Legislature(2003 - 2004)
06/23/2004 10:48 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE CONCURRENT RESOLUTION NO. 101
Relating to offsetting the projected annual general fund
revenue shortfall through equal appropriations from the
constitutional budget reserve fund and the earnings reserve
account.
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Green re-convened the meeting. She commented that the
State should be considering a variety of methods through which to
address its fiscal concerns. This legislation is such a proposal.
Co-Chair Wilken, the bill's sponsor, presented a power point
presentation titled "Building the Bridge, the Power of Earnings, An
alternate Solution" [copy on file]. An editorial titled "Stick with
Democracy" [copy on file] from the Anchorage Daily News, dated June
14, 2004 and an email [copy on file] from Governor Walter Hickel
were also provided.
Co-Chair Wilken mentioned that Governor Frank Murkowski's election
campaign focused on the message of "hope." Co-Chair Wilken stated
that he campaigned on a message of responsibly developing Alaska to
create jobs ? to fill our fiscal gap with money derived from
resource development. He is concerned that his message might have
been forgotten, as other things have taken priority.
Co-Chair Wilken voiced being skeptical that the public would
approve a fiscal plan were one presented in the upcoming November
general election. His plan would present an alternative plan to
bridge the fiscal gap that the State would experience between now
and the time when new natural resource revenues become available.
It is difficult to accept that there is a fiscal problem when the
State is experiencing such things as near-record high employment,
the price of North Slope crude oil is hovering around $30 to $40
per barrel, there are high bank deposit levels, and low bankruptcy
levels. The people of the State "are pretty content." Therefore it
is difficult to expect that people would support changing or
understanding the POMV proposal that would provide revenue to the
State and would alter the manner in which the Permanent Fund
Dividend check would be determined.
Co-Chair Wilken commented that the first chart in his presentation,
titled "So, where's the problem?" identifies that the FY 05
$7,600,000,000 Total Operating and Capital budget is comprised of
$3,010,000,00 in federal funding, $1,260,000,000 of Permanent Fund
money for inflation proofing and the Permanent Fund Dividend
checks, $937,000,000 in Statutorily restricted money, and
$150,000,000 in Trust/Dedicated money that the Legislature could
not alter. The chart also denotes a projected Constitutional Budget
Reserve (CBR) draw of $372,000,000 based upon an average crude oil
price of $28 per barrel. The fiscal gap lies within the
$1,960,000,000 general fund component of the budget. The general
fund is currently 70 to 80-percent funded by oil and gas revenue.
The goal over the next few years is to increase General Fund
revenues.
Co-Chair Wilken noted that the chart titled "?and what's the
problem?" reflects the difference in the General fund revenues and
the expenditures for FY 1990 through FY 2006 as well as the
projected State spending through FY 2020. The State expends more
than it receives in revenues.
Co-Chair Wilken stated that the chart titled, "?but things can
change quickly, for the good and for the bad" depicts various
budget scenarios were the price of North Slope crude oil to range
between $12 and $44 per barrel. The higher the price, the more
General Fund revenue is received. The FY 05 budget is based on a
$28.30 per barrel price forecast and a $372,000,000 budget fiscal
gap is projected. Were the price of oil to decrease to $22 per
barrel, a $750,000,000 fiscal gap would result. Currently a surplus
in revenue is being generated as the price is in the $39 per barrel
price range. However, he warned that this price would not continue,
as things could change quickly.
Co-Chair Wilken continued that things have changed, as the chart
titled "?And they have" depicts.
• The CBR has been used to fill the fiscal gap
• Approximately $5,5 billion has been withdrawn.
• The state has deposited $5.6 billion and earned $2 billion in
interest.
Co-Chair Wilken noted that the chart titled "for example" depicts
the CBR balance and CBR draws for FY 94 through FY 04. It states
the following.
