Legislature(2023 - 2024)GRUENBERG 120

02/15/2023 01:00 PM House JUDICIARY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HJR 2 CONST. AM: APPROP LIMIT TELECONFERENCED
Heard & Held
+= HB 38 APPROPRIATION LIMIT; GOV BUDGET TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 HJR  2-CONST. AM: APPROP LIMIT                                                                             
                                                                                                                                
1:01:21 PM                                                                                                                    
                                                                                                                                
CHAIR VANCE announced  that the first order of  business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  2,  Proposing  amendments  to  the                                                               
Constitution of the State of  Alaska relating to an appropriation                                                               
limit.                                                                                                                          
                                                                                                                                
1:01:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILL  STAPP,   Alaska  State  Legislature,  prime                                                               
sponsor, provided introductory  remarks on HJR 2.   He noted that                                                               
HJR  2 is  the companion  resolution to  HB 38,  adding that  the                                                               
resolution before  the committee is the  constitutional amendment                                                               
proposal for  a refined appropriation  limit.  He  explained that                                                               
the spending cap  would be based on gross  domestic product [GDP]                                                               
and aims  to bring  stability to  Alaska's economy  through long-                                                               
term fiscal discipline.  He deferred to his staff, Mr. Aoto.                                                                    
                                                                                                                                
1:03:21 PM                                                                                                                    
                                                                                                                                
BERNARD  AOTO, Staff,  Representative  Will  Stapp, Alaska  State                                                               
Legislature, on  behalf of  Representative Stapp,  prime sponsor,                                                               
explained that HJR 2 would  limit appropriations to 14 percent of                                                               
a five-year trailing average of real GDP.                                                                                       
                                                                                                                                
CHAIR VANCE invited questions from members of the committee.                                                                    
                                                                                                                                
1:04:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GROH expressed concern  about the possibility of a                                                               
"double whammy" economic downturn if  both the public and private                                                               
sectors were unable to produce  simultaneously.  He asked whether                                                               
the bill sponsor had considered this potential implication.                                                                     
                                                                                                                                
REPRESENTATIVE STAPP said he had  considered the possibility of a                                                               
long-term economic depression, in which  case, he argued that the                                                               
largest limiting factor would be revenue, not spending.                                                                         
                                                                                                                                
REPRESENTATIVE GROH  contended that if the  proposed spending cap                                                               
was constitutionalized, the ability to  revive the economy from a                                                               
prolonged recession would be limited.                                                                                           
                                                                                                                                
REPRESENTATIVE STAPP  highlighted the five-year  trailing average                                                               
as a  way to protect against  one year of economic  downturn.  He                                                               
pointed out that positive GDP  growth would increase the spending                                                               
cap, whereas  several years of  massive GDP decline  would create                                                               
issues.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  GROH  asked  whether  any  academic  studies  had                                                               
looked at GDP-based spending caps.                                                                                              
                                                                                                                                
REPRESENTATIVE  STAPP  said GDP  is  a  standard metric  that  is                                                               
studied  at   most  major  universities  with   a  macroeconomics                                                               
program.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GROH  asserted that there is  no academic research                                                               
on GDP-based spending limits.                                                                                                   
                                                                                                                                
REPRESENTATIVE  STAPP  suggested  that  the  effects  of  such  a                                                               
spending cap could be inferred.                                                                                                 
                                                                                                                                
CHAIR VANCE  asked why  the GDP-based model  was selected  by the                                                               
bill sponsor.                                                                                                                   
                                                                                                                                
REPRESENTATIVE STAPP conveyed that his  intent was to tie private                                                               
sector performance to statewide spending.   He expressed a desire                                                               
for Alaskans  in the private  sector to have a  strong connection                                                               
to  state  government.   The  concept  behind  utilizing  private                                                               
sector GDP,  he said, was  to create a mechanism  that encouraged                                                               
state leaders to be mindful of their constituents.                                                                              
                                                                                                                                
1:10:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRAY  referenced testimony from Mr.  Gastin during                                                               
a  previous hearing,  in  which he  indicated  that all  spending                                                               
should  be included  in  an  effective spending  cap.   For  that                                                               
reason,  he  asked  whether the  permanent  fund  dividend  (PFD)                                                               
should be included in the constitutional spending cap.                                                                          
                                                                                                                                
REPRESENTATIVE  STAPP   referenced  a  memorandum   ("memo")  and                                                               
deferred  to  Legislative  Legal Services,  [Legislative  Affairs                                                               
Agency (LAA)].                                                                                                                  
                                                                                                                                
1:11:51 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:12:13 PM                                                                                                                    
                                                                                                                                
MARIE MARX, Attorney, Legislative  Legal Services, LAA, explained                                                               
that  the  legal  memo  spoke  to whether,  in  addition  to  the                                                               
appropriation limit,  constitutional provisions could  be changed                                                               
in HJR 2,  which was a separate issue from  the question posed by                                                               
Representative Gray.                                                                                                            
                                                                                                                                
