Legislature(2025 - 2026)SENATE FINANCE 532
03/06/2025 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB80 | |
| SB109 | |
| SB73 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 80 | TELECONFERENCED | |
| *+ | SB 109 | TELECONFERENCED | |
| + | SB 73 | TELECONFERENCED | |
| *+ | SB 113 | TELECONFERENCED | |
SENATE BILL NO. 109
"An Act relating to the Alaska permanent fund;
relating to income of the Alaska permanent fund;
relating to the amount available for appropriation and
appropriations from the earnings reserve account;
relating to the permanent fund dividend; and providing
for an effective date."
9:14:24 AM
Co-Chair Stedman relayed that it was the first hearing on
SB 109.
9:14:59 AM
PETE ECKLUND, STAFF, SENATOR LYMAN HOFFMAN, addressed SB
109 and read from the Sponsor Statement (copy on file):
Senate Bill 109 continues the discussion of a long-
term sustainable fiscal solution for the State of
Alaska, and how the annual Percent of Market Value
(POMV) from the Permanent Fund plays a role in the
State's fiscal stability.
SB 109 establishes a split for the annual POMV draw,
with 75% of the draw remaining in the general fund and
25% appropriated to pay Permanent Fund Dividends
(PFDs).
The Permanent Fund was established by voters in 1976
to set aside a portion of annual oil royalties for a
time when yearly oil revenue would no longer be
sufficient to cover the State's needs.
In 2018, the legislature and governor acknowledged
that time had come, and Senate Bill 26 became law,
establishing the POMV formula for using Permanent Fund
earnings for State expenses, including the PFD.
However, Senate Bill 26 did not update the 1980s
dividend formula. As we have seen for many years, the
1980s PFD formula has not been fiscally attainable.
Since passage of SB 26, the dividend has fluctuated
from between 22% to 50% of the POMV payout. Often the
amount of the PFD is not determined until late in the
legislative session. The uncertainty surrounding
dividends has further complicated overall budget
decisions and left many in the public frustrated.
SB 26 was passed in part to stabilize the State's
revenue and budgeting. Having an outdated dividend
statute in place that is fiscally unattainable has the
opposite affect and contributes to fiscal and public
confusion.
SB 109 proposes a dividend based on a percentage of
the POMV payout, potentially adding stability to both
the budget process and the dividend.
To fully realize fiscal stability, decisions regarding
the level of State services and revenue also need to
be considered.
9:17:28 AM
Co-Chair Stedman asked Ms. Wallace to guide the committee
through the difference between may and shall in the
bill.
9:17:50 AM
MEGAN WALLACE, CHIEF COUNSEL, LEGISLATIVE LEGAL SERVICES
(via teleconference), addressed Co-Chair Stedman's
question. She addressed the wordage on page 2, line 14. The
Alaska Supreme Court held in Wielechowski v. State that
despite the seemingly mandatory statutory language (AS
37.05.145(b), the use of the permanent fund income in the
earnings reserve account was subject to normal
appropriation and veto budgetary procedures. This meant
that the legislature retained the power to appropriate from
the earnings reserve, each year, the amount it determined
appropriate for public purposes. She said that that the
legislature could decide the appropriate amount on an
annual basis.
9:19:53 AM
Senator Kiehl asked about the difference in how the
permanent fund was invested 40 years ago versus the current
investment process.
Mr. Ecklund relayed that in the early years of the
Permanent Fund, the investments were limited to low-risk
investments. He said that as time had passed the statute
had been modified to allow for investing in an array of
investments and risk types.
Senator Kiehl understood that the current practice involved
the fund buying into ownership of a company or huge real
estate parcel, and only seeing a return on investment once
the company or property sold. asked whether the current
practice had led to spikes or drops in the dividend.
Mr. Ecklund thought Senator Kiehl was referring to
statutory net income and acknowledged that there had been
spikes due to the timing of going into, or out of,
investments that had affected the statutory net income that
went into the calculation of the current dividend statute.
Senator Kiehl expressed concern with the practice. He noted
that currently APFC was able to make the best investments
for the state. He thought that the practice skewed
investment choices. He asked if the change in formula would
affect the way the corporation invested the fund.
Mr. Ecklund relayed that the POMV split proposed in the
bill would not have an impact on the dividend formula
contemplated in the legislation.
Senator Kiehl appreciated that element of the legislation.
9:23:27 AM
Co-Chair Stedman commented that there was another piece to
the bill. Over the previous few years, the trustees have
considered an endowment concept to address the issues
raised by Senator Kiehl.
9:23:43 AM
Senator Cronk appreciated the legal opinion and believed it
added clarity for the public.
Mr. Ecklund recounted that the first dividend checks in
1982 were transferred according to statute, however at the
time there had been an attorney general opinion that stated
that the dividend should be appropriated like all other
appropriations.
Co-Chair Stedman relayed that the legislature did not
"steal" but rather it was the appropriating body, which
followed statutes and the constitution. He noted that the
state constitution trumped state statutes. He added that
the operating budget has a one-year lifetime and that
during that time, statutes were sometimes modified to keep
in line with the constitution.
9:25:54 AM
Senator Cronk thought hopefully the bill would include an
education process for Alaskans to learn more about the
process.
Co-Chair Stedman added that there were times in which one
statute collided with another. He used the example of the
statutory dividend versus the 5 percent payout.
SB 109 was HEARD and HELD in committee for further
consideration.