Legislature(2021 - 2022)ANCH LIO DENALI Rm
10/13/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB4003 | |
| HB4009 | |
| HB4010 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4003 | TELECONFERENCED | |
| *+ | HB4008 | TELECONFERENCED | |
| *+ | HB4009 | TELECONFERENCED | |
| *+ | HB4010 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
Anchorage, Alaska
October 13, 2021
10:27 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool (via TEAMS)
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story (via TEAMS)
Representative Mike Prax
Representative David Eastman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 4003
"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; and providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 4009
"An Act relating to the Alaska permanent fund; relating to
dividends for state residents; relating to the use of certain
state income; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 4010
"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; and providing for
an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB4003
SHORT TITLE: PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
SPONSOR(s): WAYS & MEANS
10/04/21 (H) READ THE FIRST TIME - REFERRALS
10/04/21 (H) W&M, FIN
10/13/21 (H) W&M AT 10:00 AM ANCH LIO DENALI Rm
BILL: HB4009
SHORT TITLE: PERMANENT FUND DIVIDEND; ROYALTIES
SPONSOR(s): REPRESENTATIVE(s) HOPKINS
10/12/21 (H) READ THE FIRST TIME - REFERRALS
10/12/21 (H) W&M, FIN
10/13/21 (H) W&M AT 10:00 AM ANCH LIO DENALI Rm
BILL: HB4010
SHORT TITLE: PERMANENT FUND DIVIDEND; POMV SPLIT
SPONSOR(s): REPRESENTATIVE(s) MCCARTY
10/12/21 (H) READ THE FIRST TIME - REFERRALS
10/12/21 (H) W&M, FIN
10/13/21 (H) W&M AT 10:00 AM ANCH LIO DENALI Rm
WITNESS REGISTER
MEGAN HOLLAND, Staff
Representative Ivy Spohnholz
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a sectional analysis of HB 4003
on behalf of Representative Spohnholz.
CONOR BELL, Fiscal Analyst
Legislative Finance Division
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
4003; answered questions during the hearing on HB 4009.
REP HOPKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 4009, as the prime sponsor.
JOE HARDENBROOK, Staff
Representative Grier Hopkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint presentation, titled
"HB 4009; A New Vision for Alaska Dividends, on behalf of
Representative Hopkins, prime sponsor.
REPRESENTATIVE KEN MCCARTY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 4010, as the prime sponsor.
ACTION NARRATIVE
10:27:50 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 10:27 a.m. Representatives
Josephson, Wool (via TEAMS), Story (via TEAMS), Eastman (via
teleconference), Prax (via teleconference), and Spohnholz were
present at the call to order. Representative Schrage arrived as
the meeting was in progress. Also present was Representative
Ortiz (via teleconference).
HB4003-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
10:29:19 AM
CHAIR SPOHNHOLZ announced that the first order of business would
be HOUSE BILL NO. 4003, "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; and providing for an effective date."
10:29:39 AM
CHAIR SPOHNHOLZ introduced HB 4003, on behalf of the House
Special Committee on Ways and Means. She provided a PowerPoint
presentation, titled "HB 4003: Updated Permanent Fund POMV Split
25%/75%" [hard copy included in the committee packet]. On slide
2, she summarized the main elements of the proposed fiscal plans
in front of the legislature.
10:30:46 AM
CHAIR SPOHNHOLZ turned to slide 3, which read as follows
[original punctuation provided]:
HB 4003: Updates the Dividend Formula
Rewrite the dividend formula as follows:
The 5% Percent of Market Draw from the Permanent Fund
will be split as follows:
25% to dividends
75% all else
CHAIR SPOHNHOLZ continued to slide 4, which outlined the impact
that HB 4003 would have on the budget and the permanent fund
dividend (PFD). She noted that the proposed legislation would
produce a dividend of $1,248 in FY 23, increasing to $1,575 in
FY 28. She advanced to slide 5, which reviewed the projected
deficits of the various split formulas. She explained the HB
4003 was designed to reduce cuts and/or taxes that would be
required to balance the budget.
