Legislature(2021 - 2022)GRUENBERG 120
10/14/2021 01:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HJR402|| HJR403 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR403 | TELECONFERENCED | |
| *+ | HJR402 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HJR402-CONST AM: DIVIDENDS
HJR403-CONST. AM: GENERAL FUND SURPLUS
1:03:16 PM
VICE CHAIR CLAMAN announced that the only order of business
would be HOUSE JOINT RESOLUTION NO. 402, Proposing amendments to
the Constitution of the State of Alaska relating to payment of a
dividend to eligible state residents; HOUSE JOINT RESOLUTION NO.
403, Proposing amendments to the Constitution of the State of
Alaska relating to an unrestricted general fund surplus, the
Alaska permanent fund, and the budget reserve fund.
1:04:00 PM
REPRESENTATIVE GRIER HOPKINS, Alaska State Legislature, prime
sponsor, introduced HJR 402 and HJR 403. HJR 402, he said,
provides that there shall be a dividend, which shall be paid
according to a formula in state law. Regarding HJR 403, he
paraphrased the sponsor statement [included in the committee
packet], which read as follows [original punctuation provided]:
Alaskans are beneficiaries of the foresight of our
state's founders, who ensured that state-owned
resources would be managed for the maximum benefit of
all Alaskans (Article VIII Section 2). Unique among
states, Alaska's constitution creates communal
ownership of state resources what former Governor
Wally Hickel called "the Owner State."
In 1990, with numerous multimillion-dollar oil
taxation lawsuits pending in the courts, voters of
Alaska approved creation of the Constitutional Budget
Reserve (Article IX, Section 17), a fund which would
capture "all money received?as a result of?an
administrative proceeding or of litigation in a State
or federal court?in the budget reserve fund." In most
cases, appropriating monies from the fund requires a ?
vote of both houses of the legislature. Until funds
appropriated from the CBR are repaid, "the amount of
money in the general fund available for appropriation
at the end of each succeeding fiscal year shall be
deposited in the budget reserve fund," a maneuver now
dubbed "the sweep."
Since the advent of Alaska's oil boom, citizens and
elected leaders have sought ways to restrict state
spending during boom years, in the hopes that the
savings would pay for essential services and provide
economic relief to Alaskans during inevitable bust
years. While numerous attempts have been made,
including the adoption of a complex and (in
retrospect) unworkable Appropriation Limit amendment
in 1982 (Article IX Section 16), crafting a
politically acceptable mathematical formula which
simultaneously restrains spending AND protects
Alaskans' interests and access to essential services
during years of economic hardship has proven daunting.
HJR 403 seeks to incentivize Alaska's leaders to NOT
spend every dollar available by replacing the "sweep"
provision of the CBR with a mandate that all future
state surpluses as defined by statute - be split
evenly between the Constitutional Budget Reserve and
the payment of dividends to eligible Alaska residents.
This "political spending cap" would see Alaskans
benefit directly from actions to restrain spending.
Additionally, an equal amount would be deposited into
the CBR to build our "rainy day fund" for inevitable
economic challenges in the years ahead. Further, HJR
403 maintains the constitutional prohibition on
dedicated funds while protecting statutorily
designated funds thus preserving the legislature's
power of appropriation and the ability of future
legislators to respond to challenges and
opportunities.
1:12:09 PM
JOE HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, on behalf of Representative Hopkins, prime
sponsor, provided brief introductory remarks, noting that the
proposed resolutions were intended to renew the relationship and
trust between Alaska's citizens and their elected officials. He
introduced a PowerPoint presentation, titled "HJR 403; A New
Vision for Alaska's Fiscal Future" [hard copy included in the
committee packet]. He began on slide 2, which read as follows
[original punctuation provided]:
What is the Goal of a Spending Cap?
• Restrain Spending
• Save/Return Excess Revenue
• Cuts or New Revenues Necessary to Expand Services
1:14:19 PM
MR. HARDENBROOK continued to slide 3, which read as follows
[original punctuation provided]:
What are the Challenges of a spending cap?
• Crafting durable, multi-year formula
• Crises/funding shortfalls/windfalls
• Political agreement on formula, definitions,
priorities
1:15:28 PM
MR. HARDENBROOK turned to slide 4, which read as follows
[original punctuation provided]:
HJR 403
• A "political" spending cap
• Strengthens "owner state" principles
• No complex formulas in the constitution
• Transparency, flexibility & accountability
MR. HARDENBROOK advanced to slide 5, which provided a flow chart
of HJR 403. After the budget was developed, he explained, the
surplus (if any) would be split equally between the PFD and the
constitutional budget reserve (CBR). He proceeded to slide 6,
stating that HJR 403 was crafted with the goal of incentivizing
savings, growing the dividend, and removing roadblocks that
hamper transparency and accountability in state finances.