REPRESENTATIVE  GRAY restated  his question,  asking whether  the                                                               
spending cap  could apply  to all  state spending,  including the                                                               
PFD.                                                                                                                            
                                                                                                                                
MS. MARX stated that the  decision to exclude or include specific                                                               
allocations under  the proposed  spending cap  would be  a policy                                                               
call  not a legal question.                                                                                                     
                                                                                                                                
1:14:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CARPENTER inquired  about the  provisions related                                                               
to public enterprises and public  corporations.  He asked whether                                                               
the  existing   language  pertaining  to  revenues   from  public                                                               
corporations of  the state  that issued  revenue bonds  should be                                                               
excluded.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  STAPP  shared  his  understanding  that  existing                                                               
state-owned enterprises  (SOEs) are  excluded from  the Executive                                                               
Budget  Act  [AS  37.07].    He suspected  that  SOE's  could  be                                                               
utilized  for  bonding capacity.    He  explained that  the  bond                                                               
rating  agencies  only  allow  Alaska to  bond  $1.5  billion  in                                                               
capital  projects,  which  spoke  to   the  need  for  a  revised                                                               
appropriation limit  to give  the state  a cornerstone  for long-                                                               
term fiscal stability.                                                                                                          
                                                                                                                                
1:16:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRAY   asked  for  the  definition   of  "general                                                               
obligation (GO) bond".                                                                                                          
                                                                                                                                
REPRESENTATIVE STAPP deferred to Mr. Carpenter.                                                                                 
                                                                                                                                
1:17:23 PM                                                                                                                    
                                                                                                                                
ROB  CARPENTER, Deputy  Director,  Legislative Finance  Division,                                                               
LAA, defined a  GO bond as a  bond backed by "the  full faith and                                                               
credit of  the State of  Alaska."  He explained  that authorizing                                                               
required  passage  through the  legislature  and  a vote  of  the                                                               
people, making  it the  most secure  form of  debt issued  by the                                                               
state.                                                                                                                          
                                                                                                                                
REPRESENTATIVE GRAY  asked whether  a bond consisted  of borrowed                                                               
money that required repayment.                                                                                                  
                                                                                                                                
MR. CARPENTER  confirmed that  to bond  money, [the  state] would                                                               
issue  notes of  debt and  then borrow  the money  from a  public                                                               
market.  The  bond proceeds from the public market  would then be                                                               
spent on capital projects and repaid over time.                                                                                 
                                                                                                                                
REPRESENTATIVE GRAY asked how the interest rate was determined.                                                                 
                                                                                                                                
MR. CARPENTER  stated that  the interest  rate was  determined by                                                               
the market and Alaska's credit rating.                                                                                          
                                                                                                                                
REPRESENTATIVE  GRAY  asked  whether the  state's  credit  rating                                                               
would be impacted if the amount of debt increased over time.                                                                    
                                                                                                                                
MR. CARPENTER  answered yes,  credit rating  was impacted  by the                                                               
amount of  debt "on the books."   He explained that  if the state                                                               
continued  to  stack  debt,  the   bond  market  would  determine                                                               
Alaska's  overall  credit worthiness  based  on  the capacity  to                                                               
issue  further  debt,  existing debt,  and  the  state's  overall                                                               
revenue picture.                                                                                                                
                                                                                                                                
REPRESENTATIVE  GRAY  asked whether  GO  bond  payments would  be                                                               
outside the proposed spending cap.                                                                                              
                                                                                                                                
MR. AOTO answered yes.                                                                                                          
                                                                                                                                
REPRESENTATIVE  GRAY considered  a  scenario in  which the  state                                                               
bonded  more items  and,  ultimately,  negated the  appropriation                                                               
limit via increased spending.   In this scenario, Alaska's credit                                                               
rating  could decline  resulting in  higher interest  rates.   He                                                               
asked whether that was a possibility.                                                                                           
                                                                                                                                
MR.   AOTO   said  it   was   possible;   however,  he   reminded                                                               
Representative Gray that GO bonds required a vote of the people.                                                                
                                                                                                                                
1:21:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ALLARD  asked the bill  sponsor to expound  on the                                                               
decision to exclude GO bonds from the spending cap.                                                                             
                                                                                                                                
REPRESENTATIVE STAPP indicated that  ultimately, the decision [to                                                               
approve the bonds] would be up to the voters.                                                                                   
                                                                                                                                
CHAIR VANCE asked  why HJR 2 was put was  put forward, as opposed                                                               
to  adjusting  the dollar  value  of  the existing  appropriation                                                               
limit.                                                                                                                          
                                                                                                                                