10:33:10 AM
REPRESENTATIVE PRAX inquired about the impact that HB 4003 would
have on the Alaska Mental Health Trust Authority fund. He
requested a sectional analysis of the bill.
10:34:03 AM
MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State
Legislature, on behalf of Representative Spohnholz, presented a
sectional analysis of HB 4003 [included in the committee
packet], which read as follows [original punctuation provided]:
Section 1: Amends AS 14.17.300 adding new language
allowing the foundation formula for public education
to be funded through a percentage of the POMV draw.
Clarifies that in the case that the percentage of the
POMV is not sufficient, foundation funding may be
provided by the general fund.
Section 2: Amends AS 37.13.140, clarifying that the
amount available for appropriation may not exceed the
balance of the earnings reserve account. Repeals the
old formula for calculating PFDs.
Section 3: Amends AS 37.13.145(b) to allow
appropriations from the earnings reserve account in
accordance with AS 37.13.140(b), (the POMV statute),
as follows: 25% to the dividend fund under AS
43.23.045 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) to clarify 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) to stipulate funds
associated with the Amerada Hess settlement are not
included in the calculation of the percent of market
value under AS 37.13.140(b).
Section 6: Adds a new subsection that states, 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.
Additionally, this section provides that if this
percentage of the POMV draw does not satisfy the
foundation formula, the remaining funds may come from
the general fund. And, if it exceeds the formula, the
excess may be distributed according to the foundation
formula.
Section 7: Amends AS 37.13.300(c) to specify that
income from the mental health trust fund is not
included in the calculation of the percent of market
value under AS 37.13.140(b).
Section 8: Amends AS 37.14.031(c) to require 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.
Section 9: Amends AS 43.23.025(a) to clarify 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 restricted to appropriations from the
earnings reserve account to the general fund to not
more than was available for appropriation. Similar
language is now found in Section 2 of this bill.
Section 11: Provides an effective date of July 1,
2022.
CHAIR SPOHNHOLZ asked whether Representative Prax had a question
about Section 5.
10:36:44 AM
REPRESENTATIVE PRAX opined that it wasn't necessary to make any
changes to the Alaska Mental Health Trust Authority fund. He
asked why that was being proposed in the bill.
CHAIR SPOHNHOLZ explained that Alaska Permanent Fund Corporation
(APFC) managed the Alaska Mental Health Trust Authority's
investments. For the purposes of the proposed legislation, she
believed that it was not necessary to include Alaska Mental
Health Trust Authority funds in the dividend calculation.
10:38:02 AM
REPRESENTATIVE STORY asked how much money would come from the
education tax.
CHAIR SPOHNHOLZ returned to slide 2 and reported that HB 189,
the employment tax for education, would produce $65 million in
FY 23 and FY 24 and $66 million in the subsequent three fiscal
years (FY 25 through FY 27).
REPRESENTATIVE STORY sought clarification on the base student
allocation (BSA) increase.
10:40:28 AM
CONOR BELL, Fiscal Analyst, Legislative Finance Division,
offered to follow up on the requested information.
10:40:55 AM
CHAIR SPOHNHOLZ announced that HB 4003 was held over.
HB4009-PERMANENT FUND DIVIDEND; ROYALTIES
10:41:03 AM
CHAIR SPOHNHOLZ announced that the next order of business would
be HOUSE BILL NO. 4009, "An Act relating to the Alaska permanent
fund; relating to dividends for state residents; relating to the
use of certain state income; and providing for an effective
date."
10:41:59 AM
REP HOPKINS, Alaska State Legislature, prime sponsor, introduced
HB 4009. He paraphrased the sponsor statement [included in the
committee packet], which read as follows [original punctuation
provided]:
Alaskans are beneficiaries of the foresight of our
state's founders, who ensured that state-owned
resources would be managed for the maximum benefit of
all Alaskans (Article VIII Section 2). Unique among
all states, Alaska's constitution creates communal
ownership of state resources what former Governor
Wally Hickel called "the Owner State."
