Legislature(2023 - 2024)BUTROVICH 205
04/05/2023 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| SB20|| SJR4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 53 | TELECONFERENCED | |
| *+ | SB 20 | TELECONFERENCED | |
| *+ | SJR 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 20-APPROPRIATION LIMIT; GOV BUDGET
SJR 4-CONST. AM: APPROP LIMIT
1:49:12 PM
CHAIR CLAMAN announced the consideration of SPONSOR SUBSTITUTE
FOR SENATE BILL NO. 20 "An Act relating to an appropriation
limit; relating to the budget responsibilities of the governor;
and providing for an effective date."
and
SPONSOR SUBSTITUTE FOR SENATE JOINT RESOLUTION NO. 4 Proposing
amendments to the Constitution of the State of Alaska relating
to an appropriation limit.
1:49:56 PM
SENATOR JAMES KAUFMAN, District F, speaking as sponsor of SB 20
and SJR 4, summarized the following sponsor statement:
SJR 4 and SB 20 work together to create a
constitutional and statutory framework for how we
limit appropriations. A spending limit was one of the
elements agreed upon by Comprehensive Fiscal Plan
Working Group as a necessary component of a
comprehensive fiscal plan.
Alaska has been operating without an effective
appropriation limit for nearly 40 years, resulting in
less than-meaningful control of our state spending.
The current limit was enacted in 1982 when Alaska was
approaching peak oil production. The timing of this
cap's passage, plus its population and inflation
adjustment mechanism, have made the cap so high that
it no longer plays any role in capping our
appropriations or spending.
Successful appropriation limits have boundaries that
meet the needs of the unique way that government
operates; the right mix of rigidity where it counts
and flexibility when and where it's needed. Alaska's
inflation rate often varies significantly from
national inflation numbers, our tax structure is
unique, and our spending per capita is wildly
different than other states. If Alaska bases our cap
on any of these factors, we risk failure because that
formula does not meet our unique needs.
SJR 4/SB 20 proposes a new, functional cap which bases
its formula on a five-year trailing average of our
private sector economic performance; specifically,
Real GDP minus government spending, which measures the
value produced within our borders.
By tying the state's spending limit to the success of
our state's private economy, the government is
incentivized to support policy that will enable the
growth of our private sector economy if there is a
desire to spend more on state services. The five-year
trailing averaging of GDP will moderate the effects of
our economy's volatility, leading to stability that
prevents the worst consequences of drastic cuts and
binge spending. SB 20 would set a statutory spending
cap at the most recently approved budget levels at the
time of drafting and SJR 4 would set a constitutional
upper limit that gives the state flexibility to
respond to capital and unforeseen operational needs.
Our Permanent Fund is a tremendous asset, but it
creates the risk of Alaska becoming a "financialized"
economy. Instead of maintaining commitment to build,
add value, and produce, we risk becoming Alaskans who
wait and passively watch the market hoping for the
best. A spending limit tethered to GDP creates a
constructive link between state government and our
private sector ensuring that government does not grow
past the private sector that it is meant to support.
Alaska needs a strong link between government and our
productive economy before it's too late. We have an
opportunity to solve our biggest structural issues and
deliver a better future for all Alaskan's centered
around our people's productive efforts.
1:54:21 PM
MATTHEW HARVEY, Staff, Senator James Kaufman, Alaska State
Legislature, Juneau, Alaska, presented the sectional analyses
for SJR 4 and SB 20 on behalf of the sponsor.
SJR 4
Section 1:
Amends Article IX, sec. 16 of the Constitution of the
State of Alaska to slightly revise appropriations
subject to the limit as well as the conditions that
determine the appropriation limit. Sets a maximum
statutory cap at 15% of Real GDP (not including
government spending).
• Exceptions List [Article IX, Sec. 16]
• Adds appropriations to the Alaska permanent fund
to exceptions list
• Moved from Appropriation Limit Section to
Exceptions List
• Adds Appropriation of GO Bond proceeds to
exceptions list
• Moved with slight variation from Appropriation
Limit Section to Exceptions List
• Adds payment of principal and interest on revenue
bonds to exceptions list
• Adds 'appropriations to a state account or fund
that requires a subsequent appropriation from
that account or fund as prescribed by law' to
exceptions list
• Adds 'appropriations to meet a state of disaster
declared by the governor as prescribed by law' to
exceptions list
• Moved from Appropriation Limit Section to
Exceptions List
• Appropriation Limit Conditions [Article IX, Sec.
