Legislature(2021 - 2022)BUTROVICH 205
04/07/2021 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR1 | |
| Confirmation Hearing | |
| SB9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 9 | TELECONFERENCED | |
| += | SJR 1 | TELECONFERENCED | |
| + | TELECONFERENCED |
SJR 1-CONST AM: GUARANTEE PERM FUND DIVIDEND
1:34:56 PM
CHAIR REINBOLD announced the consideration of SJR 1, SENATE
JOINT RESOLUTION NO. 1, Proposing amendments to the Constitution
of the State of Alaska relating to the Alaska permanent fund and
appropriations from the Alaska permanent fund.
1:35:45 PM
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, Juneau,
Alaska, speaking as sponsor, offered a summary of SJR 1, which
would place the existing permanent fund statute into the Alaska
Constitution. It would also allow a mechanism to withdraw funds
from the Alaska Permanent Fund but cap the total draw at 5
percent. The people will always receive the first call on the
earnings of the Alaska Permanent Fund, ahead of government, he
said.
1:36:36 PM
CHAIR REINBOLD stated the committee would consider amendments.
1:36:52 PM
SENATOR MYERS moved to adopt Amendment 1, work order 32-
LS0015\A.3:
32-LS0015\A.3
Nauman
4/1/21
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR MYERS
TO: SJR 1
Page 1, line 16:
Delete "five"
Insert "four"
CHAIR REINBOLD objected for discussion purposes.
1:36:55 PM
SENATOR MYERS explained Amendment 1. He stated that Callan
Associates, Inc., who have served as the Alaska Permanent Fund
Corporation's investment consultants, provided some information
recently. He began a PowerPoint showing the Callan Associates
projections for the Earnings Reserve balance over the next
decade, which projected an average fund growth rate of 6.2
percent using an inflation rate of 2 percent. After adjusting
for inflation, the state could only expect to draw 4.2 percent
to maintain the overall value of the fund, in particular, the
earnings reserve account (ERA). He reviewed handouts prepared by
legislative finance. He directed attention to slide 1, "Impact
of FY21-22 Overdraws on ERA Balance and POMV Draw, Constant 6.2%
Returns." He said the large blue bars represent the projected
balance of the ERA given the current 5 percent of market value
(POMV) draw.
SENATOR MYERS turned to the next slide, "Impact of FY21-22
Overdraws on ERA Balance and POMV Draw; FY00-FY08 Returns." This
slide shows projections for the ERA if the market conditions
were similar to ones during FY00 to FY08. This slide predicted a
significant drop beginning in FY24 to FY28.
1:39:28 PM
SENATOR MYERS turned to slide 3, "Impact of FY21-22 Overdraws on
ERA Balance and POMV Draw; FY09-FY17 Returns." This slide
provides projections for the ERA using market returns from FY09
to FY17. This slide shows the anticipated significant drop in
the ERA from FY22 through FY30, which he deemed as very
problematic.
SENATOR MYERS explained that Amendment 1 would reduce the POMV
draw to 4 percent to address these concerns.
1:40:09 PM
SENATOR KIEHL asked if the charts reflect the growth in the
fund's corpus or were limited to the ERA.
SENATOR MYERS said the charts refer to the changes in the ERA,
assuming 2 percent inflation. This does not change royalty
deposits or provide statutory inflation proofing until 2024.
1:40:55 PM
SENATOR KIEHL asked if the fund's corpus would achieve real
dollar growth or if it would also deteriorate.
SENATOR MYERS answered that these projections only reflect
changes to the ERA. He was unsure about the changes to the
corpus but predicted it would slowly increase. He said this is
based on 25 percent royalty deposits but noted royalties are
down based on North Slope production levels and statutory
inflation proofing not occurring until 2024.
1:41:42 PM
SENATOR KIEHL said he envisions that SJR 1 will receive more
financial analysis as it goes through the process. He offered
his support to maintain the 5 percent POMV draw because he finds
that it is responsible and will preserve the real-dollar value
of the Permanent Fund for Alaska's future.
1:42:13 PM
SENATOR SHOWER echoed Senator Kiehl's comments. He offered his
view that the legislature has not reduced the size of state
government. He expressed concern that reducing the POMV draw
would unfairly burden the Permanent Fund Dividend (PFD).
Secondly, not taking enough from the draw will mean that taxes
will be necessary. He expressed concern that 4 percent is too
low.
1:44:00 PM
SENATOR WIELECHOWSKI said Amendment 1 is not unreasonable. He
acknowledged that some people support using a 4 percent POMV.
However, he is comfortable with 5 percent. He pointed out that
SJR 1 does away with the earnings reserve account (ERA) to avoid
giving the legislature access to spending it.
1:44:42 PM
SENATOR MYERS explained that he offered Amendment 1 to put his
concerns on record. He withdrew Amendment 1.
1:45:24 PM
CHAIR REINBOLD commented that she would like to reduce
government.
1:45:51 PM
SENATOR KIEHL moved to adopt Amendment 2, work order 32-
LS0015\A. 2:
32-LS0015\A.2
Nauman
3/31/21
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR KIEHL
TO: SJR 1
Page 1, line 14, through page 2, line 12:
Delete all material and insert:
"(b) At the end of each fiscal year, five
percent of the average market value of the fund for
the first five of the preceding six fiscal years,
including the fiscal year just ended, including any
unrealized gains or losses, shall be determined in
accordance with generally accepted accounting
principles.
