Legislature(2023 - 2024)BUTROVICH 205
04/12/2024 01:30 PM Senate JUDICIARY
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB20|| SJR4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 20 | TELECONFERENCED | |
| += | SJR 4 | TELECONFERENCED | |
| += | SB 165 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 20-APPROPRIATION LIMIT; GOV BUDGET
and
SJR 4-CONST. AM: APPROP LIMIT
2:25:21 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
CHAIR CLAMAN announced the consideration of SPONSOR SUBSTITUTE
FOR SENATE JOINT RESOLUTION NO. 4 Proposing amendments to the
Constitution of the State of Alaska relating to an appropriation
limit.
This is third hearing of SB 20 and SJR 4 in the Senate Judiciary
Committee. There is a proposed committee substitute (CS) for
each piece of legislation. He invited Ms. Kakaruk to present the
explanation of changes for SB 20 and SJR 4.
2:26:01 PM
BREANNA KAKARUK, Staff, Senator Matt Claman, Alaska State
Legislature, Juneau, Alaska, presented the explanation of
changes for SB 20:
[Original punctuation provided.]
Senate Bill 20
Explanation of Changes
Senate Judiciary Committee: Version B to Version S
The CS for Senate Bill 20 (Judiciary) version S amends
version B with the following changes:
• Including the permanent fund dividend within the
spending cap.
• Including government spending within the value of
the real gross domestic product.
• Including a conforming change from new subsection
(f) to new subsection (h) in Section 2.
2:26:40 PM
MS. KAKARUK presented the explanation of changes for SJR 4:
[Original punctuation provided.]
Senate Joint Resolution 4
Explanation of Changes
Senate Judiciary Committee: Version B to Version U
The CS for Senate Joint Resolution 4 (Judiciary)
version U amends version B with the following changes:
• Including the Permanent Fund dividend within the
spending cap.
• Including government spending within the value of
the real gross domestic product.
• In Section 1, changing the affirmative vote of two-
thirds to the affirmative vote of a majority. With
the affirmative vote of a majority of the membership
of each house, the legislature may appropriate an
additional amount for capital improvements in excess
of the limit under section 1.
• In Section 2, including language stating the amount
appropriated from the constitutional budget reserve
fund for a fiscal year under subsection (c) may not
exceed 25% of the balance of the fund on June 30 of
the previous fiscal year.
2:28:11 PM
SENATOR TOBIN asked how a deposit into the Permanent Fund might
be counted if there is a windfall and an additional deposit is
made into the corpus of the Permanent Fund. She asked whether
such a deposit would be included or excluded from the
appropriation limit as described in SB 20, version S and SJR 4,
version U.
2:29:07 PM
CHAIR CLAMAN directed the question to Senator Kaufman.
2:29:43 PM
SENATOR KAUFMAN replied that this would disincentivize savings
and added that he does not want that to happen. He expressed his
preference that changes to the permanent fund be excluded from
the cap and emphasized the importance of maintaining the state's
ability to move money into savings.
2:30:18 PM
SENATOR TOBIN asked for confirmation of her understanding that
for both SB 20, version S and SJR 4, version U, the additional
appropriation funds going into the Permanent Fund corpus would
be considered under the cap.
2:30:38 PM
SENATOR KAUFMAN replied that this was not included in the
original version. He stated his belief that this is not a
beneficial change.
2:30:48 PM
CHAIR CLAMAN expressed his understanding that the permanent fund
dividends were removed as an exception to the cap. He
interpreted the previous question to inquire about an
appropriation to the permanent fund principal as opposed to a
dividend. He said his understanding is that this would not count
under the cap. If Alaska put a billion dollars into the
permanent fund, that would not count under the spending cap.
SENATOR KAUFMAN replied that, as he understands it, the change
would have that effect. He clarified that removing the language
allows capitalization of the Permanent Fund.
CHAIR CLAMAN expressed his understanding that the language in
question had not been removed.
SENATOR KAUFMAN said he might be responding to the wrong line
item.
