04/05/2022 09:00 AM Senate FINANCE

SENATE BILL NO. 199                                                                                                           
                                                                                                                                
     "An  Act  relating  to  use of  income  of  the  Alaska                                                                    
     permanent  fund;   relating  to   the  amount   of  the                                                                    
     permanent fund dividend; relating  to the duties of the                                                                    
     commissioner   of  revenue;   and   providing  for   an                                                                    
     effective date."                                                                                                           
                                                                                                                                
9:45:15 AM                                                                                                                    
                                                                                                                                
Co-Chair Bishop relayed  that it was the  second hearing for                                                                    
SB 199. The committee intended to consider a CS.                                                                                
                                                                                                                                
Co-Chair  Stedman  made  a  motion   to  adopt  a  Committee                                                                    
Substitute.                                                                                                                     
                                                                                                                                
9:45:57 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:46:22 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Stedman restated the motion.                                                                                           
                                                                                                                                
Co-Chair   Stedman  MOVED   to   ADOPT  proposed   committee                                                                    
substitute  for  SB  199, Work  Draft  32-LS1529\I  (Nauman,                                                                    
3/25/22).                                                                                                                       
                                                                                                                                
Co-Chair Bishop OBJECTED for discussion.                                                                                        
                                                                                                                                
Ms. Shine  explained that the  proposed CS took  a different                                                                    
approach  to paying  a Permanent  Fund  Dividend (PFD).  She                                                                    
explained that the previous version  of the bill proposed to                                                                    
have  an escalating  step-up  to a  50/50  dividend, with  a                                                                    
$1,100 PFD in FY 23, a $1,200 PFD  in FY 24, a $1,300 PFD in                                                                    
FY  25, with  a  $1,300  PFD plus  inflation  in  FY 26  and                                                                    
beyond. She  noted there was  a trigger  for a 50/50  PFD if                                                                    
the  legislature adopted  $700 million  in new  revenue. The                                                                    
proposed CS  took a  similar approach,  but a  different PFD                                                                    
payout.  She directed  attention to  Section 3,  which would                                                                    
proposed to  amend the  appropriation for a  PFD to  a 50/50                                                                    
PFD in FY 23, while in FY 24  and beyond there would be a 25                                                                    
percent  of market  value (POMV)  dividend (with  75 percent                                                                    
going to the General Fund).                                                                                                     
                                                                                                                                
Ms. Shine  continued to address  the proposed CS.  She noted                                                                    
that  the new  version proposed  in  Section 5  to amend  AS                                                                    
37.13.145(b). She  discussed conditional effect  language in                                                                    
Section  11,  which  would  require   $800  million  in  new                                                                    
revenues  (as compared  to June  30, 2022)  by December  15,                                                                    
2026. If  the condition  were to  take place,  in FY  28 and                                                                    
beyond, there  would be  a 50/50  POMV dividend.  There were                                                                    
some technical  and conforming  amendments made  between the                                                                    
two  different Committee  Substitutes. The  changes were  to                                                                    
ensure the  language conformed to  a supreme court  case and                                                                    
to ensure that the version was sound.                                                                                           
                                                                                                                                
Co-Chair  Bishop  WITHDREW  his OBJECTION.  There  being  NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
                                                                                                                                
9:49:35 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman assumed that  Co-Chair Bishop had requested                                                                    
updated analyses to be brought before the committee.                                                                            
                                                                                                                                
Co-Chair  Bishop  relayed  that there  were  updated  fiscal                                                                    
analyses  that would  be provided  to the  committee in  due                                                                    
haste  by   the  Legislative  Finance  Division   (LFD).  He                                                                    
expected the bill would be before the committee again soon.                                                                     
                                                                                                                                
Senator Olson  asked what would  happen if the  $800 million                                                                    
in new revenue proposed in the CS did not materialize.                                                                          
                                                                                                                                
Co-Chair  Bishop  answered  that  if  the  revenue  did  not                                                                    
materialize then the PFD would stay at a 25 POMV payout.                                                                        
                                                                                                                                
Senator Wilson asked  why there had been a  change from $700                                                                    
million to $800 million in new revenue.                                                                                         
                                                                                                                                
Co-Chair  Bishop stated  that  the number  was  based on  an                                                                    
analysis  he saw  two months  previously. He  mentioned that                                                                    
the  number   hit  within  $25  million   of  the  Bicameral                                                                    
Permanent Fund Working Groups number the previous year.                                                                         
                                                                                                                                
Co-Chair Stedman informed that  the committee was working on                                                                    
the  operating  budget  and  would  be  coming  out  with  a                                                                    
proposed  CS in  the next  few days.  He explained  that the                                                                    
analysis from LFD  would be updated. He though  there was an                                                                    
overall roughly  5 percent budgetary increase  and mentioned                                                                    
escalating inflation issues.                                                                                                    
                                                                                                                                
9:52:33 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  observed that the  back end of  the funding                                                                    
of  the  50/50  dividend  was  quite  similar  to  what  the                                                                    
governor had  introduced the previous  year. He asked  if it                                                                    
was  the intent  of the  co-chairs to  pay for  the dividend                                                                    
through a fiscal note.                                                                                                          
                                                                                                                                
Co-Chair  Stedman  thought  paying the  dividend  through  a                                                                    
fiscal  note would  most likely  be a  good idea  and stated                                                                    
that the committee would work through the budget process.                                                                       
                                                                                                                                
Senator  Wilson  wondered if  the  committee  would also  be                                                                    
considering other models to be  presented next time the bill                                                                    
was before the committee.                                                                                                       
                                                                                                                                
Co-Chair  Bishop asked  if Senator  Wilson was  asking about                                                                    
running different scenarios.                                                                                                    
                                                                                                                                
Senator Wilson answered affirmatively.                                                                                          
                                                                                                                                
Co-Chair Bishop  stated that  the co-chairs  would encourage                                                                    
running different scenarios.                                                                                                    
                                                                                                                                
Senator Wielechowski  thought Alaskans were  concerned about                                                                    
stability  and dividend  predictability. He  shared concerns                                                                    
about  the  language  that  iterated  "the  legislature  may                                                                    
appropriate funds"  and he  thought absent  a constitutional                                                                    
amendment,  Alaskans   could  not  get  the   stability  and                                                                    
predictability that  was desired. He thought  the bill would                                                                    
put the  state in  a position  in which  future legislatures                                                                    
could choose to ignore the  bill language and pay out lesser                                                                    
dividend amounts than the statute  called for. He noted that                                                                    
there were  bills that proposed a  constitutional payment of                                                                    
the dividend. He did not think the bill provided stability.                                                                     
                                                                                                                                
SB  199  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Bishop  discussed  the agenda  for  the  afternoon                                                                    
meeting.