Legislature(2017 - 2018)SENATE FINANCE 532
03/15/2018 09:00 AM Senate FINANCE
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 | |
| HB321 | |
| SB196 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 321 | TELECONFERENCED | |
| + | SB 196 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 196
"An Act relating to an appropriation limit; and
providing for an effective date."
9:11:03 AM
Co-Chair MacKinnon invited Senator Micciche and Senator von
Imhof to present SB 196.
Senator Micciche shared a quote by Thomas Tusser related to
fools quickly being separated from their money. He read
from a Sponsor Statement:
The State of Alaska relies on a single commodity to
fund more than 85% of our government services. Today,
with declining production and lower prices, Alaska
continues to face a significant budget deficit. The
Legislature has cut the operating and capital budgets
by over $3 billion in the last four fiscal years but
has continued to draw from our savings accounts to
fill the gap between revenue and expenditures.
Senate Bill 196 sets a $4.1 billion statutory limit on
how much the legislature can appropriate every year
with regard to agency operating budget expenses. The
limit would be adjusted annually for inflation. The
appropriation limit does not apply to appropriations
for the payment of permanent fund dividends, capital
projects, state debt obligations, and receipt
supported services such as receipts of the Alaska
Marine Highway System.
Alaska must control its spending in order to refill
our savings accounts and sustain the programs Alaskans
rely on in their everyday lives. Senate Bill 196 is
the needed framework to help guide the Governor and
the Legislature through the budget making process.
Now is the time to pass an effective statutory
appropriation limit.
Senator Micciche pointed to the document, "SB 196
Appropriation Limit vs. Appropriations -"(copy on file). He
explained that the blue line represented the deflation of
today's spend back, while the green line inflated spending,
using Anchorage CPI, from FY 1999 spending levels. He
declared that if the bill had been in place in the past the
state would have $15 billion in savings and be in a better
financial position.
9:14:56 AM
Senator von Imhof said that one of the questions that the
bill raised was, "What is the best way to calculate moving
forward, inflation or population?" She said that other
states sometimes combined the two, while adding a broad-
based tax for their spending cap. She said that Alaska had
a stabilized population and the CPI was relatively stable.
She said that the CPI, extrapolated to 2030, reflected a
predictably growing and stable spending cap. She felt that
the cap would allow for people to budget with confidence.
Senator Micciche added that the key reason for a spending
cap was to keep the state form creating spending habits at
the height of revenue. He believed that the bill would
preserve savings for the long term.
9:17:18 AM
Co-Chair Hoffman queried why the sponsor believed that the
proposal would work.
Senator Micciche believed that the spending limit in the
State Constitution was too lenient and the proposal, had it
been introduced in the past, would have meant there would
have been money in savings today.
Co-Chair Hoffman believed it was necessary to keep
expenditures under control. He referenced the
constitutional limit of a 120-day session, and the
statutory change to a 90-day session; which he thought was
not working. He wondered why the proposal would work when
there was an existing constitutional limit.
Senator von Imhof opined that the current limit had a
growth rate that was connected to 100 percent change of
population, plus 100 percent change of CPI, which did not
match actual state revenues. She said that recalculating
using only 100 percent CPI change worked.
9:20:21 AM
Senator Micciche addressed the question as to why the
legislature would not ignore the statutory change. He did
not support the level that was suggested earlier. He
thought much of the spending was due to demands of
communities. He thought a spending limit would allow
members to bring a framework to constituents.
Vice-Chair Bishop referenced the graph and asked if it was
strictly operating expenses across agencies and did not
include capital expenditures.
Senator Micciche answered in the affirmative.
Co-Chair MacKinnon commented that the bill was sponsored by
the committee and noted that the Senate had previously
passed a spending limit inside other legislation. Since
other legislation was currently stalled, she thought that
the public deserved a fair vetting of a spending limit and
how spending limits would work or not work.
9:23:03 AM
Senator Micciche addressed the Sectional Analysis (copy on
file):
*Section 1: Removes the reference to the current
statutory appropriation limit
*Section 2: Statutory Appropriation limit:
? Unrestricted General Fund appropriations may not
exceed $4.1 billion
? Adjusts for inflation using known inflation data
? Inflation adjustment is based on the Consumer Price
Index for Anchorage prepared by the United States
Bureau of Labor
Statistics
Appropriation Limit excludes appropriations:
? To the Alaska Permanent Fund;
? For Permanent Fund Dividend payments;
? For payment of Debt obligations of the state (e.g. -
General
Obligation Bonds and Certificates of Participation);
and
? Capital projects
Defines:
? Capital project;
? Program Receipts; and
? Unrestricted general fund
*Section 3: Repeals current statutory appropriation
limit language
*Section 4: Effective date of July 1, 2018
Co-Chair MacKinnon referenced the exceptions that were
addressed in the Sectional Analysis. She asked Senator von
Imhof to explain why the items had been excluded.
