Legislature(2019 - 2020)GRUENBERG 120
04/25/2019 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB139 | |
| HB132 | |
| HJR18 | |
| HJR6 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 139 | TELECONFERENCED | |
| *+ | HB 132 | TELECONFERENCED | |
| *+ | HJR 6 | TELECONFERENCED | |
| *+ | HJR 18 | TELECONFERENCED | |
| + | TELECONFERENCED |
HJR 6-CONST. AM.:PERMANENT FUND & DIVIDEND
[Contains discussion of HJR 5, HJR 7, SJR 4, SJR 5, and SJR 6]
4:21:13 PM
CO-CHAIR FIELDS announced that the final order of business would
be HOUSE JOINT RESOLUTION NO. 6, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund and the permanent fund dividend.
4:21:24 PM
BRUCE TANGEMAN, Commissioner, Department of Revenue (DOR), on
behalf of the House Rules Standing Committee, sponsor of HJR 6,
by request of the governor, lauded the actions of the
legislature in creating the percent of market value (POMV)
structure of drawing money from the permanent fund and noted the
current discussions in the committee meeting addressing the
split. He stated that HJR 6 would protect Alaskans' right to
determine the future of the permanent fund dividend (PFD). He
said that the permanent fund and the PFD was never broken and
worked exactly as designed for 34 years. Over the three
decades, the PFD calculation and the amount paid to Alaskans was
never questioned, regardless of the size of the check, until
2016, when the legislature appropriated the full PFD and
Governor Bill Walker vetoed it by half. In 2017 and 2018, both
branches of government agreed on a reduced dividend.
MR. TANGEMAN, in response to Representative Wool's proposed
legislation [HB 132, introduced and discussed during the 4/25/19
House State Affairs Standing Committee meeting], said that
currently DOR tracks the market to determine a five-year rolling
average; HB 132 would track the price and production of oil. He
stated that in 2012, the PFD was $878; in 2013 the PFD was $900;
however, in 2015, the dividend was the largest ever at $2,072.
He stated that the dip reflected the market correction of 2008,
which affected the following five years; in 2013, the amount
again increased and was at its highest level in 2015. He
conceded that there has been volatility in the PFD amount, but
Alaskans never questioned the amount, because they understood it
to be the result of the calculation and not politics. He
maintained that political decisions regarding the amount of the
PFD are what "got people's attention" and created the current
situation.
MR. TANGEMAN said that the constitutional amendment under HJR 6
would guarantee the PFD; PFDs would not be subject to
appropriation; the funds would be transferred to the PFD payment
fund and distributed. He maintained that the amendment under
the proposed resolution would protect the PFD; it could not be
reduced by the legislature or the governor's veto. Further, the
amendment would require that any changes to the statutory PFD
formula would require a vote of the people. He emphasized,
"It's Alaska's PFD and they should be entrusted with the future
of any changes to the calculation." He stated that the proposed
resolution is part of Governor Michael J. Dunleavy's larger
fiscal plan, which is to ensure Alaskans are included when
deciding the size and scope of their government.
4:26:09 PM
WILLIAM MILKS, Senior Assistant Attorney General, Legislation &
Regulations Section, Civil Division (Juneau), Department of Law
(DOL), on behalf of the House Rules Standing Committee, sponsor
of HJR 6, by request of the governor, relayed that the proposed
resolution consists of a constitutional amendment which would
provide for a dividend in the Alaska State Constitution. He
reiterated that the statutory dividend program was followed for
three decades; it not being followed prompted a court case
challenge; the Alaska Supreme Court stated clearly that absent a
constitutional amendment providing for a dividend, the PFD will
compete annually for legislative appropriations. He relayed
that the proposed amendment follows up on that decision.
MR. MILKS paraphrased from the sectional analysis, which read as
follows [original punctuation provided]:
Section 1: This would provide a conforming amendment
to the existing language in order to authorize a
portion of permanent fund income to be used for
dividends as set forth in Section 2.
Section 2: This section would create two new
subsections in the permanent fund amendment.
Subsection (b) would require that a portion of the
permanent fund income be used, without an
appropriation, solely for the purpose of paying
permanent fund dividends to state residents. Those
payments would occur according to the dividend program
and formula currently set forth in statute. Subsection
(b) would also allow the legislature to change the
dividend program, including amount and eligibility,
subject to the approval of the voters in subsection
(c).
Subsection (c) would require that any law passed by
the legislature to amend the permanent fund dividend
program, including the amount and the eligibility
requirements, would not take effect unless the voters
approved the proposed law at the next statewide
election. If approved by the voters, it would take
effect 90 days after certification of the election.
Section 3: This transition provision specifies that
the dividend program in place on January 1, 2019 would
remain in place until the legislature and the voters
approved a change to the program.
Section 4: This section would require that the
constitutional amendment be placed on the general
election ballot in 2020.
4:29:06 PM
CO-CHAIR KREISS-TOMKINS asked for the administration's
perspective on the changes made to [SJR 5] - the Senate
companion resolution.