1:17:23 PM
MR. HARDENBROOK continued to slide 7, which read as follows
[original punctuation provided]:
What wouldn't change:
• CBR remains "rainy day" fund
• vote necessary to appropriate from CBR
• Legal proceeds deposited in CBR
• Constitution's dedicated fund prohibition
1:18:03 PM
MR. HARDENBROOK continued to slide 8, which read as follows
[original punctuation provided]:
What would change:
• Alaskans receive share of future state surpluses
o "surplus" defined in statute
• Potential new funding stream for dividends
• "Sweep" provision replaced with saving/sharing
1:18:42 PM
MR. HARDENBROOK continued to slide 9, which read as follows
[original punctuation provided]:
Challenges:
• Defining "surplus" in statute
• Calculating surplus in time for dividend
distribution
• Maintaining CBR without "sweep"
1:19:50 PM
MR. HARDENBROOK continued to slide 10, which read as follows
[original punctuation provided]:
HB 326 FY 2010 supplemental budget
• Page 22, line 21 section 18:
• "The amount available in the general fund at the
end of the fiscal year ending June 30, 2010,
after all other appropriations have been made, is
appropriated from the general fund to the budget
reserve fund"
• "Fifty percent of the amount available in the
general fund at the end of the fiscal year ending
June 30, 2023, after all other appropriations
have been made, is appropriated from the general
fund to the budget reserve fund."
• "Fifty percent of the amount available in the
general fund at the end of the fiscal year ending
June 30, 2023, after all other appropriations
have been made, is appropriated from the general
fund to the dividend fund for the payment of the
permanent fund dividends."
VICE CHAIR CLAMAN invited questions from committee members on
HJR 403.
1:21:18 PM
REPRESENTATIVE TARR inquired about the debt owed to the CBR and
how that would be addressed under the proposed legislation.
REPRESENTATIVE HOPKINS said the legislature's debt to the CBR
would not be forgiven. He explained that the "moral obligation"
to repay the CBR debt would remain; however, HJR 403 would
remove the "sweep," as well as the requirement to repay the
amount appropriated to the CBR.
REPRESENTATIVE TARR asked whether there was an estimated amount
for the dividend under this proposal.
REPRESENTATIVE HOPKINS explained that this would not be the only
mechanism to pay the dividend, pointing out that the statutory
formula would still be on the books. He clarified that 50
percent of the budget surplus allotted for the dividend would be
in addition to the statutory formula.
VICE CHAIR CLAMAN asked how much was owed to the CBR.
1:24:58 PM
ALEXEI PAINTER, Director, Legislative Finance Division, said the
amount was in dispute between the Division of Legislative Audit
and the administration. He noted that the amount was either $11
billion or $12 billion.
1:25:31 PM
REPRESENTATIVE KAUFMAN said it was unclear how the current
proposal would cap spending. He asked whether the spending cap
was purely based on political pressure.
REPRESENTATIVE HOPKINS acknowledged that it would be a
legislative decision rather than a formula.
REPRESENTATIVE KAUFMAN characterized HJR 403 as more of an
appropriation plan, as opposed to a spending cap.
REPRESENTATIVE HOPKINS explained that HJR 403 was intended to
incentivize fiscal prudency.
1:27:52 PM
REPRESENTATIVE TARR inquired about scenarios beyond the
legislature's control, such as fire season. She asked whether a
scenario could be created in which the legislature was impacted
by public pressure to spend less in order to create a higher
surplus to increase the dividend.
REPRESENTATIVE HOPKINS believed that pressure was already being
dealt with today. He reiterated that the proposed resolution
would be an additional mechanism to utilize the "net dividend
process." He stated that he envisioned HJR 403 as a package
deal with a new dividend formula.
1:31:14 PM
REPRESENTATIVE KREISS-TOMKINS inquired about the notion of debt
owed to the CBR. He was unsure whether having $11 billion in
the CBR would serve a purpose with a balanced budget and
structural solution in place. He asked whether that premise had
been examined and why the bill sponsor felt that having a
surplus in the CBR would be valuable.
REPRESENTATIVE HOPKINS said he was not advocating for making
repayment to the CBR the top priority. He suggested that the
legislature may want to take a more "measured" approach at that,
adding that [50 percent of the surplus] could be allocated
towards inflation proofing, education, or the Alaska Permanent
Fund, for example. He said it would be a value judgement for
the legislature to make each year.
