Legislature(2015 - 2016)BUTROVICH 205
02/23/2016 09:00 AM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB128 | |
| SB114 | |
| SJR1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 128 | TELECONFERENCED | |
| += | SB 114 | TELECONFERENCED | |
| *+ | SJR 1 | TELECONFERENCED | |
| + | TELECONFERENCED |
SJR 1-CONST AM: GUARANTEE PERM FUND DIVIDEND
10:01:19 AM
CHAIR STOLTZE announced the consideration of SJR 1.
10:01:34 AM
SENATOR BILL WIELECHOWSKI, sponsor of SJR 1, introduced the
resolution. He called SJR 1 a historic debate. He said Alaskans
have always been wary about what the government does with their
money. He revisited the reasons the Permanent Fund was set up in
the first place, which was to provide future generations a share
in Alaska's wealth and to protect it. He stated that the
dividend is critically important to Alaskans and they want to
continue to receive it.
10:03:32 AM
He specified what SJR 1 does. It would put the earnings reserve
calculation of the dividend directly into the constitution. The
House and Senate would have to vote, it would have to pass by a
2/3 majority, and then the people would vote on it for it to
become law.
He noted that a significant number of public testimonies have
said not to touch the PFD. Those who want to use the earnings
reserve also recognize the importance of the PFD; very few
Alaskans are in favor of getting rid of it.
10:05:05 AM
SENATOR WIELECHOWSKI said SJR 1 proposes to use current PFD
calculations to enshrine it in the constitution; however, he
stated that the rate of return is negotiable. He said historic
returns have been 8.9 percent. He provided rough numbers for
calculating the rate of return, noting that the resolution does
not mean that the earnings reserve is unavailable.
10:07:25 AM
He discussed market rates and maintained that there is a self-
correcting mode available regarding PFDs. He emphasized that SJR
1 is a means of gaining the trust of Alaskans. He compared
impacts to the state from cutting dividends as similar to taxes
on mining or fishing. He stated that cutting dividends would
take between $700 million and $1 billion out of Alaska's
economy.
10:10:29 AM
THOMAS PRESLEY, Staff, Senator Wielechowski, Alaska State
Legislature, presented the sectional analysis of SJR 1 on behalf
of the sponsor. He said that SJR 1 puts a question to the people
of Alaska asking them whether or not the PFD program should be
put into the constitution. He explained that Section 1
establishes the Earnings Reserve Account (ERA) in the
constitution in order to keep the current transfer of money the
same as it is now.
He related that Section 2 (b) transfers monies from the ERA to
the dividend account and calculates a 5-year average. Subsection
(c)establishes the calculation for dividing up the amount
available for dividends
He said Section 3 replaces the current statutory ERA with the
constitutional ERA, and Section 4 places the resolution before
the voters in the next general election.
10:12:06 AM
He highlighted Permanent Fund returns. He noted, as of February
19, 2016, the principle of fund was about $50 billion. Over the
31.5 years of the life of the fund, there has been an annualized
return of about 8.9 percent. He showed the annual dividend
payouts from 1982 to 2015.
He explained the steps required to calculate the PFD for FY14
and the total amount available. He said the balance in the ERA,
as of December 31, 2015, is about $6.7 billion. Even if SJR 1
was approved by voters, the legislature would still have access
to other income in the ERA above the necessary amount for the
PFD.
10:13:58 AM
MR. PRESLEY addressed the great economic impacts of the PFD,
which is uniquely Alaskan. He emphasized that the PFD is well
spent by Alaska residents, largely within the state. Dr.
Goldsmith 2010 study of the PFD found that the purchasing power
of the PFD equated to about 10,000 additional jobs, 15,000 to
20,000 additional residents, and $1.5 billion in personal
income.
He related that a more recent report by Gunnar Knapp found that
reducing the deficit by $100 million and reallocating the PFD
accordingly would lead to a loss of about 728 jobs.
10:15:21 AM
He shared that Dr. Goldsmith's study reinforced previous
findings, including the ways in which the PFD was spent and the
impacts on the economy when spent by residents and not the
government. He credited much of the 80s boom to the spending
power of the PFD. He found out that the 2009 dividend added
about $900 million in purchasing power to the economy, roughly
equivalent to the total wages of state government or the retail
trade sector.
He listed the effects of the dividend: it created a constituency
to watch over government expenditures of the fund, allowed for
individual Alaskans to invest their oil wealth any way they
choose, though often back into the Alaskan economy, and reduced
the gap between income levels in Alaska. It has had a tremendous
impact on rural communities.
10:16:59 AM
He concluded that SJR 1 is only a resolution to put the question
before the people of whether the current dividend program should
be enshrined in the constitution. It does not bar the
legislature from appropriating excess income from the fund for
other purposes. It has become a significant economic force in
Alaska. If approved by the voters, it would be a promise to
every Alaskan that their constitutionally protected mineral
rights will be protected from government in perpetuity.
SENATOR MCGUIRE asked if Senator Wielechowski was open to
including stabilization of government at certain trigger points,
such as with a POMV approach.
SENATOR WIELECHOWSKI specified that SJR 1 is a constitutional
amendment and it would be challenging to include spending. He
was open to the idea.
10:18:59 AM
SENATOR MCGUIRE suggested guaranteeing a dividend and allowing
for a percentage going to the government.
SENATOR WIELECHOWSKI thought there was a great deal of concern
among people about losing their dividends and enshrining
something in the constitution will go a long way toward easing
their concerns.
10:20:09 AM
CHAIR STOLTZE noted reluctance by the administration to discuss
programs that are funded by the dividend. He appreciated the
discussion about the dividend's impacts on Alaska's economy.
SENATOR COGHILL agreed it was an appropriate conversation. He
opined that the ability of the government to use the ERA becomes
more difficult if the PFD is enshrined. It also brings up taxing
concerns.
10:23:14 AM
SENATOR WIELECHOWSKI recalled that in the past, Senator Green
proposed a similar resolution. He said he would confer with
legislative legal about the tax ramifications. He noted that
legal determined that the ERA could be accessed for government
purposes under this resolution. He believed the ERA would have
the same impact on dividends as it does currently.
SENATOR MCGUIRE concurred, but specified that the legislature
has declined to access the ERA. She asked if enshrining the
payment of the PFD out of the ERA would change the flexibility
of the government to use ERA funds.
10:24:59 AM
SENATOR WIELECHOWSKI deferred to his staff to comment.
MR. PRESLEY explained that legal found that the nature of
changing the ERA to more of a general account was not an issue
in SJR 1, and paying out the PFD, constitutionally, out of the
ERA does not change the nature of the account.
SENATOR WIELECHOWSKI concluded that it is a policy call.
CHAIR STOLTZE noted the state's dependency on the PFD. He wished
to have more discussion on the impacts of the PFD on the private
sector.
10:28:01 AM
SENATOR MCGUIRE noted similar principles at stake in both SJR 1
and SB 114. She commented on the importance of allowing Alaskans
a part in determining how their share of wealth will be used.
She pointed out that the question is what should the size and
cost of government, which also contribute to Alaskan's lives,
be.
CHAIR STOLTZE said Hammond's noble experiment has worked
effectively. He noted there are pros and cons of a
constitutional approach. He was looking forward to public
testimony on the issue.
10:30:42 AM
SENATOR HUGGINS commented on bills that are attempting to take
money out of the pockets of Alaskans. He feels that the proposed
state budget is too large and he is opposed to picking Alaskan's
pockets.
10:32:49 AM
CHAIR STOLTZE held SJR 1 in committee.