MR. MILKS responded that the largest change was that the
proposed constitutional amendment would include the statutory
formula for calculating the dividend amount, and any change in
the formula would be subject to the approval of the voters. He
mentioned that an additional change to the proposed amendment
was the replacement of annual payments with quarterly payments.
CO-CHAIR KREISS-TOMKINS asked for the administration's position
on the quarterly disbursements.
4:31:15 PM
MIKE BARNHILL, Director of Policy, Office of Management & Budget
(OMB), Office of the Governor, responded on the administration's
position on changes made to SJR 5 by the Senate Judiciary
Standing Committee [during the 4/15/19 meeting]. The
administration supports the elimination of the requirement that
any change in eligibility requirements [for the PFD] must be
approved by voters. The administration does not object to the
amendment calling for quarterly disbursements of the PFD but
that the change would be accomplished more appropriately by
statute. The administration did not voice an objection
regarding the third change - rolling SJR 6 into SJR 5. He
explained that SJR 6 constitutes the administration's proposal
with respect to a constitutional spending limit. He said that
the administration's preference is that the two proposed
resolutions be considered separately; they represent substantial
policy amendments to the constitution.
REPRESENTATIVE LEDOUX asked whether the administration opposes
quarterly payments as a social engineering concept.
MR. BARNHILL expressed that there are valid policy reasons to
pay the PFD on a more periodic basis: more of the dividend
money would stay in state; it would have more impact on the
economy of the state; it could generate jobs; and an annual
dividend tends to be spent Outside. He said that the
administration's objection is not from a policy standpoint, but
due to a concern for the appropriate place - constitution or
statute.
REPRESENTATIVE VANCE suggested that quarterly payments would
benefit not only the recipients but the earnings of the corpus,
as the money would remain in the corpus longer. She expressed a
desire to hear the perspective of Angela Rodell, Executive
Director, Alaska Permanent Fund Corporation, (APFC) regarding
quarterly payments.
REPRESENTATIVE VANCE asked if it is possible to adopt the
proposed constitutional amendment in HJR 6 without adopting the
proposed spending cap and vice versa.
MR. BARNHILL answered that the administration intentionally
structured the proposed constitutional amendments in three
separate vehicles so that the citizens would have the ability to
vote on each one based on its merits; by implication, one could
be adopted without the other. He said that the constitutional
amendments would give the voters the opportunity to vote up or
down on the spending limit [HJR 7 and SJR 6], on a dividend that
is constitutionally appropriated [HJR 6 and SJR 5], and on the
taxpayer's bill of rights [HJR 5 and SJR 4]. He concluded that
one amendment could be adopted without the others; however, it
is the Dunleavy administration's perspective is that the
residents should have the opportunity to vote on each.
REPRESENTATIVE VANCE asked whether HJR 6 protects the corpus of
the permanent fund.
MR. BARNHILL responded that existing constitutional construct
regarding the permanent fund protects the corpus; the language
was adopted in 1976. It relays that the principle shall be used
only for incoming-producing investments, implying that it cannot
be appropriated.
4:36:46 PM
CO-CHAIR FIELDS commented that the constitution does not protect
the ERA; therefore, the legislature could still draw down that
account.
MR. BARNHILL concurred.
REPRESENTATIVE WOOL asked for confirmation that under the
proposed constitutional amendment, the statutory formula [for
the PFD] would be in the constitution, and a change in the
formula would require a vote of the people.
MR. BARNHILL replied that the constitutional amendment would
guarantee the transfer of PFD funds pursuant to statute. It
would introduce direct democracy into the constitution by
dictating that if the legislature changes the statutory formula,
the people would automatically get an opportunity to vote on the
change. It would not enshrine a particular statutory approach
to the PFD calculation. The legislature would retain the right
to change the calculation; however, any change would require
approval by a vote of the people.
REPRESENTATIVE LEDOUX asked whether the people would vote on any
changes that the legislature made before the changes can go into
effect.
MR. BARNHILL responded, "Correct."
REPRESENTATIVE LEDOUX asked for confirmation that if the
legislature wants to make any changes, it would make the
changes, put the changes out for vote, and if the people accept
the changes, the changes would go into effect the next year.
MR. BARNHILL said, "Correct." He explained that the proposed
constitutional amendment would prepackage a referendum.
Currently under the constitution when the legislature passes any
law, the public can get the issue on the ballot by gathering
signatures in a referendum process. The proposed constitutional
amendment would make the referendum process automatic.
4:39:15 PM
CO-CHAIR KREISS-TOMKINS mentioned discussion about a 50-50 split
of the POMV draw as a compromise, producing a dividend amount
that would be larger than that of the last two years but smaller
than this proposal would yield. He asked whether the
administration has a position on the 50-50 split compromise.
4:40:05 PM
The committee took a brief at-ease at 4:40 p.m.
