 PM
REPRESENTATIVE JOSEPHSON asked whether the governor's response
could only be veto or litigation if the legislature chose to
spend the SBR, treating it as "unswept."
MR. PAINTER replied that litigation would be expected on that
point. He pointed out that there were $80 million in
appropriations from the SBR that were used to fund capital
projects, so if the governor decided not to reclassify the fund,
litigation could follow.
REPRESENTATIVE JOSEPHSON sought to verify that the governor had
decided to authorize the expenditure of $80 million.
MR. PAINTER responded that he believes those appropriations were
made as part of the budget under HB 69 but have not been
released.
REPRESENTATIVE JOSEPHSON concluded that it can't be known
whether the administration intends to spend that money or
declare that the funds are swept.
MR. PAINTER confirmed Representative Josephson's comment.
12:59:32 PM
MR. PAINTER turned to slide 16, "Impact of Sweep on the budget,"
which read as follows [original punctuation provided]:
? Based on the list of funds swept in FY20 by the
Division of Finance, the FY22 budget uses $367.4
million from sweepable funds. Subtracting the PCE fund
would reduce that to $321.2 million.
? Not all funds are impacted equally, however. LFD
breaks them into three categories:
1. Immediate Impact: No ongoing source of revenue
to support appropriations.
2. Partial Impact: Ongoing source of revenue that
is insufficient to support appropriations.
3. Minimal/No Impact: Ongoing source of revenue
fully covers appropriations.
1:00:53 PM
REPRESENTATIVE JOSEPHSON discussed the prevention account for
the Division of Spill Prevention and Response (SPAR) in the
Department of Environmental Conservation (DEC). He asked how to
handle the circumstance of a sweep of $12 million, leaving $9
million to operate.
MR. PAINTER deferred to the Office of Management & Budget (OMB),
and he expressed that in some cases, OMB would structure
appropriations to ensure ongoing revenue.
1:02:46 PM
MR. PAINTER resumed the presentation and reviewed a summary of
impacts by category: Immediate impact, immediate impact pending
interpretation, partial impact, and minimal to no impact. There
are more appropriations from the low impact categories, with
balances coming from the immediate impact categories.
CHAIR SPOHNHOLZ clarified that the permanent fund dividend (PFD)
this year was largely funded through SBR because of the failure
of the reverse sweep.
1:04:32 PM
MR. PAINTER detailed immediate impact on slide 18, "Immediate
Impact." He said the Higher Education Investment Fund is the
only one in the "Immediate Impact" category; since it's an
investment fund, the only ongoing revenue is investment
earnings, resulting in a $21 million shortfall. Similarly, he
said, if the SBR is swept, there would be an $80.7 million
shortfall in capital projects and school debt.
1:05:30 PM
REPRESENTATIVE STORY noted that more money was lost due to the
low CBR interest versus high interest in the fund.
MR. PAINTER stressed that most years would see a return of
approximately 6 percent, which is the amount in ongoing
appropriations, instead of the 38 percent return seen this year.
1:06:13 PM
REPRESENTATIVE JOSEPHSON expressed concern about the term
"immediate" in terms of impact. He said the Alaska Children's
Trust relies on the marijuana education and treatment fund to
operate in approximately 40 communities, and the fund is swept.
He said, "Am I wrong when I say they also have an immediate
impact?"
MR. PAINTER responded that the MET fund has an ongoing revenue
source to fulfill a portion of the appropriations, so the
administration could keep making payments in anticipation of a
reverse sweep. He stressed that the decision is between funds
where there exists no money, versus "some" money, to pay the
appropriations.
1:07:43 PM
MR. PAINTER turned to slide 19, "Items Funded with Statutory
Budget Reserve in FY 22 Budget," which read as follows [original
punctuation provided]:
? Governor vetoed $320.0 million appropriation for
Permanent Fund Dividends from the SBR, along with
$362.5 million from the general fund.
If the SBR is swept, this would have resulted
in a PFD estimated to be $525. If the SBR is not
swept, the vetoed PFD would have been estimated
to be $1,025.
SBR also funds $4.15 million for School Debt
Reimbursement in FY22.