Following statehood and the discovery of Alaska's
North Slope oil reserves, Alaska's political leaders
and voters created the Alaska Permanent Fund to, in
the words of Governor Hammond "transform oil wells
pumping oil for a finite period into money wells
pumping money for infinity." Since 1982, Alaskans have
received dividend payments from the State of Alaska.
With a stepped four-year approach, HB 4009 crafts a
new dividend formula, where Permanent Fund earnings
AND mineral revenues from oil and gas are used to
calculate dividend payments. Starting in FY 2023, 35
percent of Oil and Gas Royalties, Rents and Bonuses
(OGRRB) would be combined with 10 percent of the total
Percent of Market Value (POMV) draw for the payment of
dividends. The amount of the state's OGRRB and POMV
contribution to the dividend fund would grow by five
percent annually until FY 2026, when the final formula
of 50 percent of OGRRB and 25% of the POMV takes
effect.
HB 4009 creates a new partnership and vision for
Alaska's dividend program. By combining the earnings
of the Permanent Fund with a percentage of Alaska's
oil and gas mineral revenues, Alaskans will benefit
from a diversified dividend revenue stream, shielding
the dividend from market downturns and commodity price
fluctuations. Additionally, Alaskans will see a direct
benefit from the continued development of resources on
state and federal land, renewing the founders' vision
of an owner state.
10:46:03 AM
JOE HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, on behalf of Representative Hopkins, prime
sponsor, provided a brief sectional analysis of HB 4009.
Section 1 deleted the old PFD formula. Section 2 created a new
formula for the fund's earning appropriations for the dividend
program. Sections 3-5 contained conforming changes. Section 6
excluded the Alaska Mental Health Trust Authority from the
calculation of the fund's market value. Sections 7-9 contained
conforming changes. Section 10 provided the new formula for oil
and gas royalty revenue and bonus appropriations to fund the
dividend program. Section 11 was the effective date.
10:48:15 AM
MR. HARDENBROOK directed attention to a PowerPoint presentation,
titled "HB 4009; A New Vision for Alaska Dividends [hard copy
included in the committee packet]. He began on slide 2,
indicating that the proposed legislation would grow and
diversify the revenue streams for Alaska's dividends. Rather
than solely relying on market returns from the Alaska Permanent
Fund, future dividends would include a percentage of state
royalties, rents, and bonuses on the development of its oil and
gas resources. He turned to slide 3, which read as follows
[original punctuation provided]:
New Formula for Dividend Calculation:
• FY23: 10% POMV Draw + 35% of Oil & Gas
Royalties/Rents/Bonuses (OGRRB)
• FY24: 15% POMV Draw + 40% OGRRB
• FY25: 20% POMV Draw + 45% OGRRB
• FY26: 20% POMV Draw + 50% OGRRB
o 25%+50% Formula in Effect from FY26 Onward
10:50:30 AM
MR. HARDENBROOK advanced to slide 4, which read as follows
[original punctuation provided]:
What Wouldn't Change:
• Permanent Fund Corporation
• Percent of Market Value Statute
• Dividend Tied to Performance of Permanent Fund
10:50:54 AM
MR. HARDENBROOK progressed to slide 5, which read as follows
[original punctuation provided]:
What Would Change:
• Alaskans Receive Direct Share of Oil and Gas
Revenue
o Federal and State Resources
• Dividend Funds Diversified under New Formula
• Dividends Calculated on Fund Returns & Resource
Development
10:51:24 AM
MR. HARDENBROOK continued to slide 6, which highlighted the
funds available for paying dividends under HB 4009. Slide 7
outlined the projected dividend amounts under the proposed plan,
starting at $1,092 in FY 23. He concluded on slide 8, noting
that HB 4009 in its current form would result in a deficit in
future years, which could be addressed in two ways: firstly,
through maintaining the proposed blended revenue stream of oil
and gas royalties and fund returns, while tweaking the amount in
the formula; secondly, through new revenue. He invited Mr. Bell
to provide an explanation of the fiscal models on slide 8.