1:34:58 PM
REPRESENTATIVE HOPKINS, in response to a question from
Representative Story, explained that the funds appropriated to a
department within a given budget year would not be surplus
dollars; therefore, those dollars would not fall under the scope
of HJR 403. Similarly, the capital budget would not be surplus
dollars either. He deferred to Mr. Painter to speak to the
annual surplus.
1:37:37 PM
MR. PAINTER said there was a "definitional question" in terms of
identifying a surplus. He reported that FY 22 was the 10th
straight year of budget deficits; however, per the constitution,
the deficit must be filled from a source. Generally, those
deficits had been filled from savings accounts with an open-
ended draw, he said. He recalled that in the last two years, a
portion of the state budget had been taken directly from the CBR
to create a post-transfer surplus; nonetheless, there was still
a net deficit. In FY 21, the deficit was less than $1 billion,
so the surplus was transferred to the statutory budget reserve
(SBR) via appropriation bills. The surplus from FY 21 was then
used to fill the deficit in FY 22. He concluded that to some
degree, there was a surplus in FY 21 and FY 22; however, the
surplus did not exist on a cashflow basis. He said the proposed
legislation would need to clarify whether the surplus was a net
surplus or a surplus based on appropriations from the general
fund (GF). He reiterated the difficulty of defining a surplus.
1:40:31 PM
MR. HARDENBROOK resumed the presentation on 13, which read as
follows [original punctuation provided]:
HJR 402 Accountability:
• There shall be a dividend
• The dividend shall be paid according to a formula
in state law
• Alaska's owner state principles in action
1:41:43 PM
MR. HARDENBROOK continued to slide 14, which read as follows
[original punctuation provided]:
HJR 402 Flexibility:
• Dividends may be paid from any funding source
o PF earnings, oil & gas revenues, general
fund
• Formula & eligibility statutes may be amended
o Future legislators may change program to
meet new challenges or opportunities
1:42:28 PM
MR. HARDENBROOK turned to slide 15, which read as follows
[original punctuation provided]:
What wouldn't change:
• Statutes detailing eligibility for dividends
• Permanent Fund Corporation
• Formula statute can be amended
1:42:51 PM
MR. HARDENBROOK concluded on slide 16, which read as follows
[original punctuation provided]:
What would change:
• Legislature must follow dividend formula or
change the law
• Constitutional mandate that dividends be paid
every year
1:43:31 PM
REPRESENTATIVE KREISS-TOMKINS inquired about the feedback from
Legislative Legal Services about potential weak constitutional
links or ambiguities.
1:44:26 PM
EMILY NAUMAN, Deputy Director, Legislative Legal Services, said
there were no obvious legal issues with the proposed
resolutions.
REPRESENTATIVE HOPKINS said it was his intention that HJR 402
would not be a standalone item. He envisioned it paired with
legislation that would constitutionalize the percent of market
value (POMV).
1:45:42 PM
MS. NAUMAN, in response to a question from Vice Chair Claman,
pointed out that Wielechowski v. State was based on a statutory
dividend formula whereas the current proposal would add to the
constitution. She shared her understanding that the proposed
amendment would overrule Wielechowski v. State, and the
legislature would be obligated to follow the formula as a
constitutional provision.
VICE CHAIR CLAMAN sought to confirm that Ms. Nauman had
indicated that the current statutory [dividend] formula would
become binding if the proposed amendment were to pass.
MS. NAUMAN answered yes.
1:47:19 PM
REPRESENTATIVE TARR opined that the proposed amendments were a
combination of HJR 7 and HJR 1. She asked whether that was
accidental or intentional. Additionally, she inquired about
that benefit of implanting two constitutional amendments.
REPRESENTATIVE HOPKINS acknowledged that it would be a question
for further deliberation in the committee process. He
reiterated that his intention was to offer an alternative
solution for consideration.
1:50:21 PM
REPRESENTATIVE KREISS-TOMKINS pondered whether it was helpful to
have multiple vehicles, as opposed to a singular solution. He
pointed out that HJR 1, which was currently in the House Finance
Committee, could be amended as part of a compromise to include
provisions in HJR 402 and HJR 403.
VICE CHAIR CLAMAN pointed out that if Ms. Nauman was correct in
that the dividend formula would become constitutionally binding,
the dividend would become the highest priority for state
spending. He asked whether that was a good idea.