4:40:09 PM
MR. BARNHILL answered that the administration has not taken a
position on any new approach to the PFD, such as a 50-50 split,
but is willing to discuss it.
REPRESENTATIVE VANCE asked for confirmation that if HJR 6
passed, it would be put to a vote on the 2020 ballot to decide
if it should be in the constitution.
MR. BARNHILL concurred.
CO-CHAIR FIELDS asked whether the administration has mapped out
a timeline, since any change in the statutory formula would
substantially alter the budget process.
MR. BARNHILL disagreed that a change in the statutory formula
would substantially change the budget process. The proposed
resolution clearly states the timelines; the first opportunity
for the legislature to make appropriations pursuant to a new
statutory formula would be the fiscal year following the
election. For example: the vote is in November; the
legislative session begins the following January; and the
legislature would appropriate for the following fiscal year
pursuant to the constitutional amendment.
REPRESENTATIVE VANCE asked whether it would be feasible for the
legislature to combine the three resolutions so that the
spending cap, the income tax, and the PFD were all put before
the voters in one ballot question.
Mr. BARNHILL stated that he appreciated the representative's
desire to simplify constitutional issues for the voters;
however, he offered that considerable time and effort was spent
to determine the best way to present the issues. The decision
was made to use three separate vehicles addressing three
separate subjects. He maintained that giving the people a voice
in how the PFD is calculated and in any legislative decision to
change that calculation is a discreet issue that stands on its
own. The other two issues - giving people a voice in any tax
changes or rate increases and giving the people a voice in
amending the constitution to limit spending - are also separate
discreet issues. He conceded that since all three issues fall
under Article IX of the constitution, it would be possible to
defend combining them; however, it is the intention of the
administration to give the people the ability to vote each one
up or down.
4:45:04 PM
REPRESENTATIVE LEDOUX referred to the proposed constitutional
amendment [in HJR 5 and STR 4], also known as the taxpayer bill
of rights, and asked whether the legislature would be required
to approve a tax passed by the people through an initiative
process.
Mr. BARNHILL agreed that passage of the constitutional amendment
would require the people to vote on any new tax or tax rate
increase passed by the legislature, and alternately, if the
people initiate a tax or a tax increase, the legislature would
be required to approve it before it is enacted. He stated that
both mechanisms currently exist with one exception - when the
people initiate a law, the legislature cannot repeal it for two
years. The resolution seeks to shorten that time frame.
REPRESENTATIVE LEDOUX expressed her belief that most people who
support the taxpayer bill of rights do not realize that it would
impact their ability through the initiative process. She
offered that the most likely tax to be approved through an
initiative process would be an oil tax. She stated that she
does not think most people realize that the constitutional
amendment would give the legislature "a second bite at that."
REPRESENTATIVE WOOL maintained that the three issues - taxes,
PFDs, and the spending cap - are all intertwined in the final
budget product. He asked whether Mr. Barnhill thought that
separating issues that are intertwined might present a problem.
Mr. BARNHILL responded, no. He expressed his belief that the
people can analyze each issue separately. He added that if
there is an emerging consensus within the committee to roll the
resolutions together to move them forward, the administration
would most likely not object.
REPRESENTATIVE WOOL suggested that the administration, through
the proposed constitutional amendments, is introducing another
branch of government. Raising or lowering revenue would require
approval not only of the House, the Senate, and the executive
branch, but of the people, which would take a year or more and a
great deal of educational campaigning.
Mr. BARNHILL responded that this very point was debated at
length at the constitutional convention, and the convention
approved this vigorous element of direct democracy. He added
that Alaska has a very strong access to legislation through the
initiative and referendum process. He suggested that the
governor is proposing to take that element of direct democracy
that exists right now and that the people regularly access right
now and pre-package the initiative/referendum in respect to the
PFD and new and increased taxes. He opined that if the
legislature were to make a change to the PFD statute, there is a
high likelihood that a referendum would be filed. He added that
the passage of a personal income tax would most likely result in
a referendum as well. The administration is seeking to make
that referendum automatic and give the people the opportunity to
vote on these very important issues that they care deeply about.
4:51:47 PM
CO-CHAIR FIELDS asked whether the inclusion of legislative
approval of voter-approved initiatives was intentional or
accidental. As an example, he referred to a voter initiative to
spend less money on per barrel tax credits to oil companies.
MR. BARNHILL responded that requiring legislative approval over
a voter initiated new tax or tax rate increase was no accident;
it was the point.
MR. MILKS responded that in the proposed constitutional
amendment addressing taxes, if the voters, by initiative, pass a
new tax or increase the rate of tax, the legislature can reject
it. He stated that in the original version of the resolution,
the default was as follows: if the legislature did nothing, the
new tax was rejected. The Senate Judiciary Standing Committee
changed the default to the following: if the voters pass a tax,
the legislature has the opportunity to ....
[Due to technical difficulties, the last minute of the hearing
was not recorded.]
CO-CHAIR FIELDS stated that HJR 6 would be held over.