? SBR was used to fund $76.5 million of capital
projects, including:
$10 million for Mat-Su Borough Pavement Rehab
$9 million for Houston Middle School
$8.5 million for West Susitna Access
$36.5 million of projects in the Department of
Natural Resources, including $10 million for
firebreak construction
$6.3 million of projects in other agencies
1:08:52 PM
REPRESENTATIVE EASTMAN expressed that he didn't remember SBR
having much money last year, and he asked how the account was
funded.
MR. PAINTER replied that two appropriations filled the account.
One populated the account with lapsing balances of general fund
appropriations from FY 2021, rather than lapsing them to CBR.
The other was an appropriation directly to SBR in the amount of
$325 million from the general fund. The two appropriations
totaled $410.7 million in SBR, which was spent in the FY 2022
budget.
1:09:47 PM
MR. PAINTER presented slide 20, Partial Impacts," and he
stressed that these are areas of appropriation where there is
some ongoing revenue, but in which there still exists a
shortfall. He said the largest impact is the Alaska Capital
Income Fund, which is used for deferred maintenance; because of
the high investment returns in FY 2021, there exists extra money
in the fund that would have been spent in the FY 2022 budget,
but will be swept, leaving a shortfall of $18.5 million. He
noted several funds with shortfalls due to the CBR sweep, and he
called special attention to the recidivism reduction fund, which
has almost a $5 million shortfall due to previous' years
exceeded projections, and the marijuana education and treatment
fund, which had been under discussion earlier in the meeting.
CHAIR SPOHNHOLZ pointed out the impacts of a failed reverse
sweep, noting that the recidivism reduction fund is used for
halfway houses and addiction treatment, and the marijuana
education and treatment fund is used for prevention programs.
1:12:28 PM
REPRESENTATIVE STORY asked whether the rate of return for any of
the funds on slide 20 would allow for separate funds to be
established in statute, as is the case with the Higher Education
Investment Fund.
MR. PAINTER responded that many of the funds are in the "general
fund and other non-segregated funds" (GeFONSI), which have
relatively low earnings amounts due to their ongoing use,
whereas funds for long-term use, such as the Higher Education
Investment Fund or the Power Cost Equalization (PCE) fund, have
a higher return.
1:13:34 PM
REPRESENTATIVE PRAX asked for the source of inflow to the
recidivism reduction fund.
MR. PAINTER responded that it's a portion of marijuana tax
receipts.
1:13:59 PM
REPRESENTATIVE SCHRAGE discussed the betrayal of public trust
stemming from the expectation that certain taxes would have
specific purposes, not to be swept to CBR. He said a portion of
the marijuana tax was expected to be used for education and
treatment, and he characterized the use of funds as "almost
criminal."
1:15:37 PM
MR. PAINTER presented slide 21, "Minimal/No Impact," which
listed several programs with accounts that had nothing to sweep,
or the amount of available projected revenue is higher than or
equal to the amount used in the FY 2022 budget, so there would
be no impact from a sweep.
1:16:37 PM
MR. PAINTER presented slide 22, "4. Comparison of HB 3003
(Governor's appropriation bill) to HB 3004 (Ways and Means
appropriation bill) and continued to slide 23, "HB 3003
(Governor's Appropriation Bill)," which read [original
punctuation provided]:
? $1.53 billion from the ERA to the Dividend Fund for
a 2021 PFD based on 50% of the POMV draw
While this is based on 50% of the POMV draw, it
is an additional draw beyond the POMV for FY22
? $1.47 billion transfer from the ERA to the CBR
When added to the above appropriation, this
represents the Governor's $3 billion "bridge
fund"
? $21.4 million of fund changes from Higher Education
Investment Fund to UGF, supporting Alaska Performance
Scholarship Awards, Alaska Education Grants, and WWAMI
Medical Education
CHAIR SPOHNHOLZ asked whether the governor's bill would double
the amount of money taken from the Permanent Fund if it were to
pass in its current form.
MR. PAINTER answered yes.
1:18:35 PM
REPRESENTATIVE SCHRAGE asked why the specific funds would be
supported by the $21.4 million, as described in the third bullet
point, instead of any of the other funds.
MR. PAINTER replied that the Higher Education Investment Fund is
the only fund in the "immediate impact" category due to the lack
of partial funding. The other items have some funding
available, and may prorate or delay grants.