2:31:51 PM
MATTHEW HARVEY, Staff, Senator James Kaufman, Alaska State
Legislature, Juneau, Alaska, explained that there were two
changes: one removing the exemption for Alaska Permanent Fund
dividends and one removing added language (which was included in
SB 20, version A and SJR 4, version A) which exempted
appropriations to the Alaska Permanent Fund. He noted that
discussions with Legislative Legal Services indicated that this
may have been clarifying language to ensure that appropriations
to the Alaska Permanent Fund itself were exempt from the cap.
2:33:00 PM
CHAIR CLAMAN commented that, as the person requesting the
changes, his goal was to ensure that Permanent Fund dividends
were no longer exempt from the cap. He clarified that it was not
his intention to exempt appropriations to the Permanent Fund
itself, which would equate to taking money that is effectively
in savings and keeping it in savings - and therefore would not
be considered an appropriation. He commented that it may be a
drafting error.
2:33:44 PM
MR. HARVEY directed attention to SB 20, Section 1, lines 9-11,
which refers and explained that the language related to
Permanent Fund appropriation exemptions may have been added as
clarifying language to specify the Alaska Permanent Fund.
CHAIR CLAMAN expressed his understanding that the language in
Section 1, lines 9-11 includes the Permanent Fund.
2:34:43 PM
MR. HARVEY replied that it likely will.
2:34:52 PM
SENATOR KIEHL said that he also interpreted SB 20, Section 1,
lines 9-11 as including the Permanent Fund, as well as the
Alaska School Trust Fund (ASTF) - from which annual
appropriations can be made. He noted that the ASTF corpus is
protected.
2:35:13 PM
SENATOR KAUFMAN said the question of whether to put the
Permanent Fund dividend under the cap is a policy decision that
can be discussed separately. He emphasized the importance of
protecting the ability to transfer funds to savings and said
that this was always the intent. He opined that the state does
not want to inadvertently limit the ability to save money when
taking actions that are intended to limit spending.
2:35:49 PM
CHAIR CLAMAN directed attention to Section 1, lines 8-10 of SJR
4 and Section 1, lines 9-10 of SB 20 and asked whether it is
reasonable to note that this language may need to be clarified
in future committees to ensure the Permanent Fund is included.
2:36:40 PM
SENATOR KAUFMAN replied yes.
2:36:44 PM
CHAIR CLAMAN invited the sponsor to make comments.
2:37:05 PM
SENATOR KAUFMAN reiterated that placing the dividend under the
cap is a policy call. He said the dividend number has not been
resolved and opined that the dividend needs its own solution. He
noted that several pieces of legislation are seeking to
determine the new dividend formula. He said that the dividend
was removed in order to allow other legislation to address this.
He surmised that, because the formula is not yet determined,
this would be easier from both a policy and economic
perspective.
2:38:20 PM
SENATOR KAUFMAN surmised that, if the dividend is included but
not resolved, the battle would continue in perpetuity. He said
that setting this aside is in line with the roadmap from the
fiscal policy work group, which carved out the dividend, the
cap, and various aspects of policy into separate segments. He
questioned how the percentage would be set if the value is
unknown. He reiterated that this is an internal battle within
the legislature and was set aside for simplicity as well as for
political and economic reasons. He clarified that this is not
holding it superior to other spending, but rather an
acknowledgment that the number still needs to be determined.
2:39:36 PM
SENATOR KAUFMAN said that disincentivizing savings is not the
goal; therefore, fund transfers for the purpose of savings are
excluded from the cap. He turned his attention to the question
of including government spending within the value of the real
gross domestic product. He said that one beneficial aspect of
the original versions of SB 20 and SJR 4 was the focus on in-
state productive, private sector economic activity. He surmised
that government spending may happen; however, baking the
spending into the number results in a loss of the dynamic focus
on the health and productivity of the private sector. He
indicated that he does not support this change. He turned his
attention to the change to the voting requirement and noted that
this is a change from two-thirds affirmative vote to a majority
affirmative vote. He opined that this is not an issue. He
expressed a willingness to discuss the final change, which
applies to the amount appropriated from the constitutional
budget reserve fund (CBR) and said there are questions about how
this may be affected by the sweep and reverse sweep provisions.
He noted that there is some concern related to how addressing
two sections of the Alaska Constitution may open the possibility
for legal action and indicated that the original legislation was
intentionally simple to avoid this.