1:53:37 PM
REPRESENTATIVE HOPKINS opined that the dividend should not be
the top priority. He believed that a long-term fiscal plan was
the most pressing matter.
VICE CHAIR CLAMAN sought to confirm that deleting the language
"according to a formula set out in law" on line 8 of HJR 402
would remove the binding aspect of the amendment.
MS. NAUMAN answered yes, removing that language would make the
legislature responsible for some dividend, which could be $1,
for example. The legislature would not have to appropriate for
a dividend according to a formula set out in law, she said.
1:56:24 PM
REPRESENTATIVE EASTMAN remarked:
If we're saying that the legislature wants to deal
with appropriations a certain way - we want to require
a certain type of appropriation to be followed
instantiating in the constitution that, yes, that is
part of the legislature's ability to pass a law that
is then incumbent on a future legislature to follow.
REPRESENTATIVE EASTMAN suggested clarifying in a broader context
what the legislature had the authority to bind future
legislature's by in terms of appropriations.
REPRESENTATIVE HOPKINS supposed that could be an option;
however, he believed it would raise concerns with dedicated
funds and the flexibility that's necessary to address annual
revenue concerns. He believed that fiscal elements needed to be
addressed extremely carefully in order to avoid unintended
consequences.
2:01:23 PM
REPRESENTATIVE KREISS-TOMKINS, in response to Representative
Eastman, pointed out that there were many appropriation-related
laws that the legislature seemed content to ignore, such as
senior benefits and senior property tax exemption reimbursement.
He opined that until there was equal righteousness about the
"non fidelity" to those laws, the statement made by
Representative Eastman seemed selective. He welcomed a
response.
2:02:54 PM
REPRESENTATIVE KREISS-TOMKINS inquired about constitutional
revision versus constitutional amendments. He asked how
ambitious the legislature could be with various joint
resolutions without activating the question of a constitutional
revision.
MS. NAUMAN said it was difficult to distill the difference
between an amendment and a [revision], in part, because there
was only one case in the state that helped delineate the
difference. She reminded the committee that a revision would
require a constitutional convention. In general, she said, a
revision was a broad sweeping change to the structure of the
constitution. She asked whether Representative Kreiss-Tomkins
was asking whether the proposed resolutions constituted a
revision or an amendment.
REPRESENTATIVE KREISS-TOMKINS answered yes.
MS. NAUMAN opined that the proposed resolution would not
constitute a revision. She highlighted a concern with the
resolutions that either tinker with the dividend or require a
dividend, as they would potentially take a large amount of money
out of the hands of the legislature, which is the appropriating
body. However, because the legislature could change the
dividend formula under HJR 402 and HJR 403, it would still have
the capacity to control a large amount of that revenue.
VICE CHAIR CLAMAN inquired about the court case that addressed
constitutional revision versus amendment.
MS. NAUMAN offered to follow up with the requested information.
2:06:37 PM
REPRESENTATIVE HOPKINS, in response to a question from
Representative Eastman, said he had intentionally excluded a
constitutional dividend formula to provide the legislature with
the ability to change the statutory formula in the future,
thereby maintain flexibility for funding mechanisms. He
reiterated his belief that a long-term fiscal policy should be
prioritized.
REPRESENTATIVE EASTMAN asked whether the sponsor would be open
to an amendment that would add senior tax exemptions to the list
of laws that needed to be followed by future legislatures.
REPRESENTATIVE HOPKINS said, at this time, no, as it would not
address long-term fiscal policy.
2:13:14 PM
REPRESENTATIVE STORY asked why HJR 402 and HJR 403 would be an
easier path forward.
REPRESENTATIVE HOPKINS responded, "Hope springs eternal."
VICE CHAIR CLAMAN announced that HJR 402 and HJR 403 were held
over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 403 and HJR 402 Presentation_H STA_10.14.21.pdf |
HSTA 10/14/2021 1:00:00 PM |
HJR402 HJR403 |
| HJR 403 Sponsor Statement.pdf |
HSTA 10/14/2021 1:00:00 PM |
HJR403 |
| HJR 403_Fiscal Note_OOG-DOE_10.13.21.pdf |
HSTA 10/14/2021 1:00:00 PM |
HJR403 |
| HJR 402_Fiscal Note_OOG-DOE_10.13.21.pdf |
HSTA 10/14/2021 1:00:00 PM |
HJR402 |
| HJR402A.PDF |
HSTA 10/14/2021 1:00:00 PM |
HJR402 |
| HJR403A.PDF |
HSTA 10/14/2021 1:00:00 PM |
HJR403 |