10/22/2021 10:00 AM House WAYS & MEANS

          HB 4010-PERMANENT FUND DIVIDEND; POMV SPLIT                                                                       
                                                                                                                                
11:31:03 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."                                                                                  
                                                                                                                                
11:32:02 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KEN  MCCARTY, Alaska  State Legislature,  as prime                                                               
sponsor of  HB 4010, gave  a PowerPoint presentation,  titled "HB
; A  New Solution for  an Established  sustainable tradition"                                                               
[hard copy included in the committee  packet].  As shown on slide                                                               
2, he  reviewed that the  percent of market  value (POMV) is  a 5                                                               
percent  draw  on  the  Alaska   permanent  fund.    He  directed                                                               
attention to a slide 3,  which shows the following question asked                                                               
by a committee  member at a previous meeting:   "Does the HB 4010                                                               
plan have a  negative impact on the  operational budget resulting                                                               
in  reductions to  it in  order to  support the  capital budget?"                                                               
Slide 4 provides the answer in  a breakdown of the bill, which he                                                               
clarified at  the request of  Chair Spohnholz  to be that  of the                                                               
100 percent  coming from the POMV  draw:  35 percent  goes to the                                                               
permanent  fund dividend  (PFD), and  65 percent  goes to  Alaska                                                               
government  expenses;  of the  65  percent,  20 percent  goes  to                                                               
capital projects and 45 percent to government operations.                                                                       
                                                                                                                                
11:35:55 AM                                                                                                                   
                                                                                                                                
EMILY  NAUMAN,  Deputy   Director,  Legislative  Legal  Services,                                                               
Legislative Affairs  Agency, at  the request of  Chair Spohnholz,                                                               
clarified that  as drafted,  HB 4010 would  allot 35  percent [of                                                               
the POMV draw] to the PFD and  65 percent to the general fund for                                                               
general state spending.  Of that  65 percent, 20 percent would go                                                               
to  capital projects    in  other words,  13 percent  of the  100                                                               
percent.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   MCCARTY,  in   response   to  Chair   Spohnholz,                                                               
confirmed that was his intent.                                                                                                  
                                                                                                                                
CHAIR SPOHNHOLZ  asked that  Representative McCarty  resubmit the                                                               
figures on  slide 4  so that there  are sub-bulleted  items under                                                               
the  65 percent  specifying that  20  percent of  the 65  percent                                                               
would go  to capital projects  and 80  percent of the  65 percent                                                               
would go to government operations.                                                                                              
                                                                                                                                
11:38:58 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE MCCARTY  noted that slide 5  shows the information                                                               
from  slide 4  in a  pie  chart.   Slide  6 has  two graphs,  one                                                               
showing $60  per barrel in FY  21-27 and project revenue  with no                                                               
liability reduction  until 2028 and  surplus in 2030.   The other                                                               
graph shows $70  per barrel in FY 21-24 and  reflects a projected                                                               
slight  deficit  with  significant  surplus  growth  after  2025.                                                               
Slides  7 and  8  offer a  closer  look  at the  plan.   Slide  9                                                               
addresses appropriations to capital  projects and indicates money                                                               
to  support jobs  for  Alaskans,  a boost  for  the economy,  and                                                               
infrastructure for  the present and  future.  Slide 10  boasts no                                                               
disadvantages  of the  "35/65" plan  and  advantages including  a                                                               
distribution plan  that is:  dependable  & sustainable; equitable                                                               
for  both  the  people's   government  and  individual  Alaskans;                                                               
beneficial from the  standpoint of the PFD and  jobs and services                                                               
from   capital  projects;   and   fiscally  sustainable   without                                                               
requiring  excessive revenue  expansion  or taxation.   Slide  11                                                               
reiterates the sustainable future aspect of the plan.                                                                           
                                                                                                                                
REPRESENTATIVE MCCARTY  noted that slide  12 answers "no"  to the                                                               
question  of whether  HB 4010  would result  in reduction  to the                                                               
operational budget in  order to support the capital  budget.  The                                                               
slide further  posits that the  proposed legislation  would offer                                                               
"balanced fiscal  management with  projections of  future surplus                                                               
protection."   Slide 13 adds  that "recent projected  oil revenue                                                               
forecasts  have seen  unexpected surplus,  which could  reduce or                                                               
eliminate deficit years."                                                                                                       
                                                                                                                                
11:42:36 AM                                                                                                                   
                                                                                                                                
CHAIR   SPOHNHOLZ   pointed   out  that   the   bill   comparison                                                               
presentation  given by  Alexei Painter  just prior  to this  bill                                                               
hearing used  the current oil  prices as  an even way  to compare                                                               
the various proposed legislation.                                                                                               
                                                                                                                                
11:43:45 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE STORY  inquired whether the bill  sponsor knew how                                                               
many millions of dollars would go to capital projects.                                                                          
                                                                                                                                
REPRESENTATIVE  MCCARTY responded  that  if the  model were  used                                                               
this year,  it would produce  just shy  of $400 million  from the                                                               
permanent fund to capital projects.   In 2030, $800 million would                                                               
go  towards  capital  projects.    In  response  to  a  follow-up                                                               
comment, he agreed  that there is a need to  build workforce that                                                               
has been  lost.  He noted  that HB 108 would  help with workforce                                                               
and training.                                                                                                                   
                                                                                                                                
11:47:33 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  noted  that  Representative  McCarty's                                                               
presentation states  there would  be no  impact on  the operating                                                               
budget; however, slide 30 from  Mr. Painter's Legislative Finance                                                               
Division  presentation  said there  would  be  an impact  on  the                                                               
budget.  He said, "Something's got to give."                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ compared the bill  sponsor's analysis of HB 4010,                                                               
which shows  a deficit  of $617  million in FY  23 going  down to                                                               
minus  $69  million in  FY  25,  and  she expressed  interest  in                                                               
comparing this  to the information  from the  Legislative Finance                                                               
Division,  for  example  whether   slide  30  reflects  only  the                                                               
operating  budget and  does not  include "the  additional capital                                                               
spend."                                                                                                                         
                                                                                                                                
11:49:45 AM                                                                                                                   
                                                                                                                                
CONOR BELL,  Fiscal Analyst,  Legislative Finance  Division, said                                                               
the division  assumed that the  capital budget increases  and the                                                               
agency  operating  budget  "stays  with the  status  quo  of  the                                                               
enacted budget  growing with  inflation."   He said  the division                                                               
views  the cutting  or increasing  of the  operating budget  as a                                                               
response to a larger capital  budget as a separate policy choice.                                                               
In  response  to  Chair  Spohnholz, he  confirmed  that  all  the                                                               
amounts on slide 30 of  the division's presentation account for a                                                               
higher capital  budget and resulting overall  higher unrestricted                                                               
general fund (UGF) budget.                                                                                                      
                                                                                                                                
11:52:22 AM                                                                                                                   
                                                                                                                                
MR.  BELL,  in response  to  Representative  Josephson, said  the                                                               
numbers improve because revenue  is growing faster than inflation                                                               
"during this  forecast period," including both  POMV and non-POMV                                                               
revenue.                                                                                                                        
                                                                                                                                
CHAIR SPOHNHOLZ reasoned that the FY  23 deficit under HB 4010 is                                                               
$200 million higher due to the additional capital spend.                                                                        
                                                                                                                                
MR. BELL confirmed that's correct.                                                                                              
                                                                                                                                
11:53:57 AM                                                                                                                   
                                                                                                                                
CHAIR SPOHNHOLZ  thanked the bill  sponsor and announced  that HB
 was held over.