2:41:47 PM
SENATOR KIEHL said he understands the goal and reasons for
excluding state government spending. He is considering this as
it relates to state spending; however, he opined that federal
government spending is materially different, in terms of what
Alaskans - and the legislature - can control and the impact it
has on the economy. He wondered if it would be advisable to
include federal government spending - which he opined can be
considered economic spending in the state - or whether this
should be treated differently.
SENATOR KAUFMAN replied that if the federal government initiates
activity in the state, the economic impact on the community
(e.g. payroll, local economic activity) would be captured. He
said this was not carved out in the original legislation. He
clarified that the economic impact on the community would be
measured, rather than the initial layer of spending.
2:44:20 PM
SENATOR TOBIN referred to page 1 of both SB 20 and SJR 4, and
questioned how appropriations to meet state disaster would be
impacted. She asked about guardrails and pointed out that the
state is currently experiencing after-effects of receiving
federal funds to assist with issues in public schools. However,
the state recently discovered it was in non-compliance with
federal requirements to receive the funds. Additional
appropriations to certain school districts may be necessary in
order to meet contractual obligations and become eligible for
the federal funds. She asked if this would fall under the scope
of the appropriations in SJR 4 and SB 20 despite it being
outside of the initial disaster timeframe. She wondered how the
language in SB 20 and SJR 4 addresses these types of extenuating
circumstances (e.g. when there is a lag between the time of the
disaster and the disbursement of federal funds).
2:45:45 PM
SENATOR KAUFMAN replied that if it was associated with a
declared disaster, it would not be under the cap. He said that
the intent is not to limit the state's ability to be able to
respond to a disaster and therefore there is no cap on these
appropriations. He acknowledged that some might consider this an
incentive for the governor to declare a disaster unnecessarily
but opined that this is a drastic action that he is not
concerned about. He acknowledged the subtlety of the question
with respect to the question of duration and opined that if a
declared disaster could clearly be tied to the expenditure, this
would be part of the exemption.
2:46:51 PM
SENATOR TOBIN shared an example of a recent earthquake impacting
Ursa Minor Elementary School on Joint Base Elmendorf-Richardson.
She said that the school is currently being rebuilt but is years
away from completion - and is still working to access adequate
federal funds. She expressed hope that language could be added
to protect funds that face these types of extenuating
circumstances and commented that lags of this kind are becoming
more common.
2:47:48 PM
SENATOR KAUFMAN said that he does not think this will be an
issue. He read from SJR 4, page 1, lines 9-12 and opined that
the language ensures that any expenditure associated with the
disaster would be exempt. He pointed out that federal funds
would not be limited.
2:48:35 PM
SENATOR TOBIN expressed her understanding and said that
rebuilding Ursa Minor might require match funds in order to
leverage the federal dollars. She commented that it is
convoluted, requiring either a school bond or additional
resources from the state. She expressed a desire to understand
and make a public record so that the intent is clear.
2:49:14 PM
SENATOR KIEHL asked what changes might impact the sweep and
reverse sweep.
2:49:29 PM
SENATOR KAUFMAN replied that, in SJR 4, changes are made to two
sections of the Alaska State Constitution (ASC) simultaneously.
He directed attention to SJR 4 Section 2, page 3, line 2.
2:50:26 PM
SENATOR KIEHL said that he understands the concerns about
simultaneously amending 2 sections - and distinguishing an
amendment from a revision. He asked about the mechanism of
concern related to the reverse sweep, which is a CBR provision.
2:50:49 PM
MR. HARVEY replied that it is a question rather than a specific
mechanism of concern. He said that the potential tangle with the
reverse sweep was mentioned to ensure that a limit to CBR
appropriations would not impact money being swept into CBR. He
noted that there is also a limit to how much can be taken from
CBR. He said that he is uncertain whether there would be an
issue or concerns.
2:51:35 PM
CHAIR CLAMAN briefly commented on the difference between a sweep
that occurs on June 30 vs July 1. He said that he does not know
when the sweep would occur.
2:52:18 PM
SENATOR KIEHL commented that it is a complicated process and
briefly discussed the CBR "scoop" that occurs before the sweep.
He opined that the June 30 date raises a significant question.