REPRESENTATIVE STAPP explained that in  addition to setting a new                                                               
appropriation  limit,  the  goal  is to  measure  private  sector                                                               
growth.     He  opined   that  the  best   way  to   satisfy  the                                                               
legislature's  constitutional  obligation  to  the  state  is  to                                                               
prioritize individual  Alaskans by ensuring  economic opportunity                                                               
for a brighter future.                                                                                                          
                                                                                                                                
1:24:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRAY  pointed  out  that the  legislature  had  a                                                               
constitutional  obligation  to  maintain  education.    He  asked                                                               
whether  the  bill  sponsor would  consider  excluding  education                                                               
funding from the spending cap.                                                                                                  
                                                                                                                                
REPRESENTATIVE   STAPP  agreed   that  education   is  incredibly                                                               
valuable.   He  said, "Money  is  money is  money," opining  that                                                               
prioritizing operational  and capital spending  is the key  to an                                                               
effective appropriation limit.                                                                                                  
                                                                                                                                
REPRESENTATIVE GRAY  cited Article  7, Section  1, of  the Alaska                                                               
State  Constitution  and  expressed  concern  that  the  proposed                                                               
spending cap could prevent the  legislature from carrying out its                                                               
constitutional duty to establish and  maintain a system of public                                                               
schools open to all children of the state.                                                                                      
                                                                                                                                
REPRESENTATIVE STAPP  suggested that Representative  Gray propose                                                               
a constitutional funding formula for education.                                                                                 
                                                                                                                                
1:26:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN   inquired  about   the  timing   of  the                                                               
calculation.   He directed attention  to the language on  page 2,                                                               
line 2,  and asked  whether the year  preceding the  prior fiscal                                                               
year would be 2020.                                                                                                             
                                                                                                                                
REPRESENTATIVE    STAPP    shared    his    understanding    that                                                               
Representative Eastman was correct.                                                                                             
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  how  Representative  Stapp  would                                                               
describe the current inflationary environment.                                                                                  
                                                                                                                                
REPRESENTATIVE STAPP described  the current inflationary pressure                                                               
as far above the historic average of 2.5 percent.                                                                               
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  how   that  contrasted  with  the                                                               
inflationary environment of FY 20.                                                                                              
                                                                                                                                
REPRESENTATIVE  STAPP  believed  that  the  current  inflationary                                                               
pressure is much higher than that of FY 20.                                                                                     
                                                                                                                                
REPRESENTATIVE EASTMAN  sought to confirm that  future changes in                                                               
inflationary   pressure   would   need  to   be   forecasted   or                                                               
anticipated, as that data is not readily available.                                                                             
                                                                                                                                
REPRESENTATIVE STAPP clarified that inflation  as a metric is not                                                               
included  in  HJR   2.    He  asked   Representative  Eastman  to                                                               
elaborate.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  whether  it  seemed  reckless  to                                                               
remove  the  existing  inflationary  adjustment  from  the  state                                                               
spending cap  and hope  that inflation  wouldn't increase  in the                                                               
future.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  STAPP contended  that  it is  not  reckless.   He                                                               
argued that  a state government  that burned through  $10 billion                                                               
in revenue  and $16 billion  in savings over a  12-year timeframe                                                               
was  reckless.   He expressed  concern  that if  Alaska does  not                                                               
begin to  lay strong fiscal  foundations, inflation would  be the                                                               
least of its  worries, as available revenues would  cease to meet                                                               
existing operating expenses.                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  asked why HJR  2 would not  maintain some                                                               
kind of  adjustment for inflation given  that future inflationary                                                               
pressures   were   unknown.      He   expressed   concern   about                                                               
constitutionalizing a  spending cap for  which the  nominal value                                                               
was too low.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STAPP pointed  out  that voters  could choose  to                                                               
accept or reject the proposed spending cap.                                                                                     
                                                                                                                                
1:33:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GROH pointed out that  HJR 2 made an exception for                                                               
capital improvements,  as opposed  to operational  spending, such                                                               
as K-12  funding or SNAP  benefits, which many  constituents were                                                               
concerned about.   He added that capital  spending had "exploded"                                                               
during the  boom-and-bust periods referenced by  the bill sponsor                                                               
and asked Representative Stapp to speak to that.                                                                                
                                                                                                                                
REPRESENTATIVE  STAPP  pointed  out that  levels  of  operational                                                               
spending  could   decrease  based  on  the   priority  of  future                                                               
legislators.   He  challenged Representative  Groh  to propose  a                                                               
constitutional formula for education spending.                                                                                  
                                                                                                                                
REPRESENTATIVE  GROH  asked  whether the  exception  for  capital                                                               
spending would create a bias  over operational spending in future                                                               
years if HJR 2 were to pass.                                                                                                    
                                                                                                                                