16]
• Adds (Appropriations Not to Exceed) a percentage
of the average Real GDP (not including government
spending) for the first five of the last six
years. This measure of Real GDP is as reported by
the responsible federal bureau and expressed in
current dollars.
• Adds language stating that the percentage shall
be established by a law that is not enacted as an
appropriation bill, or 15 percent, whichever is
less.
• Adds language stating that with a 2/3 vote the
legislature may appropriate above the statutory
limit, but below the constitutional limit of 14%
for capital improvements.
• Removes Old appropriation limit anchored to $2.5
Billion + Pop. and infl. (since 7/1/81) o Removes
language reserving 1/3 for capital projects and
loan appropriations.
• Removes language adding exceptions to
appropriations subject to the limit from this
Appropriation Limit Conditions section and moves
these to the exceptions list section.
• Removes specific language surrounding Capital
projects exemptions
Section 2:
Adds a new section to Article XV of the Constitution
of the State of Alaska (Schedule of Transitional
Measures), section 30, which sets an 'effective date'
of the end of the fiscal year immediately following
the next possible opportunity for Alaskans to ratify a
proposed amendment to the constitution.
Section 3:
Includes the provision that the constitutional
amendments proposed by this resolution must be placed
before the voters at the next general election.
SB 20
Section 1:
Amends AS 37.05.540(b) to conform to changes made by
SJR 4. Changes affect the list of appropriations
subject to the limit as well as the conditions that
determine the appropriation limit. Defines a
calculation for an appropriation cap at 12% of a
trailing average of Real GDP (not including government
spending).
• Exceptions List [37.05.540(b)]
• Adds Appropriation of GO Bond proceeds to
exceptions list
• Adds payment of principal and interest on
revenue bonds to exceptions list
• Adds 'appropriations to a state account or fund
that requires a subsequent appropriation from
that account or fund as prescribed by law' to
exceptions list
• Adds 'appropriations to meet a state of
disaster declared by the governor as prescribed
by law' to exceptions list
• Appropriation Limit Conditions [37.05.540(b)]
• Adds (Appropriations Not to Exceed) 12% of the
average Real GDP (not including government
spending) for the first five of the last six
years
• Removes Old cap of 5% more than last year + the
change in population and inflation since
beginning of preceding fiscal year
• Removes language describing determination of
change in population based on annual estimate by
DLWD
• Removes language describing change in inflation
based on CPI for all urban consumers for
Anchorage
Section 2:
Adds a new subsection (f) to AS 37.07.020 which
requires a comparison of the governor's budget
requests, supplemental requests, and budget amendments
to the calculated appropriation limit.
Section 3:
Repeals AS 37.05.540(e) due to section 1 of SB 20
adding disaster response spending to the exceptions
list in subsection b.
AS 37.05.540(e) Notwithstanding other provisions of
this section, appropriations may be made from the
budget reserve fund needed by the governor to meet a
disaster. In this subsection, "disaster" has the
meaning given in AS 26.23.900.
Section 4:
Adds a new section to Uncodified Law of the State of
Alaska which ensures that this act is contingent upon
the ratification of an amendment to Article IX, Sec.
16 of the Constitution.
Section 5:
Sets an 'effective date' of the beginning of the
fiscal year immediately following the next possible
opportunity for Alaskans to ratify a proposed
amendment to the constitution. Aligns with the
effective date in SJR 4.
CHAIR CLAMAN asked Mr. Harvey to proceed with the PowerPoint
presentation.
2:00:31 PM
MR. HARVEY presented the PowerPoint presentation titled "GDP-
Based Spending Cap." He began with slide 2, Appropriation
Limits Overview."
• Structure of an appropriation limit
o Exemptions List: Appropriations subject to
the limit The Appropriation Limit: Define
the calculation factor, starting point,
growth rate, and other limit mechanisms
o Other: Capital projects or other specific
language
• Current Appropriation Limit
o Constitutional: Article IX, §16 (effective
in 1982) Statutory: AS 37.05.540(b)
• Types of Appropriation Limits
• Proposed Appropriation Limit (SJR 4 / SB 20)
2:01:47 PM
MR. HARVEY moved to slide 3, "Current Constitutional Limit."
• Constitutional: Article IX, §16 (effective in
1982)
• "Appropriations from the treasury made for a
fiscal year shall not exceed $2,500,000,000 by
more than the cumulative change, derived from
federal indices as prescribed by law, in
population and inflation since July 1, 1981.
o $2.5 B plus inflation and population growth
since 1982
square4 Calculation for FY 21 would be about
$9.8 billion.