Senator von Imhof stated that inside SB 26, which was a
Percent of Market Value (POMV) bill, the dividend was
addressed by taking a structured draw on the permanent fund
earnings, separate from the spending cap. She said that
there was agency spending and then there was the dividend,
which was addressed in a different bill. She stressed that
the bill addressed agency spending only.
Co-Chair MacKinnon asked Senator Micciche whether debt
service was not included in the bill because it would need
to be approved by the public and was beyond the reach of
the legislature.
Senator Micciche relayed that the bill was a statutory
guideline for areas that were most difficult to control. He
reiterated that the bill was statutory language for
operating budget discipline. He said that excluded from the
bill was the public's ability to demand a larger Capital
Budget through general obligation bonds.
9:26:48 AM
Co-Chair MacKinnon asked whether Public Employees'
Retirement System (PERS) and Teacher's Retirement System
(TRS) were debts of the state.
Senator Micciche replied in the affirmative.
Co-Chair MacKinnon understood that tax credits were a debt
to the state.
Senator Micciche responded that under the bill, tax credits
were a debt of the state.
Co-Chair MacKinnon understood that the tax credits were a
debt of the state by both legislative finance and the
administration.
Senator Micciche agreed.
Vice-Chair Bishop asked about Section 3 of the bill, which
pertained to the governor's ability to execute disaster
funds.
Senator Micciche felt that the governor already had the
authority for emergency spending, which was why it had been
left outside of the appropriation limit. He said that the
authority would come in the form of a supplemental.
9:28:24 AM
AT EASE
9:30:06 AM
RECONVENED
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, clarified that
the repeal section of the bill repealed the current
statutory appropriation limit. She relayed that an
exemption of emergency or disaster declaration could easily
be incorporated into the bill.
Co-Chair MacKinnon stated that the language would be
incorporated by amendment. She noted that amendments for
the bill were due by 5 PM.
Ms. Cramer pointed out that there would be clarification of
the effective date of the bill, as the intent was to apply
the bill to the FY 20 budget proposal.
Senator Micciche appreciated the clarification on the
emergency spending.
Ms. Cramer clarified that a supplemental budget could be
subject to the appropriation limit; if there were capital
items in the supplemental, they would not be subject to the
limit.
Co-Chair MacKinnon lamented the growth in governmental
agency spending. She said that the bill was intended to
hold the administration accountable in general fund
spending a to limit growth.
Co-Chair MacKinnon OPENED public testimony.
9:33:50 AM
MICHELLE HALE, SELF, JUNEAU, testified in opposition to the
bill. She related that she was a third generation Alaskan
and spent her whole life in the state. She pondered the
meaning of defining the state; what sets Alaska apart. She
offered that we were a very large state with a huge land
area and a small population. She asserted that the needs
across the state were not bet in the same was as needs in
other areas of the country. She had observed that there
had been a descent into a hatred of government that was not
in accordance with the functions of government. She
stressed that the savings account could not be filled by
only making cuts - new revenues needed to be brought in to
the state. She argued that spending caps and arbitrary cuts
were blind and blunt tools. She felt that when the
legislature forced agencies to cut an additional $100
million from their budgets it was unloading its
responsibility to the state and the people of the State of
Alaska. She stated that there was not basis for the cap.
She said the legislature made the laws and the agencies
implemented the laws; if the legislature did not want
agencies to do something specifically - it needed to tell
agencies those specifics. She felt that the state was
immature and failed to take care of its people while
limiting spending when necessary. She did not think that
the legislature was doing a good job handling the current
fiscal crisis.
9:38:30 AM
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon discussed housekeeping.
Co-Chair MacKinnon commented that there were many
perspectives and frustrations surrounding the current
fiscal climate in the state. She said that certain advocacy
groups heavily affected the operations of the state and
sometimes made it impossible, through statutory changes, to
reduce the budget. She believed that the appropriation
limit provided a balance between supporting agencies and
controlling spending. She understood that inflation was an
erosion to the baseline of the budget and noted that the
proposal tried to inflation proof budget going forward,
while capping spending.
SB 196 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 196 Support Leavitt.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |
| SB 196 Support Taviliero.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |
| SB 196 - NFIB Support.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |
| SB 196 MultiYearAgencySummary-1.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |
| SB 196 Public Testimony Neumann.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |
| SB 196 Inlfation Graph.pdf |
SFIN 3/15/2018 9:00:00 AM |
SB 196 |