REPRESENTATIVE  STAPP stated  that capital  spending is  a proven                                                               
indicator  of private  sector  growth and  GDP  development.   He                                                               
opined   that   Alaska    requires   significant   infrastructure                                                               
development, adding  that most residents would  welcome relief in                                                               
energy and  fuel bills in  the event  that the state  invested in                                                               
infrastructure to facilitate commerce.                                                                                          
                                                                                                                                
1:36:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRAY asked whether  the governor's current [FY 24]                                                               
budget   proposal  would   fall  underneath   the  constitutional                                                               
spending cap proposed in HJR 2.                                                                                                 
                                                                                                                                
REPRESENTATIVE  STAPP   said  the   current  budget   would  fall                                                               
underneath  the  constitutional limit.    He  further noted  that                                                               
should  HJR  2  pass,  the  constitutional  limit  would  not  be                                                               
effective  in  FY 24,  making  it  irrelevant to  the  governor's                                                               
proposed budget.                                                                                                                
                                                                                                                                
REPRESENTATIVE  GRAY restated  his question,  asking whether  the                                                               
governor's  FY  24  budget proposal  would  fall  underneath  the                                                               
constitutional spending cap.                                                                                                    
                                                                                                                                
MR. AOTO  shared his understanding  that the  governor's proposed                                                               
budget would not breach the  constitutional limit proposal in HJR
2.                                                                                                                              
                                                                                                                                
1:38:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ALLARD   inquired   about   the   relevance   of                                                               
hypothetical scenarios.                                                                                                         
                                                                                                                                
REPRESENTATIVE  STAPP   said  he  was  happy   to  entertain  all                                                               
questions.   He  reiterated that  ultimately, the  Alaskan voters                                                               
would  get  to  determine whether  the  constitutional  amendment                                                               
should advance.                                                                                                                 
                                                                                                                                
1:39:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN asked whether  the governor's FY 24 budget                                                               
proposal was close to exceeding the constitutional limit.                                                                       
                                                                                                                                
REPRESENTATIVE STAPP deferred to Mr. Carpenter.                                                                                 
                                                                                                                                
MR.  CARPENTER said  based on  preliminary  calculations, the  14                                                               
percent spending cap would equate  to approximately $6.2 billion.                                                               
He  estimated  that  the  appropriations  within  the  governor's                                                               
budget that  were germane to  the constitutional cap  amounted to                                                               
approximately  $5.4  billion    roughly  $800  million under  the                                                               
constitutional limit.                                                                                                           
                                                                                                                                
REPRESENTATIVE    EASTMAN    asked    how    the    supplementary                                                               
appropriations were  calculated underneath  the spending  cap, as                                                               
proposed.    Specifically,  he  asked  whether  the  recent  $393                                                               
million supplemental  budget request  would be  put on  the "tab"                                                               
for FY 23 or FY 24.                                                                                                             
                                                                                                                                
1:42:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STAPP deferred to Mr. Carpenter.                                                                                 
                                                                                                                                
MR.  CARPENTER indicated  that  the  proposed statutory  spending                                                               
limit applies to  appropriations "in" a fiscal  year, whereas the                                                               
constitutional  limit applies  to appropriations  "for" a  fiscal                                                               
year.   He added  that he would  need further  clarification from                                                               
the bill  sponsor as to  whether the  supplemental appropriations                                                               
would be "in" or "for" the fiscal year.                                                                                         
                                                                                                                                
REPRESENTATIVE  EASTMAN questioned  how GDP  would be  determined                                                               
for the purpose of the spending cap.                                                                                            
                                                                                                                                
REPRESENTATIVE STAPP indicated  that the process by  which GDP is                                                               
determined and  transmitted to the  legislature would  be similar                                                               
to that of inflation for the existing appropriation limit.                                                                      
                                                                                                                                
REPRESENTATIVE  EASTMAN asked  when GDP  would be  transmitted to                                                               
the legislature and how much time  the body would have to craft a                                                               
budget that fell underneath the GDP-based cap.                                                                                  
                                                                                                                                
MR. AOTO offered to follow up with the requested information.                                                                   
                                                                                                                                
1:47:04 PM                                                                                                                    
                                                                                                                                
CHAIR VANCE asked whether a  transmittal date would be determined                                                               
and inserted on page 2, lines 3-4.                                                                                              
                                                                                                                                
REPRESENTATIVE STAPP was unsure whether  that would be the proper                                                               
place in the language.  He deferred to Ms. Marx.                                                                                
                                                                                                                                
MS. MARX explained that  typically, constitutional provisions are                                                               
drafted with  broader language, whereas  the specific  nuances of                                                               
the law  are placed into  statute.   She expounded that  based on                                                               
HJR 2, the legislature could  establish additional provisions and                                                               
procedures  in  statute  that were  necessary  to  implement  the                                                               
constitutional requirement.                                                                                                     
                                                                                                                                