• At least 1/3 of limit reserved for Capital
Projects and Loans
o Can also break the limit for appropriations
to Permanent fund, capital projects if
signed by governor or approved by the
voters, and a state of disaster
2:02:49 PM
MR. HARVEY continued with slide 4, "Current Constitutional
Limit: Exemptions.
"Expect for appropriations for Alaska permanent fund
dividends, appropriations of revenue bond proceeds,
appropriations required to pay the principal and
interest on general obligation bonds, and
appropriations of money received from a non-state
source in trust for a specific purpose, including
revenues of a public enterprise or public corporation
of the state that issues revenue bonds...No other
appropriation in excess of this limit may be made
except to meet a state of disaster declared by the
governor as prescribed by law."
o Creates exemptions for fund sources as well as
purposes
o Current limit applies to all UGF, most statewide
items, and some DGF items
o Excludes PFDs, bond proceeds, debt service payments,
non-State sources of revenue, public corporation
revenues, and disaster declarations
o School Bond Debt Reimbursement is excluded from the
limit
2:03:40 PM
MR. HARVEY continued with slide 5, "Current Statutory Limit
• Enacted in 1986
• Based on appropriations made in a fiscal year, not for
a fiscal year
• Counts supplementals in the year appropriated, not
effective
• Limits spending growth to population plus inflation
plus 5%
• The use of both factors to calculate the limit has
caused the limit to outgrow effectiveness
• The timing of data for calculation of this limit
does not work well with the budget process. The
limit is not known before the annual budget process
2:04:38 PM
MR. HARVEY moved to slides 6 and 7, "UGF Spending History." The
timelines on the graphs depict milestones beginning with the
North Slope oil flow initiated in FY 77. He pointed to FY 82,
which displayed the passage of the Constitutional Spending
Limit.
MR. HARVEY moved to slide 8, "Proposed Appropriation Limit."
• Calculated by subtracting government spending from
historical State GDP values and adjusting for inflation
• Stability is improved by averaging these values over the
previous full five fiscal years
• Constitutional amendment, as drafted, caps the statutory
limit at 15% of the calculated value
• Statutory limit, as drafted, caps appropriations at 12%
of calculated value
• We arrived at 12% based upon FY24GovAmd appropriation
levels
2:06:04 PM
MR. HARVEY continued with slide 8, "Proposed Appropriation
Limit." He informed the committee that the chart describes
reactivity under the proposed changes. The reactivity results
from changing oil prices and volatile revenues.
2:06:38 PM
SENATOR TOBIN assessed that 2009-2014 were recession years.
MR. HARVEY offered to provide the depiction of historical
revenue figures for comparison. He stated that Alaska did see
effects from the 2008 financial collapse.
SENATOR KIEHL noted that the period Senator Tobin highlighted
was also a time of significant capital spending. He added that
the state addressed a portion of the multibillion-dollar
deferred maintenance backlog. He believed that the proposal in
the bill would have constrained that effort to address the
backlog. He wondered how the state can maintain the existing
facilities under the proposed constraints.
MR. HARVEY responded that a vote of two-thirds is required to
spend up to the constitutional limit for capital projects. He
stated that the proposed plan would efficiently address the
backlog of maintenance costs.
SENATOR KAUFMAN commented on the chart on slide 9. He explained
that the area between the constitutional limit proposed by SJR
4, and the statutory limit proposed by SB 20 would be available
for capital spending with a two-thirds vote from the
legislature. He advocated for moderate spending and sweeping
funds forward, which would allow continuity in project
completion. He proposed that continuity would enable better
workforce retention and development. The continuity would allow
the state to sustain capital projects, address the deferred
maintenance backlog and prevent overbuilding in the future.
2:10:22 PM
SENATOR KIEHL responded that the constraint in FY 14 and FY 15
capital spending followed a reduction in revenue. He stated that
he would contemplate the notion further.
SENATOR KAUFMAN surmised that moving the revenue forward would
moderate the process.
2:11:28 PM
MR. HARVEY continued the presentation with slide 10, "Spending
Subject to Limit." He noted that all Undesignated General Fund
(UGF) operating, and capital expenditures would be subject to
the limit. He mentioned that appropriations to capitalize state
retirement accounts would not be subject to the limit.
CHAIR CLAMAN asked about the exclusion of the PFD from the
appropriation limit.