He said that the legislature has considered the CBR minimum
balance, given Alaska's potential oil revenue volatility. He
noted that there is some stability with the sustainable draw
from the permanent fund and some split for public services. He
wondered if creating a 25 percent CBR draw limit would quadruple
the necessary minimum CBR balance.
2:53:40 PM
CHAIR CLAMAN asked for more detail. He surmised that a 25
percent draw limit would result in 75 percent remaining in the
fund.
2:53:54 PM
SENATOR KIEHL said the disagreement with the administration is
related to whether CBR needs a minimum balance that is
sufficient to cash flow the state for quarter 1, or whether CBR
needs a balance sufficient to cover potential issues such as a
year when oil prices drop significantly or there is a pipeline
disaster. He surmised that a 25 percent cap on the draw would
quadruple the minimum balance (whatever that minimum balance is
determined to be).
2:54:40 PM
CHAIR CLAMAN commented that this would limit the funds available
to fund the state in the event of a disaster impacting state
revenue.
2:54:46 PM
SENATOR KIEHL commented that this may not be a negative outcome;
however, it should be given adequate consideration.
2:55:08 PM
SENATOR KAUFMAN said that it is a question that can be
considered in more detail by the Senate Finance Committee. He
stated that the intention is to do no harm. He explained that
the idea was to create a tie that would provide a healthy
measurement of state economic activity, rather than simply
referencing the price of oil and guessing at potential spending.
He emphasized that he does not want to block access to
beneficial activities (e.g. savings) or inadvertently create
requirements in funds like CBR that make operations more
difficult. He reiterated that the intent is to create a healthy
measurement tool that would allow for constructive moderation of
peak spending - at the maximum moments.
2:56:36 PM
CHAIR CLAMAN commented that, with respect to removing PFD from
exemptions - thus including PFD in the spending analysis, one of
the long-standing issues has been that PFD comes before all
else. However, Wielechowski v. Alaska determined that PFD must
not be treated differently than other programs. He stated that
he supports including PFD in the spending, as this reflects the
Alaska Supreme Court decision. He said that, as a result, this
requires careful consideration of priorities when determining
how funds are allocated. He opined that none of the potential
appropriations should be exempt from the spending cap. Regarding
whether to include government spending in the cap, he opined
that there are good arguments for both sides. He said government
spending has historically been a large part of the state economy
and opined that it is more appropriate to include government
spending in the cap. He acknowledged that this would change the
cap percentage.
2:59:04 PM
CHAIR CLAMAN solicited a motion for SB 20.
2:59:10 PM
SENATOR KIEHL moved to adopt the committee substitute (CS) for
SSSB 20, work order 33-LS0206\S, as the working document.
2:59:31 PM
CHAIR CLAMAN found no objection and CSSSSB 20 was adopted as the
working document.
[CSSSSB 20 was held in committee.]
CHAIR CLAMAN solicited a motion for SJR 4.
2:59:42 PM
SENATOR KIEHL moved to adopt the committee substitute (CS) for
SSSJR 4, work order 33-LS0205\U, as the working document.
2:59:57 PM
CHAIR CLAMAN found no objection and CSSSSJR 4 was adopted as the
working document.
[CSSSSJR 4 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 20 version S 4.10.2024.pdf |
SJUD 4/12/2024 1:30:00 PM |
SB 20 |
| SB 20 Amendment S.1.pdf |
SJUD 4/12/2024 1:30:00 PM |
SB 20 |
| SB 20 Amendment S.2.pdf |
SJUD 4/12/2024 1:30:00 PM |
SB 20 |
| SJR 4 version U 4.11.2024.pdf |
SJUD 4/12/2024 1:30:00 PM |
SJR 4 |
| SJR 4 Amendment U.1.pdf |
SJUD 4/12/2024 1:30:00 PM |
SJR 4 |
| SJR 4 Amendment U.2.pdf |
SJUD 4/12/2024 1:30:00 PM |
SJR 4 |
| SB 20 Explanation of Changes 4.12.2024.pdf |
SJUD 4/12/2024 1:30:00 PM |
SB 20 |
| SJR 4 Explanation of Changes 4.12.2024.pdf |
SJUD 4/12/2024 1:30:00 PM |
SJR 4 |