CHAIR VANCE  directed attention to  page 1, line 16  and inquired                                                               
about the  implications of referencing  federal law in  the state                                                               
constitution.                                                                                                                   
                                                                                                                                
MS. MARX said she did not  understand the question.  She conveyed                                                               
that  the data  on GDP  would come  from the  federal government,                                                               
which explained the  reference to the federal  bureau and federal                                                               
law on page 1, line 16.                                                                                                         
                                                                                                                                
REPRESENTATIVE  VANCE  asked what  would  happen  if the  federal                                                               
bureau stopped providing economic analyses on GDP.                                                                              
                                                                                                                                
MS. MARX acknowledged  that the point highlighted  by Chair Vance                                                               
was a  downside to having  specific language in the  Alaska State                                                               
Constitution.                                                                                                                   
                                                                                                                                
1:51:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN pondered to  what extent the data provided                                                               
by the federal government is susceptible to political pressure.                                                                 
                                                                                                                                
REPRESENTATIVE STAPP pointed out that  the same argument could be                                                               
made  for the  census  data used  in  the existing  appropriation                                                               
limit.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  EASTMAN considered  a scenario  in which  the new                                                               
formula enshrined in the constitution,  per HJR 2, "isn't working                                                               
for some reason."   He asked how much time it  would take to roll                                                               
back  the  constitutional  amendment  and  fix  the  hypothetical                                                               
error.                                                                                                                          
                                                                                                                                
MS.  MARX  outlined  the  following   process  for  amending  the                                                               
constitution: firstly, a  resolution would need to  pass from the                                                               
legislature  with a  two-thirds  vote;  secondly, the  resolution                                                               
would appear  on the ballot  at the  next general election  to be                                                               
voted on by the public.                                                                                                         
                                                                                                                                
1:55:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  considered a  scenario  in  which HJR  2                                                               
passed from  the legislature tomorrow.   He asked how  long until                                                               
the resolution would be effective and constitutionally binding.                                                                 
                                                                                                                                
MS. MARX  noted that  the next  general election  was 2024.   She                                                               
reported  that per  Article 13,  Section 1,  of the  Alaska State                                                               
Constitution,  unless  otherwise   provided,  the  constitutional                                                               
amendment would become effective  30 days after the certification                                                               
of the election returns by the lieutenant governor.                                                                             
                                                                                                                                
1:56:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE VANCE opened public testimony on HJR 2.                                                                          
                                                                                                                                
1:56:29 PM                                                                                                                    
                                                                                                                                
KEVIN  BERRY, Associate  Professor  of  Economics, University  of                                                               
Alaska  Anchorage (UAA),  pointed out  that HJR  is prototypical,                                                               
meaning that spending  would increase when GDP  was higher, which                                                               
would  exacerbate  business  cycles  in  Alaska.    He  said  the                                                               
government had  two different ways  of making economic  policy to                                                               
influence  growth:  monetary  policy  and  fiscal  policy.    The                                                               
federal  government can  do both;  however, Alaska's  economy was                                                               
often  counter cyclical  to the  rest  of the  country, he  said,                                                               
adding that  monetary policy could  not be utilized at  the state                                                               
level.   For  that reason,  he opined  that HJR  2 would  tie the                                                               
state's  hands,  making  it  harder to  craft  fiscal  policy  to                                                               
counter federal  policy that  was not beneficial  to Alaska.   He                                                               
provided  an  example.    He  argued  that  exacerbation  of  the                                                               
business  cycle  could cause  more  people  to leave  the  state,                                                               
further  destabilizing   the  population   and  workforce.     He                                                               
concluded  by emphasizing  the importance  of utilizing  accurate                                                               
inflation measures when considering the spending cap.                                                                           
                                                                                                                                
1:59:29 PM                                                                                                                    
                                                                                                                                
KATIE CAPOZZI, President, Alaska  Chamber, stated her support for                                                               
a meaningful spending cap.   She remarked that the existing state                                                               
spending  cap was  outdated and  did not  restrict spending  in a                                                               
"serious" way.   She explained  that when revenues fails  to meet                                                               
budgeted expenses,  the business community would  be targeted for                                                               
increased  taxes, fines,  and  fees  to fill  the  deficit.   She                                                               
stressed   the  need   for  stability   and  predictability   for                                                               
businesses  to grow,  invest in  the state,  and hire  employees.                                                               
She emphasized  that the  constant looming  threat of  needing to                                                               
bail out  a state government  that periodically overspends  was a                                                               
disincentive to invest  in Alaska.  She opined  that a meaningful                                                               
cap  would go  a long  way  in showing  Alaskans that  government                                                               
could be  trusted to  spend wisely  and provide  a safety  net of                                                               
core government services during years  of revenue shortfalls.  As                                                               
state leaders  ask Alaskans to  contribute to state  revenue with                                                               
increased or  new taxes, she  requested assurances  that dramatic                                                               
overspending would not occur once  more money was available.  She                                                               
cited an  annual public  opinion survey  conducted by  the Alaska                                                               
Chamber,  indicating  that  Alaskans supported  a  constitutional                                                               
spending cap by  over 60 percent.  In closing  she noted that the                                                               
chamber had  not taken  an official  position on  any legislation                                                               
related  to  an  appropriation  limit;  nonetheless,  the  Alaska                                                               
Chamber strongly supports the policy in general.                                                                                
                                                                                                                                