SENATOR KAUFMAN replied that separate legislation seeks to
establish new control limits for the PFD. He mentioned a
constitutional resolution to combine the earnings reserve with
the corpus and manage it with a Percent of Market Value (POMV)
draw. He added that SB 20 and SJR 4 offer a solution to a
specific subset of Alaska's fiscal challenges.
CHAIR CLAMAN recalled the Wielechowski v. Alaska case. The court
ruled that the dividend must compete with every other state
program for available revenue. He wondered if the effort before
the committee might prioritize the dividend over other spending.
He expressed concern about the lack of a dividend cap.
SENATOR KAUFMAN explained that the proposed legislation involves
a constitutional resolution versus a revision. He agreed that
the PFD presents a significant variable that must be addressed
in separate efforts or legislation.
2:15:23 PM
SENATOR TOBIN expressed curiosity about Alaska's retirement
systems and Article 12, Section 7 of the Alaska Constitution,
which states that benefits from the retirement systems cannot be
diminished or infringed upon. She opined that the spending cap
counters the constitutional requirement.
MR. HARVEY responded that the proposed legislation does not
alter the current constitutional limit. He offered to obtain a
legal opinion related to the two provisions' interaction.
SENATOR TOBIN pointed out that the current constitutional limit
considers the state retirement accounts since the number of
retirees is projected to increase over the next decade.
2:16:43 PM
SENATOR KIEHL revisited the question about the PFD. He noted
that the bills before the committee set a lower limit on the
dividend amount, with permission to increase payment with
additional revenue. He wondered if the issue relates to the
earlier conversation about spreading capital budget needs to
meet the deferred maintenance backlog.
2:17:36 PM
SENATOR KAUFMAN opined that the legislature must balance all
spending. He declared that the current spending plan is not
working, evidenced by the results. He stated that the
legislature must balance an abundance of needs going forward. He
remarked that rebuilding budget management processes and
structures around budget performance is crucial. He acknowledged
that the bills before the committee are not designed to address
every fiscal concern.
2:18:52 PM
SENATOR GIESSEL revisited the PFD and Wielechowski v. Alaska.
She wondered if the limits proposed in the bills prioritize
those dividends over the money supporting state services. She
wondered if the Internal Revenue Service considered the
Permanent Fund exempt from taxation because it is considered a
support fund. She added that the dividend is not the priority
related to the spending of the permanent fund. If the dividend
becomes the priority, then the fundamental purpose of the fund
becomes the question.
CHAIR CLAMAN offered a time limit related to upcoming public
testimony.
SENATOR TOBIN commented that disaster declaration exemptions and
limited capital expenditures might impact economic recovery from
the pandemic. She commented that Alaska might require an
increase in state and nationwide capital expenditures. She
wondered if placing disaster spending outside of the spending
cap might create a situation where a governor might access
disaster declaration funds inappropriately. She asked how the
bill provides ramifications related to loopholes.
SENATOR KAUFMAN agreed that spending caps lead to many questions
about spending and mechanisms. He opined that a governor who
spends disaster funding inappropriately would face significant
reputation damage. He stated that inappropriate behavior would
be unsustainable and come at a price. The current cap allows
twice the spending permitted in the proposed legislation. He
surmised that the state's fiscal issues are the result of
established structures. He proposed a solution for better
process control and budget development.
2:24:06 PM
MR. HARVEY continued the presentation on slide 11, Benefits.
He spoke to the following:
• Effective and Reasonable
o This proposal would set the cap at recently
approved budget levels and would include a
constitutional provision for some
flexibility in the case of unforeseen risks
• Stable and Predictable
o The 5-year trailing average creates
stability, smooths out overspending when
revenues are up, allows government spending
to fall much slower than GDP during poor
years, and the limit can be known before the
budget process begins
• Private-Sector Focused
o Open the discussion to outcomes during the
budget process
2:25:08 PM
SENATOR KIEHL asked for an explanation for the use of Gross
Domestic Product (GDP) and Gross State Product (GSP).
MR. HARVEY responded that different appropriation limits exist
relative to population and inflation. He stated that GDP and GSP
provide a holistic view of Alaska's economy.
SENATOR KIEHL appreciated the desire to obtain a holistic view,
but he opined that Alaska's business activity involves varied
commodities. He wondered why the element is included.