REPRESENTATIVE SCHRAGE expressed that if the reverse sweep is
not addressed, and funding for the other programs isn't restored
within a few months, the impact would be the same by end of
fiscal year.
MR. PAINTER responded that there would only be a partial
reduction in the funds, so while there would be an impact at the
end of the fiscal year, it would be less of an impact on those
funds.
1:20:21 PM
MR. PAINTER continued to slide 24, titled "HB 3004 (Ways and
Means Appropriation Bill)," which read as follows [original
punctuation provided]:
? Restores funding for all Governor's vetoes of
operating and capital items except for the PFD
? Appropriates $500.7 million to the PFD Fund
(representing a roughly $742 PFD) from the General
Fund and Statutory Budget Reserve
Funds direct CBR funded items that were removed from
HB 205 with the failure of the CBR vote
$114.0 million for oil and gas tax credits,
$48.6 million for School Debt Reimbursement
? Provides reverse sweep and CBR deficit-filling
language (requiring a ? vote)
CHAIR SPOHNHOLZ noted the importance of understanding that a PFD
of $742 is what the Permanent Fund could support unless other
revenue sources can be found.
1:22:20 PM
REPRESENTATIVE JOSEPHSON asked whether the difference between an
$1,100 and $742 PFD is due to oil and gas tax credits and school
bond debt reimbursement being funded not using CBR.
CHAIR SPOHNHOLZ replied yes.
REPRESENTATIVE JOSEPHSON surmised that adding the $114 million
for oil and gas tax credits and the $48.6 million for school
bond debt reimbursement would translate to an $1,100 PFD.
MR. PAINTER added that $48 million from CBR was directly funding
the $1,100 PFD.
1:23:19 PM
REPRESENTATIVE PRAX asked whether legal issues would arise from
funding the PFD from another source.
1:24:10 PM
MS. WALLACE explained that the dividend is subject to
legislative appropriation and is calculated based on the amount
of money in the Alaska Permanent Fund, so there would be no
legal issue with transferring money into the Alaska Permanent
Fund for payment of a PFD.
REPRESENTATIVE PRAX expressed that the statutes seem confusing.
CHAIR SPOHNHOLZ clarified that the statute is about defining the
amount of the dividend, but the legislature has the ultimate
appropriating authority.
REPRESENTATIVE PRAX expressed that "taking funds from the
constitutional budget reserve to pay the dividend" would create
a future obligation to fund CBR.
MR. PAINTER answered that anything spent from CBR becomes
subject to repayment.
1:26:39 PM
REPRESENTATIVE EASTMAN said the money from the dividend is to
come from the earnings reserve account (ERA), and he wondered
why money wouldn't be taken from ERA.
CHAIR SPOHNHOLZ said the point of the draft of HB 3004 was to
show what dividend could be afforded if a balanced budget were
passed.
1:27:44 PM
REPRESENTATIVE STORY asked whether an amendment could be made to
HB 3003 to direct money into the Higher Education Investment
Fund.
MR. PAINTER explained that HB 3004 would reverse the sweep,
thereby restoring the money to the Higher Education Investment
Fund.
REPRESENTATIVE STORY clarified that she was talking about HB
3003.
MR. PAINTER answered that such an amendment could be adopted to
HB 3003, and that it would require a three-quarters vote to
remove money from CBR.
1:29:15 PM
REPRESENTATIVE EASTMAN asked why a balanced budget would allow a
dividend of $742, when the Alaska Permanent Fund has gained
approximately $20 billion.
CHAIR SPOHNHOLZ reiterated that HB 3004 was drafted based on a
presumption that the statutory formula for spending from the
Alaska Permanent Fund that was passed in SB 26 in 2018.
1:30:54 PM
REPRESENTATIVE EASTMAN commented that HB 3004 would require
support from the House minority to pass, and he asked why there
was "no effort to consult with or gain consensus from" members
of the minority in drafting the proposed legislation.
CHAIR SPOHNHOLZ acknowledged his comments, and she reiterated
that the goal was to define the existing problem, clarify the
impact of the reverse sweep, and show what a balanced budget
would look like when operating within the rules-based framework
with regards to drawing from the Alaska Permanent Fund.
[HB 3004 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| Leg Finance Presentation 8.23.21.pdf |
HW&M 8/23/2021 11:00:00 AM |
Presentation |