2:03:08 PM                                                                                                                    
                                                                                                                                
CHAIR  VANCE closed  public testimony  on HJR  2.   She announced                                                               
that the resolution would be held over.                                                                                         
                                                                                                                                
             HB  38-APPROPRIATION LIMIT; GOV BUDGET                                                                         
                 HJR  2-CONST. AM: APPROP LIMIT                                                                             
                                                                                                                                
2:03:39 PM                                                                                                                    
                                                                                                                                
CHAIR VANCE announced  that the final order of  business would be                                                               
HOUSE BILL  NO. 38, "An  Act relating to an  appropriation limit;                                                               
relating  to the  budget responsibilities  of  the governor;  and                                                               
providing for an  effective date" and HOUSE  JOINT RESOLUTION NO.                                                               
2,  Proposing amendments  to  the Constitution  of  the State  of                                                               
Alaska relating to an appropriation limit.                                                                                      
                                                                                                                                
2:03:56 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:03 p.m. to 2:07 p.m.                                                                       
                                                                                                                                
2:07:04 PM                                                                                                                    
                                                                                                                                
CHAIR VANCE asked  the bill sponsor to  highlight key differences                                                               
between HB 38 and HJR 2.                                                                                                        
                                                                                                                                
2:07:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILL  STAPP,   Alaska  State  Legislature,  prime                                                               
sponsor of HB  38, indicated that the  main structural difference                                                               
between the  two proposals was  the percentages, adding  that the                                                               
statutory limit  is set  at 11.5  percent.   Further, conditional                                                               
language  was  included  in  HB  38, which  ties  it  to  HJR  2,                                                               
effectively making it so one  could not properly function without                                                               
the other.                                                                                                                      
                                                                                                                                
2:08:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN asked  the bill  sponsor to  contrast the                                                               
constitutional  limit   against  the  statutory  limit   of  11.5                                                               
percent.                                                                                                                        
                                                                                                                                
REPRESENTATIVE STAPP responded that  the constitutional limit, as                                                               
proposed, is 14 percent.                                                                                                        
                                                                                                                                
REPRESENTATIVE EASTMAN  asked why the  statutory limit is  set at                                                               
11.5  percent,  as opposed  to  keeping  it consistent  with  the                                                               
constitutional limit of 14 percent.                                                                                             
                                                                                                                                
REPRESENTATIVE STAPP deferred to his staff, Mr. Aoto.                                                                           
                                                                                                                                
2:09:32 PM                                                                                                                    
                                                                                                                                
BERNARD  AOTO, Staff,  Representative  Will  Stapp, Alaska  State                                                               
Legislature,  said  the  11.5 percent  was  calculated  based  on                                                               
spending  habits as  exhibited  by the  legislature  in the  late                                                               
1970s prior to  the oil boom of the 1980s  and the constitutional                                                               
cap, as provided in 1983.                                                                                                       
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  whether the  governor's  [FY  24]                                                               
budget  proposal  would  fall   underneath  the  statutory  limit                                                               
proposed in HB 38.                                                                                                              
                                                                                                                                
MR. AOTO stated that the  governor's proposed budget would breach                                                               
the statutory  limit.  He  added that the legislature  would have                                                               
the   ability   breach   the  statutory   limit,   as   long   as                                                               
appropriations remained underneath the  constitutional limit.  He                                                               
noted  that neither  HB  38 nor  HJR  2 would  impact  the FY  24                                                               
budget,  as   both  were  intertwined,  and   the  constitutional                                                               
provision required a vote of the people to go into effect.                                                                      
                                                                                                                                
REPRESENTATIVE  EASTMAN  considered a  scenario  in  which HB  38                                                               
passed the legislature  sooner than HJR 2.  He  sought to confirm                                                               
that  the statutory  limit would  not  go into  effect until  the                                                               
constitutional provision was enacted.                                                                                           
                                                                                                                                
MR. AOTO answered yes.                                                                                                          
                                                                                                                                
2:11:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GROH  asked whether  the statutory  limit includes                                                               
exceptions related  to the Alaska  Mental Health  Trust Authority                                                               
(AMHTA).                                                                                                                        
                                                                                                                                