MR. HARVEY turned back to slide 9 and responded that the five-
year trailing average provides one of the moderating mechanisms
to combat the volatility in GSP. He stated that volatility is
also seen in state income because employment is driven by the
industries. He remarked that the five-year trailing average
provides the best mechanism to moderate and increase reactivity
and drive the need for services.
2:28:13 PM
SENATOR KAUFMAN informed the committee that the modeling on
slide 9 reflects the ebb and flow of the economy. He added that
the cap is neutral to a revenue source. State spending is linked
to a manageable percentage of our economic activity. He stated
that the cap may prevent Alaska from becoming a service economy
supported by the Permanent Fund. He remarked that the plan's
averaging allows the potential to continue an upward and
horizontal trajectory, which provides continued employment
during recessive times. The mechanism enables lay-off protection
because the state will not experience a contraction in the same
way the private sector might. He added that the revenue source
must exist. The structure presented will help in a downturn, but
reserves must be retained.
2:30:37 PM
CHAIR CLAMAN turned to invited testimony.
2:31:03 PM
KEVIN BERRY, PhD., Associate Professor of Economics, University
of Alaska, Anchorage, Alaska, spoke to his prepared remarks
based on GDP-based spending caps. He intended to draw insights
from tax and expenditure limits that share similar objectives
with spending caps. He explained that Alaska has a non-binding
existing and effective cap. He pointed to the graph on slide 2,
"Proposed Cap Under SB 20 and SJR 4." He analyzed the graph and
noted that the yellow line depicts the state's existing limit or
cap. The two proposed caps are depicted with orange and grey
lines. The blue bars indicate the spending subject to the cap.
He remarked that lowering the cap requires less spending in peak
years for use in down years.
DR. BERRY moved to slide 3, "Tax and Expenditure Limits Have
Mixed Evidence."
• Reduced taxes are hoped to positively impact
economic growth
o Unclear, as taxes fund services and we can't
disentangle these two things easily
• Also possible revenue sources (or spending) are
just moved outside the cap
2:33:48 PM
DR. BERRY continued with slide 4, "Components of State Spending
in Alaska." He pointed to the graph on the left side of the
slide "FY2024 Governor Amended UGF." He reported to the
committee that he included the Permanent Fund Dividend (PFD) in
the data even though it is not subject to the proposed cap. He
stated that the large budget items depicted in the graph include
Education, Health, Corrections, and Family and Community
Services. The graph on the right side of the slide depicts state
spending by category, FY 75 - FY 21. The graph depicts the
necessary source of cuts if the binding cap is used.
2:34:31 PM
DR. BERRY moved to slide 5, Changes in AKGSP Excluding
Government are More Volatile." He commented on the use of Gross
State Product (GSP) to measure a spending cap. He noted that
Alaska's GSP is volatile and heavily influenced by the price of
oil. When the government is excluded, the volatility increases.
He added that the government is stable compared to the private
sector economy. When the government is excluded from the cap
calculation, larger volatility is observed. He explained that
the graph's blue bars indicate the percentage change in Alaska's
GSP. The grey bars depict the percentage change in Alaska's GSP
minus the government. The yellow bars indicate a five-year
average.
2:35:58 PM
DR. BERRY moved to slide 6, Longer Time Horizons Dampen but Do
Not Remove Cycles." He pointed to the graph's dark blue bars
indicating the percentage change in a three-year average: yellow
bars depicting a five-year average, light blue indicating a
seven-year average, and green showing a ten-year average. He
explained that the longer time horizons show smaller changes and
fluctuations. He remarked that despite the longer time horizons,
fluctuations follow the GDP. He added that the orange line
indicates the Alaska North Slope's first purchase price (dollars
per barrel). He pointed to years with higher oil prices, the GDP
spending cap allows the state to spend more, but spending must
be cut when oil prices fall. He stated that the cap will smooth
the spending out over time.
2:36:52 PM
DR. BERRY moved to slide 7, GSP in Alaska is dominated by
natural resources.
• Alaska GDP is dominated by natural resources (oil
& gas).
o Pre-2014 recession this was ~30% of Alaskan
GSP
o Now ~16% of Alaskan GSP
o Production has been declining for decades
• Many of our fiscal shocks are due to changing oil
prices
DR. BERRY continued with slide 8, Issues with procyclical
policy
"Balanced budget requirements lead to substantial pro-
cyclicality in state government spending, with the
stringency of a state's rules driving the pace at
which it must adjust to shocks."