10:54:32 AM
MR. BELL explained that the fiscal model was showing the impact
of the proposed legislation using assumptions based on the
enacted capital budget and operating budget.
CHAIR SPOHNHOLZ directed attention to the bottom left chart on
slide 8 and asked whether the unplanned ERA draw was in addition
to the surplus or deficit.
MR. BELL said the draw was part of the surplus or deficit.
CHAIR SPOHNHOLZ sought to confirm that the CBR would be drawn
from to fund the deficit first, followed by an ERA draw to
maintain the minimum balance of $500 million in the CBR. She
estimated that in FY 22, there would be a (indisc.) of $204
million that would grow up to $552 million in FY 26 and decline
again to $234 million in FY 30.
MR. BELL confirmed that her understanding was accurate.
10:58:25 AM
REPRESENTATIVE JOSEPHSON asked whether the incremental increase
was designed to provide the legislature with a timeframe to
adopt new revenue.
REPRESENTATIVE HOPKINS answered yes.
10:59:29 AM
REPRESENTATIVE WOOL observed that the modeling on slide 8 showed
a deficit in FY 22 with a CBR draw. He asked why that was
depicted.
MR. BELL believed that Representative Wool was referring to the
ERA draw in FY 22. He explained that LFD's modeling did not
include any of the federal revenue replacement.
REPRESENTATIVE WOOL applauded the foundational formula in the
proposed legislation; nonetheless, he expressed concern about
the step-up portion of the plan and the overdraw that would
result. Further, he asked whether there was any research that
showed a benefit to paying out large dividends, as opposed to
putting that money towards the BSA, education, and other state
services.
REPRESENTATIVE HOPKINS said the bill would need to be part of a
package that included new revenue, noting that he did not
support an unplanned overdraw from the ERA. He believed that
with a full fiscal plan, a balance could be struck between
revenue, the economy, and the dividend. He expressed his hope
that the formula in HB 4009 would drive resource development
that would bring in new revenue to support the budget. He
maintained that the proposed legislation would allow for a fluid
dividend while protecting the POMV draw.
11:05:25 AM
REPRESENTATIVE WOOL agreed that this plan would require new
revenue to avoid the overdraws. He said he supported the
initial formula in the bill but was reluctant to increase it,
because he believed new revenue could be used in a better way.
REPRESENTATIVE HOPKINS credited [HB 37] from Representative Wool
for the formula proposed in HB 4009.
11:07:01 AM
REPRESENTATIVE STORY sought to clarify how the plan would allow
the state to maintain essential public services and provide for
a capital budget.
REPRESENTATIVE HOPKINS directed attention to slide 8, which
highlighted the size of the capital budget under this proposal.
He acknowledged that the dividend formula would create a
deficit, so essential services would have to be identified, as
well as new revenue and cuts to maintain a balanced budget.
MR. HARDENBROOK noted that the numbers in the model included
inflationary increases for the FY 22 state budget.
CHAIR SPOHNHOLZ added that it did not, however, include
strategic investments, such as increases to the BSA, as
referenced by Representative Story.
REPRESENTATIVE HOPKINS, in response to a question from
Representative Story, confirmed that oil prices were
unpredictable. He reasoned that the dividend formula proposed
in HB 4009 reflected the needs of Alaskans, such as high energy
costs.
11:11:50 AM
REPRESENTATIVE HOPKINS, in response to a question from
Representative Schrage, shared his belief that the bill would
shield from market downturns by balancing oil and gas revenue
and permanent fund earnings. He acknowledged that the proposal
would come with a new set of risks and discussed Alaskans
retaining ownership of state resources and sharing in both the
high and low times.