MR. AOTO acknowledged that the  exceptions differed between HJR 2                                                               
and  HB 38;  however, he  shared his  belief that  the exceptions                                                               
"were  supposed  to match."    He  remarked, "the  mental  health                                                               
funds, as an exception in one, are  meant to keep it in line with                                                               
the other."                                                                                                                     
                                                                                                                                
REPRESENTATIVE GROH requested a more extensive explanation.                                                                     
                                                                                                                                
2:12:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRAY  inquired about  the vote  threshold required                                                               
to surpass the statutory spending cap.                                                                                          
                                                                                                                                
MR. AOTO shared  his understanding that a two-thirds  vote of the                                                               
legislative body was needed to  override the statutory limit.  He                                                               
reiterated  that because  HB  38 is  tied  to the  constitutional                                                               
limit  provided  in HJR  2,  the  statutory  limit would  not  be                                                               
effective  until the  constitutional  provision was  voted on  by                                                               
Alaskans and subsequently enacted.                                                                                              
                                                                                                                                
REPRESENTATIVE GRAY  questioned why  the statutory limit  is tied                                                               
to the constitutional limit.                                                                                                    
                                                                                                                                
MR.  AOTO  stated that  the  constitutional  limit served  as  an                                                               
enforcement  mechanism, as  the  legislature had  the ability  to                                                               
override the statutory spending limit with a two-thirds vote.                                                                   
                                                                                                                                
REPRESENTATIVE GRAY expressed confusion  as to the vote threshold                                                               
required to surpass the proposed statutory spending limit.                                                                      
                                                                                                                                
MR. AOTO deferred to Ms. Marx.                                                                                                  
                                                                                                                                
2:16:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STAPP  asked Representative  Gray to  rephrase the                                                               
question.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  GRAY inquired  about the  vote count  required to                                                               
surpass the statutory limit.   Additionally, he asked whether the                                                               
constitutional  limit  could be  surpassed  with  a vote  of  the                                                               
legislature.                                                                                                                    
                                                                                                                                
MR.  AOTO  shared  his   understanding  that  the  constitutional                                                               
[limit] could not be surpassed by the legislature.                                                                              
                                                                                                                                
REPRESENTATIVE GRAY remarked:                                                                                                   
                                                                                                                                
     Correct me if  I'm wrong, if we just  had the statutory                                                                    
        11.5  percent    we  would  just  need 21  votes  to                                                                    
     override, but  if we  put the  constitutional amendment                                                                    
     in place,  there's language that  states that  we would                                                                    
     need two-thirds  to override that  11.5 percent.     We                                                                    
     can't go above 14 percent    but we could go above 11.5                                                                    
     percent with  a two-thirds vote; however,  without that                                                                    
     constitutional amendment, we could override that 11.5                                                                      
     percent with 21 [votes].                                                                                                   
                                                                                                                                
REPRESENTATIVE GRAY asked whether that was correct.                                                                             
                                                                                                                                
REPRESENTATIVE   STAPP  clarified   that  Representative   Gray's                                                               
summation was not  entirely accurate.  He  reminded the committee                                                               
that if  HJR 2 did not  pass, the statutory limit  would cease to                                                               
exist due to the conditional language in the bill.                                                                              
                                                                                                                                
CHAIR  VANCE asked  Ms.  Marx  to speak  to  the vote  thresholds                                                               
required   to  surpass   a  statutory   spending   limit  and   a                                                               
constitutional spending limit.                                                                                                  
                                                                                                                                
2:18:54 PM                                                                                                                    
                                                                                                                                
MARIE MARX, Attorney, Legislative  Legal Services, LAA, clarified                                                               
that the  legislature could not exceed  the constitutional limit,                                                               
as  the state  constitution  was  binding on  all  the people  of                                                               
Alaska, including the legislature.                                                                                              
                                                                                                                                
CHAIR VANCE  inquired about the  repercussions for  exceeding the                                                               
constitutional limit.                                                                                                           
                                                                                                                                
MS.  MARX  speculated  that  the   action  would  be  subject  to                                                               
litigation and resolved through the courts.                                                                                     
                                                                                                                                
CHAIR VANCE asked whether there  had been instances of historical                                                               
action against the legislature for similar scenarios.                                                                           
                                                                                                                                
MS.  MARX   did  not  know   that  answer  with  regard   to  the                                                               
appropriation limit.  She referenced  the 2020 lawsuit pertaining                                                               
to the RPL  process [Eric Forrer v. State of  Alaska], in which a                                                             
citizen  asserted that  using RPLs  to  allocate certain  federal                                                               
funds was unconstitutional and could only  be done with an act of                                                               
the  legislature.    She  added  that  there  were  other  recent                                                               
instances, in  addition to the  aforementioned case,  of citizens                                                               
suing the legislature for unconstitutional actions.                                                                             
                                                                                                                                