(Clemens and Miran 2012)
Concerns for procyclical policy
• Government competes with the private sector to
hire or purchase materials during periods of
rapid growth
• Safety net programs grow in economic slowdowns
2:40:25 PM
DR. BERRY continued with slide 9, Considerations with Real
Gross State Product
• Real Gross State Product is calculated using
chain-type indexes weighted using current-period
prices
o current-dollar shares of GDP provide a more
accurate measure of the relative importance
of components and are preferable to chained-
dollar shares
o chained-dollar levels tends to overstate or
understate sector contributions to GDP
growth
• Real GDP by state does not capture state-to-state
differences in the prices of goods and services
that are produced and sold locally • Issues with
measuring quality improvements and productivity,
particularly in service industries
• Nominal GDP expressed in current year prices has
similar issues
2:41:49 PM
DR. BERRY moved to slide 10, RGSP Government Spending is Based
on Infrequent Survey Data.
• Based mostly on quinquennial Census of
Governments and annual Government Finances
Surveys with regular revisions
• Takes about 2 years from the close of each fiscal
year for the Census Bureau to tabulate and
release COG and GF data. However, BEA's
production schedule calls for more timely monthly
and quarterly estimates.
o Data on government receipts and expenditures
are interpolated based on various data
sources and revised later
• Annual revisions cover the prior 3 years and the
current year and include both annual and
quarterly estimates
DR. BERRY continued with slide 11, "Issues with Other Various
Measures.
• Including population growth does not reflect
population composition
o Senior citizen or child population might
grow faster than overall population
o Focusing only on employment numbers ignores
users of services
• Including inflation measures is not the same as
measuring the cost of providing state services
o Medicaid and medical costs growing faster
than CPI
• Exclusion of funds and budget items biases
spending, and excluded categories would likely
grow as a share of spending
2:44:43 PM
CHAIR CLAMAN asked if there were questions.
2:45:02 PM
SENATOR TOBIN asked Dr. Berry to expound on the ebbs and flows
coupled with the need for support services and social
programming. She mentioned the Medicaid and Supplemental
Nutrition Assistance Program increase in beneficiaries. She
wondered if the proposed cap would require a reduction in social
services.
DR. BERRY responded that he was unable to provide precise data.
He highlighted the idea of automatic stabilizers, which include
government programs that naturally increase during recessions.
Accommodating the binding cap with support programs and social
services would require the state to limit total spending.
CHAIR CLAMAN wondered about the impact of including the PFD in
the cap, with education spending outside of the cap. He wondered
about the impact the hypothetical structural change would have
on education spending.
DR. BERRY replied that the change would likely lead to an
increase in education funding and a decrease in dividends. He
noted that anything outside of the cap would compete for revenue
above the cap.
CHAIR CLAMAN clarified that the program label was irrelevant,
including the program in the cap was the limiting factor. A
program or agency located outside the cap would be easier to
spend money on.
DR. BERRY agreed.
2:47:51 PM
SENATOR KIEHL asked if there were periods in American history
where a shift in government spending occurred.
DR. BERRY replied that large shifts occurred during the Great
Depression and the Second World War. He offered to provide the
committee with more details.
2:48:58 PM
CHAIR CLAMAN queried the effectiveness of the Anchorage tax cap
related to constraints on municipal spending. He requested Mr.
Berry's opinion about the effectiveness of the tax cap in
Anchorage.
DR. BERRY replied that he had not reviewed the municipal tax cap
in preparation for the presentation. He understood that the tax
cap in Anchorage was binding and constrained the total amount of
taxes collected, which forces budgetary choices. He noted recent
debates about spending included in the cap.
CHAIR CLAMAN offered his perspective that the municipal tax cap
is more effective than the spending cap for influencing spending
decisions. He wondered if Mr. Berry perceived that revenue
restrictions have more influence on spending decisions than a
tax cap.
2:51:19 PM
DR. BERRY replied that both mechanisms have similar effects
because of the requirements for balanced budgets, but he offered
to follow up with more details.
2:51:51 PM
SENATOR KIEHL disclosed his apprehension about the economic
measure. He opined that the government should have an interest
in the economy, but government spending does not serve
resources, it serves citizens. He pointed to the chart on slide
four displaying state spending. He wondered about an indicator
that would more closely address the service needs of Alaskans
without resource volatility.
DR. BERRY replied that no one measure provides a perfect
solution. He explained that each model comes with its challenges
and benefits. He encouraged a comprehensive approach.
2:53:45 PM
CHAIR CLAMAN held SB 20 and SJR 4 in committee for further
review.