REPRESENTATIVE HOPKINS, in response to a question from
Representative Schrage, recalled times throughout recent history
when the economy was thriving while oil prices were low and vice
versa.
11:16:17 AM
REPRESENTATIVE HOPKINS, in response to a question from
Representative Josephson, confirmed that the purple line labeled
"current scenario" [slide 8, top right] represented the proposed
legislation.
REPRESENTATIVE JOSEPHSON asked whether there was a scenario in
which the royalty contribution in HB 4009 would result in a
dividend equal to the 1982 statutory formula.
REPRESENTATIVE HOPKINS answered yes, but it could also be
substantially lower depending on the price of oil.
11:17:24 AM
REPRESENTATIVE HOPKINS, in response to Representative Josephson,
confirmed that in all likelihood, the dividend would not be
$2,800 [despite projections indicating that it would reach that
by FY 30] due to the difficulty in predicting oil prices. He
noted that according to the forecast, oil was predicted to be
$65 per barrel going forward.
CHAIR SPOHNHOLZ stressed the volatility of oil as a revenue
source.
11:18:55 AM
REPRESENTATIVE EASTMAN asked whether any analysis had been
conducted on how reduced dividend years would impact
participation in state services and programs.
REPRESENTATIVE HOPKINS said no specific analysis had been
conducted on that topic.
REPRESENTATIVE EASTMAN maintained his belief that such an
analysis would be helpful.
REPRESENTATIVE HOPKINS reiterated that the goal of the bill was
to create economic incentive for resource development and job
creation to grow Alaska's economy.
CHAIR SPOHNHOLZ recalled hearing from the Institute of Taxation
and Economic Policy (ITEP) and others on the impact of dividend
cuts.
11:22:16 AM
REPRESENTATIVE PRAX didn't recall hearing about the dividend's
impact on municipalities. He requested information on how much
money was collected from unpaid fines, parking tickets, speeding
tickets, etcetera.
11:23:32 AM
REPRESENTATIVE STORY reminded the committee that an influx of
people would be accompanied by their need for services and the
necessity to pay for those services.
CHAIR SPOHNHOLZ announced that HB 4009 was held over.
HB4010-PERMANENT FUND DIVIDEND; POMV SPLIT
11:25:23 AM
CHAIR SPOHNHOLZ announced that the final order of business would
be HOUSE BILL NO. 4010, "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; and providing for an effective date."
11:25:54 AM
REPRESENTATIVE KEN MCCARTY, Alaska State Legislature, prime
sponsor, introduced HB 4010. He paraphrased the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
House Bill 4010 would provide an established formula
for the appropriate of annual permanent fund dividend
for Alaskans.
From 1982 until 2016 the annual appropriate of
permanent fund dividends were established and
implemented per Statute. In 2016 the Legislature and
an uncontested governor veto changed the Statute and
the allocation formula resulting in an undetermined
dividend appropriation. House Bill 4010 will integrate
the POMV formula consideration of Statute with an
established percentage formula appropriation for both
the state and dividend for Alaskans. The purposed
formula for consideration is 65% state and 35% Alaskan
dividend.
In addition to the 65% formula for the state that at
least 20% of that must be used for Capital Projects.
The state's expenses involve operations and capital
projects. Over the years the Capital projects have not
been attended to for one reason or another, which at
this time the state is over 2 billion dollars behind
in Capital project repairs. The inclusion of the 20%
will not only secure the importance of attending to
Capital Projects but also avail funds for
infrastructure, promote businesses, avail jobs, secure
and improve roads, bridges, buildings, and school
facilities.
The origin of the Permanent Fund Dividend is in
recognition of individual residents / stakeholders of
Alaska. The appropriation of the funds are done with
equality. No social economic, age, or political
preference determine the dividend. Simply, being a
resident of Alaska under law qualifies an annual
dividend.