2:21:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CARPENTER  asked how  the courts had  responded in                                                               
the past to the violation of an appropriation statute.                                                                          
                                                                                                                                
MS.  MARX stated  that the  statutory  limit was  not binding  in                                                               
regard  to legislative  spending.   She  stressed  that, per  the                                                               
state  constitution, the  legislature had  the absolute  power of                                                               
appropriation,   which  could   not  be   limited  by   statutory                                                               
authority.      She   reiterated   that   constitutionally,   the                                                               
legislature was not bound by statutory appropriation limits.                                                                    
                                                                                                                                
REPRESENTATIVE CARPENTER  inferred that  the courts  would likely                                                               
rule in  the legislature's  favor if  a citizen  were to  sue the                                                               
state for violating the statutory appropriation limit.                                                                          
                                                                                                                                
2:24:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  inquired about  the two-thirds  vote that                                                               
Mr. Aoto had referenced earlier.   He questioned the mechanism by                                                               
which  the legislature  could violate  statute with  a two-thirds                                                               
vote.                                                                                                                           
                                                                                                                                
MR. AOTO stated that he had misspoken.                                                                                          
                                                                                                                                
2:24:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GROH pointed out that  there is a provision in HJR
2  that allows  for an  affirmative  vote of  two-thirds of  each                                                               
legislative body to appropriate  an additional amount for capitol                                                               
improvements.   He  asked  whether  that had  been  the point  of                                                               
confusion.                                                                                                                      
                                                                                                                                
MR.  AOTO  remarked,   "In  all  honesty,  the   entire  line  of                                                               
questioning was very confusing."                                                                                                
                                                                                                                                
2:25:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  shared his understanding that  unless the                                                               
legislature could come up with  an affirmative two-thirds vote of                                                               
both  bodies to  pass  a constitutional  amendment, any  spending                                                               
limit  would   not  be  enforced   by  the  courts   against  the                                                               
legislature.   Effectively, the legislature  could spend  as much                                                               
as it wanted, he surmised.  He asked whether that was correct.                                                                  
                                                                                                                                
REPRESENTATIVE STAPP  remarked, "All  the more  reason to  have a                                                               
constitutional spending limit  to have some sort  of restraint on                                                               
individuals."                                                                                                                   
                                                                                                                                
MR. AOTO  confirmed that  Representative Eastman's  summation was                                                               
accurate.  He  pointed out that the legislature  had breached the                                                               
existing statutory spending limit  several times in recent years;                                                               
however,   the  current   constitutional  limit   had  not   been                                                               
surpassed.                                                                                                                      
                                                                                                                                
REPRESENTATIVE EASTMAN pointed out that it would be extremely                                                                   
difficult to breach the existing constitutional spending limit.                                                                 
                                                                                                                                
2:27:23 PM                                                                                                                    
                                                                                                                                
CHAIR VANCE opened public testimony  on HB 38; after ascertaining                                                               
that no  one wished to  testify online  or in person,  she closed                                                               
public testimony.   She announced that  HB 38 and HJR  2 would be                                                               
held over.                                                                                                                      

Document Name Date/Time Subjects
HJR 2 - Sponsor Statement.pdf HJUD 2/15/2023 1:00:00 PM
HJR 2
HJR 2 - v.A.PDF HJUD 2/15/2023 1:00:00 PM
HJR 2
HJR 2 - Fiscal Note - DOE.pdf HJUD 2/15/2023 1:00:00 PM
HJR 2
HB 38 - Leg Memo FPWG.pdf HJUD 2/15/2023 1:00:00 PM
HB 38
HB 38 - Leg Memo PFD.pdf HJUD 2/15/2023 1:00:00 PM
HB 38
HB 38 - Fiscal Note - OMB.pdf HJUD 2/15/2023 1:00:00 PM
HB 38
HB 38 - HJR 2 Presentation 1.25.23.pdf HJUD 1/27/2023 1:00:00 PM
HJUD 2/15/2023 1:00:00 PM
HB 38
HJR 2
HB 38 - HJR 2 Research Appropriation Limit Data.pdf HJUD 1/27/2023 1:00:00 PM
HJUD 2/15/2023 1:00:00 PM
HB 38
HJR 2
HB 38 - HJR 2 Research GDP information 1.25.23.pdf HJUD 1/27/2023 1:00:00 PM
HJUD 2/15/2023 1:00:00 PM
HB 38
HJR 2
HB 38 - HJR 2 Reserach AG Opinion from 1983 1.25.23.pdf HJUD 1/27/2023 1:00:00 PM
HJUD 2/15/2023 1:00:00 PM
HB 38
HJR 2