• CBR draw 9 out of 11 years
• Average draw $350 million
• Current balance $2.1 billion
Co-Chair Wilken noted that were the current per barrel price to
continue, the projected FY 05 CBR draw would not be required. He
cautioned however that the CBR would erode in the future, as the
State "does not feed it like we used to."
Co-Chair Wilken noted that, as supported by the comments listed on
the chart titled "? but Alaska is a resource state", Alaska is a
resource State and there are new revenue possibilities.
SFC-04 1st SS #4, Side A 02:19 PM
Co-Chair Wilken stated that the chart titled "? and a bridge is
needed, From today to Development" depicts the FY 05 budget and the
projected budget shortfalls that would occur until new revenue
resources are generated, beginning in the year 2011, from such
things as the completion of the proposed gas pipeline and new oil
field developments. How the State would address its budget deficit
until that time is the question to which there are a multitude of
answers.
Co-Chair Wilken stated that some options through which to address
the fiscal deficit are depicted in the "Several pots of Money" fact
sheet. These would include: reducing State spending; instituting an
income tax, a corporate tax, and a sales tax; utilizing the CBR
increasing user fees and taxes on such things as tobacco to
generate other revenues. He stressed that while these revenue
sources would generate some money, it would not be significant
enough to support the State's budget. Another source must be
generated in the interim, as these sources and the CBR could not
adequately support the State's annual budget deficit.
Co-Chair Wilken stated that his proposal would involve utilizing
$1,500,000,000 in realized earnings of the four billion dollars in
unrealized and realized earnings that are available to the
Legislature in the Permanent Fund. The CBR is projected to
terminate in the year 2009 as depicted in the chart titled, "and
why not just the CBR?"
Co-Chair Wilken continued that, based on current projections, the
CBR would be unavailable to assist in building the bridge to the
time when new revenue resources come on line. Referring to the
chart titled, "but what if..." he noted that were the Legislature
to split "the future fiscal gaps with equal contributions from the
Constitutional Budget Reserve and the Earnings Reserve Account," a
fiscal bridge could be built that would extend the life of the CBR
through the year 2012. This revenue proposal is depicted in the
chart titled " ? and we build a bridge".
Co-Chair Wilken noted that the Permanent Fund, the Division of
Legislative Finance, and the Office of Management and Budget
provided the numbers depicted in the charts.
Co-Chair Wilken stated that the answer to the question of whether
the Earnings Reserve Account could be utilized in this manner is
yes, as substantiated on the fact sheet titled, "but can we?"
The Earnings Reserve Account, a result of wise investment of
our Permanent Fund, has been and is still available to the
legislature by a majority vote of 21-11.
Co-Chair Wilken noted that an enormous amount of information is
available on the Permanent Fund website as depicted in the sheet
titled " PF financial projections say?". This information includes
such things as that the Fund projects a 7.38 percent return and a
realized Earnings Account amount of $740 million in FY 04. The
chart depicts that the Legislature, if it so desired, could access
approximately four billion dollars from the Permanent Fund in
realized and unrealized funds.
Co-Chair Wilken voiced being surprised as the number of people who
confuse the Earnings of the Permanent Fund with the Principal of
the Fund. As denoted on the sheet titled "?our Fund and our
Earnings", the Permanent Fund is comprised of "two distinct pots of
money:" the Principal of the Fund, valued at $23.5 billion, is
protected by the Constitution; however, the Earnings Reserve
Account, valued at $1.5 billion, is available to the Legislature by
a majority vote. The Principal receives 25-percent of oil revenues,
and special deposits could be received from the Earnings Reserve
Account. The Earnings Reserve Account is the account from which
Permanent Fund Dividends, inflation proofing of the Principal
account, and other expenditures are made. While come decry that
using the ERA would be a raid on the Permanent Fund, this is not
the case. Those people "should know better." His proposal is to
utilize the ERA, matched with an equal portion of the CBR, to fund
the fiscal deficit until new resource revenues transpire.
Co-Chair Wilken read the information on the sheet titled " ? the
Earnings Reserve the crown jewel of Alaska's Fiscal Future."