Since the 2016 change to the Permanent Fund Dividend
formula and inclusion of the POMV that the people of
Alaska have greatly questioned the intent of its state
government. Alaskans have made statements with themes
that the state is disenfranchised of its people /
stakeholders by depriving them of a reliable annual
dividend. By approving House Bill 4010 it will make a
resounding statement that residents of Alaska are
valued stakeholders of this great state and will be
honored with a reliable annual dividend.
CHAIR SPOHNHOLZ clarified that the 1982 statute had not been
repealed yet.
11:28:05 AM
REPRESENTATIVE MCCARTY presented a sectional analysis for HB
4010 [included in the committee packet], which read [original
punctuation provided]:
Section 1
AS 37.13.140 Income and annual computed formula.
(a) Maintain the origin of income source according to
AS 37.13.145. Deletes the language describing the
distribution formula equals 21 percent of the net
income. The formula has resulted in an incongruent
calculation with (b).
(b) Inserting current language to affirm that
appropriation may not exceed the balance in the
earnings reserve account. The computed annual
calculation remains the same.
Section 2
AS 37.13.145 (b) Appropriation formula.
Adds the new appropriation formula of 35% for the
dividend and 65% toward the state. It also describes
the state appropriation of 65% which 20% of it must be
used toward Capital Projects.
Section 3
AS 37.13.145(c) Appropriation from the Earnings
Reserve Account
Changes the language from transfer to appropriation
and legislature role in the appropriation process.
Section 4
AS 37.13.145(d) Appropriate in consideration of the
State v. Amerada Hess decision
Changing language to be congruent from transfer to
appropriation. There is no change to the State v
Amerada Hess judgment. Delete AS 37.13.145(e) as it is
amended and addressed in Section 1 of AS 37.13.140(b).
Section 5
AS 37.13.300(c) Mental Health Trust funds
Change language according to congruency of other
changes but does not change the autonomy of the mental
health trust funds which is not to be calculated in
the Permanent Fund appropriation.
Section 6
AS 37.14.031(c) Date of annual computation
Inserts language to define the date of the annual
computation according to accepted accounting
principles, excluding any unrealized gains or losses.
Section 7
AS 43.23.025(a) Date of determination and announcement
of the dividend
Changing language to be congruent from transferred to
appropriated. The amendment is to continue congruency
of language changes to recognize the appropriation
process.
Section 8
AS 37.13.145(e) and 37.13.145(f) Repeal of limitation
of the appropriation from Earnings Reserve
Delete (e) and (f) as the language is already
addressing in other changes within the bill.
Section 9
Effective Date
Provides for July 1, 2022 effective date.
11:31:00 AM
REPRESENTATIVE MCCARTY introduced a PowerPoint presentation,
titled "HB 4010" [hard copy included in the committee packet].
He began on slide 2, which read as follows [original punctuation
provided]:
Since 1982 the State of Alaska has recognized the
resident / stakeholders through annual dividends from
the Alaska Permanent Fund. Unlike no other state, the
equitable nature of dividends for all residents,
according to law, has been bestowed upon and not
entitled to Alaskans.
REPRESENTATIVE MCCARTY continued to slide 3, which read as
follows [original punctuation provided]:
The Alaskan Dividend Tradition has long been fulfilled
through an annual percent of the viable appropriated
distribution base of the Permanent Fund realized
earnings.
REPRESENTATIVE MCCARTY turned to slide 4, which read as follows
[original punctuation provided]:
In 2016 this long Alaskan tradition was altered. A
new appropriation method was placed in Statute, which
has resulted in confusion or contradiction of existing
Statute and the appearance of disenfranchising
Alaskans of their stakeholder investment dividend.
REPRESENTATIVE MCCARTY advanced to slide 5, which read as
follows [original punctuation provided]:
The intent of HB 4010 is to make clear once again the
established annual percentage formula for both the
Permanent Fund Dividend for Alaskans and the
percentage of budget revenue for the state government
to the benefit of Alaskans.