(c) Each fiscal year, an amount
(1) equal to one and one-fourth percent of
the average market value of the fund, as calculated
under (b) of this section, shall be transferred from
the permanent fund for use in a program of dividend
payments to state residents, as provided by law;
(2) not to exceed three and three-fourths
percent of the average market value of the fund, as
calculated under (b) of this section, may be
appropriated by the legislature from the permanent
fund to the general fund."
CHAIR REINBOLD objected for discussion purposes.
1:45:58 PM
SENATOR KIEHL explained that Amendment 2 would enshrine the
dividend and set a minimum percentage of the dividend below
which the legislature cannot go. It would make the remainder of
the draw available for appropriation, just as it is today. It
allows most of the discretion for appropriations to legislators,
who are the people's representatives. He summarized that under
Amendment 2, a minimum of 25 percent of the draw would be used
for dividends, which leaves 75 percent for deposit to the
general fund for the legislature to consider. He clarified that
the 25 percent draw for the dividend is not a cap.
1:47:46 PM
SENATOR MYERS offered his view that Amendment 2 would go against
the intent of the constitutional framers. Their intent was to
provide dividends as the first draw. Making the guaranteed
portion the smaller portion will place the dividends in the
position of the second draw. He offered his view that the
resource owners should get the first call on the states'
royalties. He expressed concern that Amendment 2 will reduce the
effective rate on royalties even further. Therefore, Amendment 2
is not a good idea.
1:49:12 PM
SENATOR SHOWER agreed with Senator Myers. He expressed concern
that Amendment 2 would result in a smaller permanent fund
dividend and the government would increase in size. He predicted
that the legislature would continue to allow this to happen
unless it has no choice. He emphasized the need for a PFD
solution.
1:51:26 PM
SENATOR WIELECHOWSKI stated that SJR 1 is designed to resolve
the PFD issue. He offered his view that the people would not
support this approach. He said he could not support Amendment 2.
1:52:05 PM
SENATOR KIEHL highlighted differing viewpoints on how the Alaska
Constitution is constructed. He said the committee could discuss
what the framers intended. However, the Alaska Constitution's
language requires that the permanent fund's earnings be
deposited to the general fund. The courts have affirmed it, he
said. A majority of the House and the Senate makes
appropriation determinations. Amendment 2 would put the first
call on the PFD for Alaskans. Legislators currently disagree on
the size of that dividend. Early in this legislative session,
there were discussions about having a zero dividend. However,
that is not something he supports, he said. The federal COVID-19
funds have offset the state's revenues. He reminded members that
funding for state government benefits Alaskans. State funding
paves and plows roads, fuels state trooper vehicles, pays
biologist salaries and natural resource managers who enable
resource development to occur. He related his understanding that
there was no support for Amendment 2.
SENATOR KIEHL withdrew Amendment 2.
1:54:17 PM
CHAIR REINBOLD remarked that the 25 percent to 75 percent split
would "throw people for a loop." However, she liked the minimum
floor aspect in Amendment 2.
1:54:57 PM
SENATOR KIEHL moved to adopt Amendment 3, work order 32-
LS0015\A.1:
32-LS0015\A.1
Nauman
3/31/21
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR KIEHL
TO: SJR 1
Page 1, lines 14 - 15:
Delete "in accordance with generally accepted
accounting principles"
Insert "as provided by law"
CHAIR REINBOLD objected for discussion purposes.
1:55:02 PM
SENATOR KIEHL explained Amendment 3. He said the legislature
does not set generally accepted accounting principles. Amendment
3 would allow the legislature to establish the principles.
CHAIR REINBOLD remarked that she likes Amendment 3.
SENATOR SHOWER offered his support for Amendment 3.
1:56:47 PM
SENATOR MYERS asked if the bill sponsor could comment on
Amendment 3.
SENATOR WIELECHOWSKI responded that this language is the current
language in the permanent fund statutes. The term is used 25
times in the statutes. He offered his view that Amendment 3
makes a reasonable change.
1:57:41 PM
CHAIR REINBOLD withdrew her objection. There being no further
objection, Amendment 3 was adopted.
SENATOR SHOWER remarked that he thought this change would help.
[SJR 1 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda 4.7 UPDATE.pdf |
SJUD 4/7/2021 1:30:00 PM |
Agenda 4.7 UPDATE |
| Agenda 4.7.pdf |
SJUD 4/7/2021 1:30:00 PM |
Senate Judiciary Hearing April 7, 2021 Agenda |
| SJR1 Amendment Presentation Senator Myers.pdf |
SJUD 4/7/2021 1:30:00 PM |
SJR 1 |
| Amendment SJR1 Myers A.3.pdf |
SJUD 4/7/2021 1:30:00 PM |
SJR 1 |
| Amendment SJR1 Kiehl A.2.pdf |
SJUD 4/7/2021 1:30:00 PM |
SJR 1 |
| Amendment SJR1 Kiehl A.1.pdf |
SJUD 4/7/2021 1:30:00 PM |
SJR 1 |
| ALL AG Taylor Public Testimony Against.pdf |
SJUD 4/7/2021 1:30:00 PM |
Governor's Appointee Attorney General Nominee Treg Taylor, All Public Testimony |
| Amendment SB9 Hughes B.13.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| Amendment SB9 Hughes B.14.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| Amendment SB9 Hughes B.15.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| Amendment SB9 Myers B.12.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| Amendment SB9 Kiehl B.16.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| Amendment SB9 Kiehl B.17.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |
| SB9 ALL Public Testimony February 10- April 7.pdf |
SJUD 4/7/2021 1:30:00 PM |
SB 9 |