• Only Legislature in America deciding how to manage $27 billion
for 640,000 people
• Every minute, every hour, every day, the world helps build
Alaska by
o Investing in corporate America
o Investing in America's society
o Investing in America's future
• The Earnings Reserve Account is an abutment to our Bridge to
Development.
Co-Chair Wilken referred to the chart titled " ? but what about my
check if you use the Earnings Reserve?", as it specifies how
citizens' PFDs might be affected by addressing the State's fiscal
deficit with a 50/50 split from the ERA and the CBR. Based on
Permanent Fund financial projections, a $550 million fiscal gap
that would be addressed by a $275 million draw from the CBR and a
$275 million from the ERA for the next five years: would not reduce
the level of the PFD the first year; would decrease it by three
dollars the second year; and would serve to decrease one's PFD by
$32 the fifth year. The cumulative affect of this would amount to a
total five-year decrease of $64. He pointed out that the average
CBR draw has been $350 million.
Co-Chair Wilken noted that the chart titled " ? how does this
compare to the status quo" reflects what the projected amount of
the PFD would be in the forthcoming years based on projections.
Were $275 million removed from the ERA to support the budget
deficit for the next ten years, the FY 2014 dividend would amount
to $2,057 as opposed to being $2,177 were the ERA not utilized.
Co-Chair Wilken stated that the chart titled " ? and to the
suggested POMV method" indicates that, were the proposed Percent of
Market Value plan (POMV) adopted, the FY 2009 PFD check would
amount to $1,151 rather than $1,889 as proposed in his plan and
$1,319 in FY 2014 under the POMV as opposed to $2,057 under his
plan. "This is a powerful slide" as were the POMV plan adopted,
citizens PFDs would be significantly affected as compared to his
50/50 ERA/CBR proposal.
Co-Chair Wilken noted that while a State Income Tax might raise
$275 million, the sheet titled "but is this the best way? Let's
compare other revenue sources" depicts that it would cost each
Alaskan $1,059. A State Sales Tax might raise $275 million at a
cost of $1,035 to that same person. Utilizing $275 million from the
Earnings Reserve Account would cost that Alaskan $12. These amounts
reflect information based on the second year of implementation and
Department of Revenue projections for a married person with two
children and a $57,000 adjusted gross income.
Co-Chair Wilken continued that the chart titled, " ? and what about
over time" depicts the cumulative cost to a family of four for
these three options through the year FY 2014. The cost in FY 2014
would be $9,531, $9,315, and $1,940 for implementation of an income
tax, sales tax, or use of the ERA proposals, respectfully.
Co-Chair Wilken stated that the chart titled, "but does this help
the CBR" reflects the fact that were only half of the amount of the
fiscal deficit funded by the CBR, the CBR's life could be extended
almost an additional three years. Total funding of the Fiscal
deficit and the 50/50 CBR/ERA split portion impact to the CRB is
reflected on this chart.
Co-Chair Wilken stated that the effect of removing money from the
ERA is depicted in the chart titled " ? and what about the ERA."
While it would affect the ERA balance that balance would reflect
growth when the projected new resource revenues begin.
Co-Chair Wilken read the following information.
" ? a brief comparison ?"
POMV Method verses Build the Bridge.
POMV Method Build the Bridge
1) Amount of PFD 1) Amount of PFD
more predictable follows the market
2) More negative 2) Less negative
impact on your PFD impact on your PFD
3) Perm Fund principal 3) Perm Fund Principal
may be impacted protected
4) Perm Fund draw for 4) Earnings used only
state services is if necessary for state
automatic services
"? let's use it only when we need it ?"
• Build the Bridge Plan demands spending accountability
because
• the Earnings Reserve Account is the people's money and
• each legislator must answer to the public on how much was
spent from the Earnings Reserve to fund state services.
"lets summarize .. The Build the Bridge Plan"
• Recognizes Alaska's natural resource potential and
opportunity for jobs
• Recognizes the power of the Earnings Reserve - the crown
jewel of a fiscal plan
• Bridges the State of Alaska revenue needs until
development can occur
• Establishes accountability by forming a spending
partnership with all voters
" ? and now the challenge to our governor and to the
Legislature"
• It's time to recognize the power of the Earnings Reserve.
• It's time to have the courage, when needed, to use the
Earnings Reserve
• We're elected to work hard, get smart, and make the right
decisions for the people of Alaska,
• That's why we're here
Co-Chair Wilken concluded his presentation.
Senator Dyson asked whether the management plan proposed by the
POMV could be incorporated with the revenue stream provided via the
50/50 CBR/ERA proposal.
Senator Bunde interjected that the POMV plan would not recognize
there being an ERA.
Senator Dyson acknowledged that point, but stated that the POMV
could provide a revenue stream that could, on some basis, provide a
revenue stream that could support the 50/50 CBR/ERA proposal.
Co-Chair Wilken asked for further clarification.
Senator Dyson stated that a portion of the five-percent income
provided by POMV for distribution could be utilized, perhaps to
fund the Dividend and/or to support the CBR. He asked that, at some
point, the Administration provide a response to this suggestion.
Senator Bunde characterized Co-Chair Wilken's proposal as being
"thoughtful, logical" and reasonable. He asked how the Legislature
might further this proposal.
Co-Chair Wilken responded that SCR 101 provides some of this
detail. He is willing to compromise and would support any method
chosen by the Legislature to further the concept. While he is
unsure as to whether the proposal could be placed in law, he wished
to provide citizens a method through which to approach the fiscal
deficit without having the proposal being subject to the risk of
failure as a ballet question. We should not take a chance, and as a
Legislature, we should represent our constituents and take the
responsibility for addressing the situation. The plan he has
proposed is "a viable plan" that would save citizens' money. He
declared that "POMV is flawed mechanically and it is flawed at the
ballot box as it is not going to pass."
Senator Bunde agreed that two messages must be sent: one relating
to the Legislature and one to the investment community. He noted
that were a plan adopted either in Resolution or in Statute, a
forthcoming Legislature could either "abide by that or ignore it."
A psychological issue exists regarding spending a large portion of
the earnings of the Permanent Fund. The only prevention to change
is public and political pressure. The financial market would also
desire that a fiscal plan be adopted in this State. "They seem to
want something on paper" that would reassure them that "the rules
would not change cavalierly." He stated that were the Legislature
to support this proposal, the methodology to support it would be
furthered.
Co-Chair Wilken stated that of the various options available
through which to address the budget deficit, use of the ERA would
be his first choice. Were that removed from the equation, the other
options would move closer to the forefront. However, those options
would have more impact on financial and business communities than
the plan proposed in SCR 101, as it would eliminate the threat of
an income tax, a sales tax, and changes in corporate tax structure.
These entities should be reminded that the use of the State's
assets would be a better option than "going to their pockets." The
Standard &Poors national credit rating analyst's message was that
the State is not "judged on what you are going to do," but "on what
you have done." Alaska has exceeded other states in terms of its
assets and liquid assets, with only the inclusion of the CBR rather
than the entire Permanent Fund assets. He stated that when the
State's fiscal crisis is addressed, "this place would hum" just as
it did in 1999.
Senator Bunde understood that regardless of whether a solution to
the fiscal situation is addressed via Statute or Resolution, action
on the part of the Legislature would speak louder than words. The
Legislature must act.
Co-Chair Wilken stressed that the State would be faced with a $500
million deficit for several years. Oil must continue at a price of
$33.80 per barrel in order for the State to have a balanced budget
in FY 05. It is difficult to predict the price of oil in future
years. He reiterated that his plan would cost residents less than a
one-dollar decrease in their Permanent Fund dividend in FY 06. The
Legislature must have the courage to address the issue.
Senator Hoffman found the presentation interesting, but noted that
some of the "soft points" would include the fact that due to oil
price volatility a one billion dollar CBR balance must be
maintained. A $2.3 billion budget is flat spending. It is a known
consideration that the PERS and TRS obligation would amount to one-
third of a billion dollars over the next eleven years. Other
expense levels are unknown. He stated that when $270 million was
withdrawn from the CBR in FY 02, its balance dipped to almost zero.
This could have jeopardized the PFD. The effect on the monies
available for PFD would also be an area of concern. Under the
current status quo system the Permanent Fund balance in FY 2015
would be $45 billion. He asked regarding the level of the FY 2015
Fund were this proposal adopted. The POMV plan would result in an
eight million dollar reduction in the Fund. Another concern would
be, as alluded to by Senator Bunde, how to assure the public that
the Permanent Fund Dividend would be protected, were this proposal
furthered. This is the primary reason that the Legislature has not
voted to utilize the ERA to date.
Co-Chair Green reminded that there is no guarantee that there would
be a PFD payment each year. The payment "is based on performance of
the investment fund." If it is a guaranteed payment, it should not
be called a Dividend.
Senator Hoffman agreed that, while this is true under the current
scenario, it would not be true were the POMV plan adopted.
Co-Chair Green declared that it would be difficult to declare that
there would always be a dividend payment, regardless of what occurs
with the Fund.
Co-Chair Wilken agreed that Senator Hoffman's CBR concern is valid.
Everything being presented today is based on projections. While a
lot of negative things could occur, a lot of good things could
occur as well. The Permanent Fund balance is expected to be $43
billion in 2014. It should be clarified that the $100 million FY 02
amount referred to by Senator Hoffman, related to realized earnings
resulting from three years of negative earnings. It should also be
noted that there was, at that time, in excess of $1.1 billion in
unrealized earnings. If need be, some of the unrealized earnings
could be sold to support the payment of a Dividend. While "there is
no guarantee in investments," the investments over time "have been
very successful."
Senator Hoffman stated that in order to access the ERA Fund,
assurance must be provided that the Dividend would be protected.
Otherwise, the question would be how many Legislators would provide
the required vote.
Co-Chair Wilken responded that that might be true, and thereby,
access of the ERA might not occur for a few years as the options
are reviewed. Senator Hoffman is talking about enshrining the
Permanent Fund Dividend in the Constitution. He opined that paying
a Dividend Check is not one of the top four priorities of State
Government. It would be number five in his view, behind public
safety, public health, public education, and transportation.
Therefore, he could not support enshrining the payment of a
Dividend check in the Constitution.
Senator Hoffman responded that State voters should make this
decision.
Senator B. Stevens agreed, "that the POMV concept as presented, is
flawed." Were it exclusively a money management tool it would not
be flawed. The Permanent Fund Board of Trustees have supported the
POMV proposal for numerous years; however, their position "is
solely based on one thing alone", and that is enshrining inflation
proofing of the Permanent Fund. Legislators have been convinced to
raise spending levels in order to allow inflation proofing to be
enshrined. However, "the premise is flawed because the Legislature
has never not fully funded inflation proofing of the Permanent Fund
under the current formula." The current dilemma is that in order to
fund the State's essential services, inflation proofing of the Fund
must occur first. "Then you can enshrine the Dividend, and" were
any funds left, they could be used to fund other things. This
argument is flawed as the AS 37 Statutes "have never been not been
fulfilled." He argued that it has been "over-inflation proofed."
Now that the State has reached a budgetary point to which some of
the Permanent Fund money should be accessed, the Legislature might
be required "to break our philosophical positions" by being
required to enshrine inflation proofing and the PFD in the
Constitution, "even though we have never not done it." He voiced
support for Co-Chair Wilken's comment that, were it deemed
necessary, the Legislature could access the money in the ERA. The
POMV concept approach being presented is flawed.
Senator B. Stevens stated that while Co-Chair Wilken has presented
another alternative to the problem, the true nature of the problem
must be determined. Some opine that the State is "not spending
enough money so we need to get to the Dividend; others say that,
"we don't have enough money to spend so we have to get to the
Dividend." Both of these approaches are incorrect, as the State has
more money, in excess reserve, than most governments on the planet.
Senator B. Stevens stated that he is one of several fiscal
conservatives who view the level of State services as being
adequate to the demands presented by the State's citizens. It is
common knowledge that aligns with Co-Chair Wilken in support of
utilizing the ERA when the time comes, after inflation proofing and
funding of the Dividend has occurred.
SFC 04, 1st SS #4, Side B 03:07 PM
Senator B. Stevens stated that there is money available and such
usage would have minimum effect on the Dividend payout.
Senator B. Stevens suggested some changes to the presentation. The
chart titled "? and a bridge is needed" which depicts the potential
Future Oil and Gas revenue based on the Spring 2004 Revenue
Forecast, could provide a few alternate scenarios to reflect how
significant the fiscal deficit would be, particularly "as
projections become more conservative as the years out expand." In
addition, the Chart titled " ? and what about the ERA?" should
include a projection of the Permanent Fund corpus balance in
addition to the ERA balance.
Senator Hoffman commented in regards to Senator B. Stevens's claim
that the Legislature "has never not inflation proofed and never
not" funded a Dividend. Since it would appear that these things
would continue to be done, why not allow the people to vote on
whether or not to enshrine the Dividend in the Constitution. This
would "remove the politics" regarding how to spend the rest of the
earnings, as it would eliminate citizens' fear that the Dividend
would be negatively affected.
Senator B. Stevens stated that Senator Hoffman omitted his comment
that in times of excess revenue, the Legislature super-funded the
corpus of the Fund. Now is the time to utilize a portion of the ERA
to provide public services.
Senator Bunde stressed that Alaska's physical resources, being
finite, would be gone someday. When that occurred and were the
Dividend enshrined in Constitution, the citizens of the State would
be required to pay such things as an income tax in order to support
it. Demographics project that in ten or fifteen years, the smallest
component of the State's population would be the 30 to 50 year
olds. This "most productive age group" would be the taxpayers who
would be required to support the large group of Dividend
recipients. He quoted that "the democracy is doomed when the public
realizes they could vote themselves money from the public
treasury." That is what enshrinement would do. He hoped that, on
the other hand, the State would not resemble "the miser who died
with his mattress stuffed full of money."
Senator Dyson voiced appreciation for the efforts exerted by Co-
Chair Wilken to develop an alternate method through which to
address the fiscal gap.
Co-Chair Wilken acknowledged his staff person, Sheila Peterson, for
her efforts in developing the presentation.
Co-Chair Green expressed that public questions regarding this
proposal could be directed to Co-Chair Wilken and his staff.
Co-Chair Green asked Senator Hoffman to further explain the
intention of enshrining the Dividend in the Constitution:
specifically whether the intent is to insure that a payment would
be made, regardless of the State's fiscal situation or whether the
calculation mechanism for the dividend would be enshrined.
Senator Hoffman responded that Co-Chair Wilken's presentation
reflects that, in 2014, new resource revenues would be deposited
into the Fund. Proper management of the Fund would insure continued
funding for Dividends.
Co-Chair Green understood therefore that the desire is to guarantee
the Dividend rather than to establish a formula.
CHERYL FRASCA, Director, Office of Management and Budget, stated
that while the Administration had a copy of Co-Chair Wilken'
presentation, until today, they had not received the benefit of his
accompanying narrative. While she could question some aspects of
the proposal's "practical application", she noted that she had not
been able to confer with the Governor in regards to his
perspective.
Co-Chair Green requested that Ms. Frasca present her remarks and,
at a later date, provide comments from the Governor.
Ms. Frasca spoke to her concerns, including: the Administration's
desire to retain a one billion dollar CBR balance to provide "some
cushion" to the budget were oil prices to drop dramatically whereas
Co-Chair Wilken has presented the alternate idea that the ERA be
used for this purpose; what would happen were the fiscal deficit to
exceed $550 million: would the direction be to impose an additional
income source or remove more funds from the CBR or the ERA. This is
a concern, as, in forward years, the fiscal deficit would exceed
those of the past. Another concern about implementing this proposal
as opposed to the POMV is that the POMV model is less volatile in
terms of the payout and would be easier to budget. The volatile
fund sources through which to address the fiscal deficit under Co-
Chair Wilken's proposal would include the stock market and the
current volatility of the price of oil.
Co-Chair Green asked how the volatility of the price of oil and the
stock market differs from the current situation.
Ms Frasca responded that while it does not differ from the current
situation, it would affect the ability to provide a long-term
solution of fiscal stability. Part of the Administration's goal is
to develop a mechanism that would "fund future services with
stability." Due to wide swings in the stock market and the
investments of the Permanent Fund, the current Fund's earnings
income payout calculation is not as stable, going forward, as the
methodology proposed in POMV.
Ms. Frasca noted that another concern evolves around whether flat
spending, going forward, is a realistic approach upon which to base
future budgetary projections.
Ms. Frasca also asked whether, as a manner in which to be
accountable to the voters regarding how programs are funded, the
intention would be to utilize the ERA as a fund source that could
be directly identified as the fund source for new programs that
might be developed such a new funding for schools, public safety
officers, or transportation.
Senator Bunde agreed with Senator B. Stevens that the Permanent
Fund Trustees support the POMV concept, as it would provide a
mechanism through which to guarantee inflation proofing of the
Fund. The only reason that the Legislature would support POMV is
that it would provide a predictable revenue source. "The only
reason that you would need a predictable revenue source would be
that you are going to use that to fund government." On a public
policy basis, "it is not critical to the State that Dividends be
predictable." While POMV would supply a predictable funding source,
it might be a tool that is unacceptable to the public. This brings
us back to determining what would be possible, and that would
include accessing the ERA.
At EASE 3:23 PM / 3:24 PM
SENATOR GENE THERRIAULT opined that the Permanent Fund Board of
Trustees' support of the POMV is appropriate because insuring that
inflation proofing of the Permanent Fund must continue in order to
protect its value over time, as it is the appropriate action of
their role as fiduciaries of the Fund.
Senator Therriault noted that the importance placed on SJR 9 and
HJR 3 during the Legislative Session is interesting, as those
pieces of legislation are not being discussed anymore. The sponsor
of HJR 3 commented that protection of the purchasing power of the
Permanent Fund was the paramount thing that the Legislature should
protect. When it was pointed out that HJR 3 did not provide
protection to such things as the inflation proofing of the Fund,
support of the bill diminished.
Senator Therriault stated that currently the argument evolves
around two things: one is that protection of the PFD is being
sought; and secondly, the "growing realization" that the POMV plan
is the sensible thing to do as inflation proofing the Fund is the
"appropriate" mechanism through which to protect the purchasing
power of the Fund. "Unfortunately," these two approaches have
become linked together. Nonetheless, he supported the development
of a mechanism that would protect the purchasing value of the
assets of the Fund as well as providing a predictability "or
smoothing affect" of the size of the Dividend in the future as it
infuses a substantial amount of money into the economy.
Senator Therriault applauded Co-Chair Wilken's efforts in
developing an alternative proposal. He has some suggestions to the
plan that he would discuss separately with Co-Chair Wilken. He
agreed that the Legislature has the ability to access millions of
dollars in funding.
Co-Chair Green commented that the Legislature "is cursed" because
it does not utilize the ERA, which is a viable funding source.
Because it does utilize the ERA, an alternate approach would be to
implement an income tax.
Senator Olson commented that while there are a number of mechanisms
being discussed through which to address the fiscal gap, "the
reality" is that until the time when the public is guaranteed that
the Permanent Fund Dividend is protected, the public would not
support a plan.
The bill was HELD in Committee.
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