REPRESENTATIVE MCCARTY proceeded to slide 6, which read as
follows [original punctuation provided]:
P.O.M.V.
The Percent of Market Value calculation based on the
growth of the Permanent Fund was changed into Statute
in 2019. At a 5% annual draw on the Permanent Fund
this allows for prudent distribution and continued
growth within the fund into the future.
REPRESENTATIVE MCCARTY continued to slide 7, which read as
follows [original punctuation provided]:
The question is what should the annual distribution
look like from the 5% POMV draw that does not result
in deficiency elsewhere?
REPRESENTATIVE MCCARTY proceeded to review the governor's 50/50
plan, highlighting the advantages and disadvantages (slide 9)
and the fiscal modeling (slides 10-11). On slide 12, he pointed
out that moneys from both the CBR and the SBR had been used
historically for deficit spending.
11:35:05 AM
REPRESENTATIVE MCCARTY outlined HB 4010 on slide 13, which read
as follows [original punctuation provided]:
HB 4010
A Permanent Fund Appropriation Formula that supports
Alaskans in many ways!
35 % -Dividend Amount for Alaskans
20 % -Capital Projects to benefit Alaskans
45 % -Government Operations to support Alaskans
REPRESENTATIVE MCCARTY continued to slide 14, which read as
follows [original punctuation provided]:
PREMISE
Equitable formula that gives Alaskans "More Bang for
the Bucks!"
The McCarty Plan
5% of POMV draw with a 35/65 Percent Split
35% to PFD
65% to State with at least 20% allocated to Capital
Budget Projects
Capital Projects assurance will result in jobs and
projects toward maintenances, improvements, and
infrastructure for roads, airports, A.M.H., bridges,
buildings, fire support, school structures, etc.
11:36:07 AM
REPRESENTATIVE MCCARTY highlighted the perceived advantages and
disadvantages of HB 4010 on slide 15, which read as follows
[original punctuation provided]:
ADVANTAGE
Seeks to establish a distribution plan that is
dependable & sustainable into the future
Equitable for both the people's government and
individual Alaskans
Alaskans benefit from a dividend as well as jobs and
services from Capital Projects
Fiscally sustainable that does not require excessive
revenue expansion / taxation
DISADVANTAGE
Not a 50 / 50 Plan
Not a 25 / 75 Plan
Revenue continues through resource development and
free enterprise industry rather taxation
REPRESENTATIVE MCCARTY discussed the modeling on slide 16,
noting that LFD projected revenue with no liability reduction
until 2028 and surpluses in 2030. Additionally, FY 21 to FY 24
showed a deficit with surplus growth after FY 25.
11:38:59 AM
REPRESENTATIVE MCCARTY addressed appropriations to capital
projects on slide 17, which read as follows [original
punctuation provided]:
More Money to Support Jobs for Alaskans
Boosts the Economy
Infrastructure for now and into the future
REPRESENTATIVE MCCARTY concluded on slide 18 by reiterating his
hope that HB 4010 would provide a more sustainable future for
Alaska by implementing a "safety net" and boosting a strong
economy.
11:39:32 AM
REPRESENTATIVE SCHRAGE commended bill sponsor for putting
forward a plan. He asked why this plan would be favorable to a
75/25 split. He acknowledged the deficits that would need to be
addressed under this proposal and asked why this would be the
appropriate formula for the legislature to move forward with.
REPRESENTATIVE MCCARTY believed that a 65/35 plan would be more
balanced than a 75/25 split in terms of fairness to both
residents and government services.
11:42:04 AM
REPRESENTATIVE JOSEPHSON asked whether the proposed legislation
would result in substantial cuts to the operating budget.
REPRESENTATIVE MCCARTY claimed that there would not be a deficit
and argued that the budget would be balanced under HB 4010.
REPRESENTATIVE JOSEPHSON asked Mr. Bell whether the operating
budget would need to be cut without the addition of new revenue
if HB 4010 were to pass.
MR. BELL said it was unclear whether the bill sponsor had
intended 20 percent of the entire POMV draw would go to the
capital budget or if it was 20 percent of 65 percent of the POMV
draw. Regardless, it would increase the capital budget either
way.
CHAIR SPOHNHOLZ clarified that 20 percent of the overall POMV
would go to the capital budget under Representative McCarty's
plan. She asked what kind of deficit that would create.
11:48:17 AM
MR. BELL confirmed that based on DOR's spring forecast, there
would be small deficits through FY 30 if the entire amount was
appropriated towards the capital budget.
CHAIR SPOHNHOLZ asked what the deficit would be in FY 23.
MR. BELL estimated a deficit of slightly over $1 billion.
11:49:20 AM
REPRESENTATIVE JOSEPHSON pointed out that slide 16, which
provided modeling of HB 4010, showed the capital budget from FY
22 to FY 30 using assumptions from the FY 22 enacted budget, as
opposed to modeling the proposed 20 percent of 65 percent of the
POMV draw.
MR. BELL confirmed. He said the fiscal model on slide 16 did
not use the 20 percent minimum for the capital budget
assumption, which was proposed in HB 4010. Instead, it modeled
the capital budget assumptions that grow with inflation based on
the enacted budget.
CHAIR SPOHNHOLZ said that's an important distinction.
REPRESENTATIVE JOSEPHSON sought to confirm that slide 16 did not
accurately reflect the bill.
MR. BELL said it did not include that aspect of the bill. He
offered to follow up with an assumption that increased the
capital budget to conform with the language in the bill.
11:51:08 AM
CHAIR SPOHNHOLZ shared her understanding that HB 4010 would
create a fairly significant fiscal gap. If the bill were to
become law, she asked the sponsor how he would recommend
balancing the budget.
REPRESENTATIVE MCCARTY believed that investments in
infrastructure could lead to an increase in revenue.
CHAIR SPOHNHOLZ asked how state revenue would increase based on
capital spending.
REPRESENTATIVE MCCARTY shared an example from the North Slope.
CHAIR SPOHNHOLZ sought to confirm that Representative McCarty
was suggesting that the legislature increase oil industry
subsidies to increase state revenue.
REPRESENTATIVE MCCARTY responded, "Well, I suggest looking into
all the different things that's increasing the infrastructure
within the state." He discussed ports in Alaska and potentially
moving more commodities through them.
11:55:07 AM
CHAIR SPOHNHOLZ pointed out that economic development would take
a long time to produce new revenue; further, she opined that
there wasn't a clear relationship between short-term capital
spending and short-term revenue. She addressed the billion-
dollar deficit beginning in FY 23 under this proposal, adding
that there would need to be a billion dollars in net cuts or new
revenue sources to balance the budget. She encouraged the
sponsor to consider ways to balance the budget.
REPRESENTATIVE MCCARTY believed that the dividend formula in HB
4010 would boost the economy.
11:58:18 AM
REPRESENTATIVE SCHRAGE appreciated the idea of increasing the
capital budget and the argument that government spending could
facilitate the economy. Nonetheless, he expressed concern that
Alaska's revenue was highly was dependent on oil and gas
revenue. Additionally, he pointed out that there was no
indication of a correlation between private industry success and
an increase in state revenue.
CHAIR SPOHNHOLZ appreciated the consensus from the fiscal policy
working group that different elements had to come together to
create a successful fiscal plan, such as broad-based revenue, a
robust dividend, modest cuts to the budget from systemic
reforms, and an updated spending cap.
[HB 4010 was held over.]
12:02:48 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
12:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4009 Sponsor Statement.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4003.PDF |
HW&M 10/13/2021 10:00:00 AM |
|
| HB 4010.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4003 Presentation.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4003 |
| HB 4009 Presentation.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4009.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4009 Fiscal Note, OMB.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4010 Sponsor Statement.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Sectional Analysis.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Fiscal Note, OMB.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Presentation 10.13.21.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |