02/04/2021 03:30 PM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SJR5 | |
| SJR7 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 53 | TELECONFERENCED | |
| *+ | SJR 6 | TELECONFERENCED | |
| *+ | SJR 5 | TELECONFERENCED | |
| *+ | SJR 7 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 4, 2021
3:34 p.m.
MEMBERS PRESENT
Senator Mike Shower, Chair
Senator Lora Reinbold, Vice Chair
Senator Mia Costello
Senator Roger Holland
Senator Scott Kawasaki
MEMBERS ABSENT
All members present.
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 5
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit; and relating to the budget
reserve fund.
- HEARD & HELD
SENATE JOINT RESOLUTION NO. 7
Proposing amendments to the Constitution of the State of Alaska
relating to prohibiting the establishment of a state tax without
the approval of the voters of the state; and relating to the
initiative process.
- HEARD & HELD
SENATE BILL NO. 53
"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; relating to an
advisory vote on the permanent fund; providing for an effective
date by repealing the effective date of sec. 8, ch. 16, SLA
2018; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
SENATE JOINT RESOLUTION NO. 6
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund, appropriations from the
permanent fund, and the permanent fund dividend.
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SJR 5
SHORT TITLE: CONST. AM: APPROP LIMIT; BUDGET RESERVE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/22/21 (S) READ THE FIRST TIME - REFERRALS
01/22/21 (S) STA, JUD, FIN
02/04/21 (S) STA AT 3:30 PM BUTROVICH 205
BILL: SJR 7
SHORT TITLE: CONST. AM: STATE TAX; VOTER APPROVAL
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/22/21 (S) READ THE FIRST TIME - REFERRALS
01/22/21 (S) STA, JUD, FIN
02/04/21 (S) STA AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
CAROLINE SCHULTZ, Chief Policy Analyst
Office of Management and Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Introduced SJR 5 on behalf of the
administration.
MIKE BARNHILL, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Co-presented SJR 7 on behalf of the
administration.
BILL MILKS, Assistant Attorney General
Labor and State Affairs Section
Civil Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: Co-presented SJR 7 on behalf of the
administration.
ACTION NARRATIVE
3:34:05 PM
CHAIR MIKE SHOWER called the Senate State Affairs Standing
Committee meeting to order at 3:34 p.m. Present at the call to
order were Senators Kawasaki, Holland, Costello, Reinbold, and
Chair Shower.
CHAIR SHOWER stated that several committee members have asked
him to highlight once again that work on SB 39 began three years
ago and he filed the first version a little more than two years
ago. He clarified that SB 39 was not introduced because of the
last election.
SJR 5-CONST. AM: APPROP LIMIT; BUDGET RESERVE
3:36:57 PM
CHAIR SHOWER announced the consideration of SENATE JOINT
RESOLUTION NO. 5 Proposing amendments to the Constitution of the
State of Alaska relating to an appropriation limit; and relating
to the budget reserve fund.
3:37:09 PM
CAROLINE SCHULTZ, Chief Policy Analyst, Office of Management and
Budget, Office of the Governor, Juneau, Alaska, began her
presentation with some background on the appropriation limit.
She explained that Alaska already has a constitutional
appropriation limit that voters ratified in 1982. That provision
had a sunset clause and in 1986, voters re-approved the
constitutional appropriation limit. Also in 1986, the
legislature enacted a statutory spending limit and the statutory
budget reserve as a rainy day savings account. In 1990, voters
ratified the Constitutional Budget Reserve Fund (CBR) in Art.
IX, Sec. 17, Constitution of the State of Alaska.
MS. SCHULTZ said SJR 5 amends the appropriation limit in Art.
IX, Sec. 16, of the constitution. Importantly, SJR 5 amends the
calculation of the appropriation limit. It provides that state
spending may not exceed the prior three-year average by more
than the greater of inflation or population growth. SJR 5 also
clarifies the definition of appropriations subject to the
spending cap. It includes all undesignated general fund (UGF)
and designated general fund (DGF) spending. The exceptions
include the PFD, bond proceeds and debt service costs, deposits
to state savings accounts, disaster response, and non-state
funds for a specific purpose.
3:39:39 PM
SENATOR REINBOLD highlighted that disaster relief money is not
included.
MS. SCHULTZ explained that state or federal funds used to
respond to a disaster, as defined by state disaster statutes,
would not be included in the appropriation limit
SENATOR REINBOLD asked how much disaster funding had come into
the state since March 2020 and if the resolution excludes that
from the cap.
MS. SCHULTZ said she would follow up with the exact numbers. She
clarified that most federal funds would not be counted under the
cap and state funds expended for a disaster would not count
toward the cap.
3:41:03 PM
MS. SCHULTZ continued the presentation. She explained that the
second part of SJR 5 amends Art. V, Sec. 17, Constitution of the
State of Alaska. It changes how the legislature accesses the CBR
by removing the three-fourths vote requirement. SJR 5 provides
that appropriations from the CBR may be made by a majority vote
if there are insufficient general fund revenues to meet
expenditures. Further, it removes the general fund liability to
the CBR. She noted that this is known as the CBR "sweep"
provision.
CHAIR SHOWER asked what the governor's intent is in changing
those two provisions.
MS. SCHULTZ explained that the first of the two gates of the CBR
says that if the amount available for an appropriation is
insufficient to meet the budget and the budget is smaller than
the previous year, the legislature can access the CBR with a
majority vote. Importantly, in 1994 the court ruled in Hickel v.
Cowper that the amount in the permanent fund earnings reserve
counts as available for appropriation. She said that is billions
of dollars so the bar is too high to qualify for the majority
vote provision to access the CBR for a traditional rainy day
fund. Instead, the three-fourths rule, which allows an
appropriation from the CBR for any state purpose, applies.
MS. SCHULTZ said a provision in the current CBR language
requires that if the state has made expenditures from the CBR,
it must pay that back at the end of the fiscal year. At the end
of FY 2020, there was approximately a $10 billion liability to
the CBR. SJR 5 eliminates the requirement to repay the liability
and the three-fourths vote for access, which eliminates the
year-end political problem of the reverse sweep.
CHAIR SHOWER commented that these are significant changes that
the body will need to consider very carefully.
MS. SCHULTZ said the idea is to make the CBR a traditional rainy
day account.
She said the next slides model quantitatively what the funding
cap would look like under different scenarios.
3:44:22 PM
MS. SCHULTZ turned to the line graph on slide 3 that illustrates
that the appropriation limit articulated in the constitution is
ineffective. The heavy black line represents the current
appropriation limit. She pointed out that the heavy black line
that starts in FY1982, when voters approved the constitutional
appropriation limit, grows beyond the scope of either state
revenue or state general fund expenditures. UGF revenue matched
the current cap just two years, and UGF spending never
approached the limit. While there was an awareness that the
appropriation limit was ineffective, voters reapproved it in
1986. She said the concept is still popular but the math needs
fine-tuning.
CHAIR SHOWER mentioned the extensive work that several members
did on this topic several years ago and asked why this model did
not include revenue in addition to inflationary factors.
MS. SCHULTZ answered that this version intends to be as close as
possible to the measure from two years ago.
3:46:17 PM
SENATOR REINBOLD asked if she was recommending that the
approximately $10 billion liability to the CBR not be paid back.
MS. SCHULTZ confirmed that SJR 5 proposes to remove that
liability.
SENATOR REINBOLD said she liked the idea of tightening the
budget and paying the liability back because she thinks it was
the result of overspending. She also pointed out that the three-
fourths vote and reverse sweep can be a big deal and her
preference would be for the legislative branch to discuss this.
CHAIR SHOWER said that is why it is under debate and he was open
to changes if that was the will of the committee.
3:48:17 PM
SENATOR COSTELLO asked whether the $10 million liability affects
the state's bond rating and if so, how it is affected.
MS. SCHULTZ said she would follow up with a response after
consulting the bond manager.
3:48:55 PM
MR. BARNHILL, Deputy Commissioner, Department of Revenue,
Juneau, Alaska, added that he did not believe that rating
agencies account for that liability but he would check with
DOR's debt manager and follow up with the answer.
3:49:28 PM
SENATOR COSTELLO asked if the administration could look back to
see how much the bargaining to get the three-fourths vote to
access the CBR increased the budget over time.
MS SCHULTZ said she would try to get the information but that
kind of analysis would require a level of subjectivity and
perhaps offline calls with former co-chairs.
3:50:54 PM
MS SCHULTZ clarified that while she was modeling UGF spending,
the appropriation limit applies to a broader definition of state
spending than just UGF. For ease of the presentation and the
historical lookback, she used UGF as a proxy for state spending.
She added that when she shows the finer points within a three-
year timeframe, she would use the actual amount defined under
the appropriation limit.
She pointed to the black dotted line on the graph that shows the
spending cap if the voters had approved SJR 5 in FY1982 instead
of starting with $2.5 billion and letting it grow with inflation
and population. If SJR 5 had gone into effect in 1982, about $35
billion of unrestricted general funds would not have been spent.
It is speculation to say what would have happened to those funds
but if $35 billion was put into the permanent fund over that
timeframe, the fund would be valued at $100 billion and the
percent of market value (POMV) would be enough to cover the
current structural deficit.
3:52:48 PM
CHAIR SHOWER commented that the chart was worth a thousand
words. UGF expenditures nearly doubled since 2006 and when
revenue started to become an issue, the legislature did not act.
Now this legislature has to make the hard choices so the state
is not in the same position 14 years from now.
3:54:30 PM
SENATOR KAWASAKI pointed to the large expenditure spikes in
2008-2010 and asked how much of that was capital spending versus
operating expenses.
MS. SCHULTZ said she did not have the exact numbers but capital
expenditures drove the majority of the increase.
CHAIR SHOWER pointed out that while the capital spend was high,
there were also significant payments to PERS and TRS.
SENATOR KAWASAKI asked to see a chart that also represented
operating expenses because the years with spikes in capital
spend were to fill potholes that were unfilled for 20 years. He
said he agrees with paying back the billions owed to the CBR but
there were also billions of dollars in deferred maintenance that
normal operation and maintenance does not address. There needs
to be a recognition that some of those big spending years were
to catch up, he said.
3:56:41 PM
CHAIR SHOWER said it was a valid point but the problem today was
how to balance the budget when capital budgets are minimal.
He asked Ms. Schultz to get that data to the committee.
3:57:25 PM
SENATOR REINBOLD commented that the governor has 95 percent of
the budget so he has whatever cap he wants. Regarding the
deferred maintenance issue, she said the administration must be
held accountable for bloated budgets and not using the funds the
legislature gave for specific things.
3:58:52 PM
MS. SCHULTZ turned to the next slide and explained that the
green line in the background is for UGF revenue and the orange
line is for UGF expenditures. She noted that the graph only
looks at FY2000 through FY2022 because she wanted to show that a
positive aspect of using the three-year rolling average was that
the spending cap could adjust. She said what is modeled with the
various blue lines is the retrospective notion of what the
spending cap would look like if SJR 5 had been implemented in
FY2005. She pointed out that the blue line follows a fairly
linear progression with some growth for the greater of inflation
or population. She noted that recent history in Alaska
chronicles inflation as a higher growth factor than population.
CHAIR SHOWER commented that there had been a net outflow from
the state for the last three years.
MS. SCHULTZ agreed. Continuing, she pointed out that if SJR 5
had been implemented in FY2005, the line tracks along the FY2000
line. However, if SJR 5 had been implemented during a period of
higher spending, such as FY2010, that higher period of budget
growth allows for a larger spending cap but then it adjusts
down. It would have been the same for FY2015. It starts at a
very high level because it is factoring in those prior record
budget years into the three-year average, but it tapers to meet
the fiscal reality of the situation. She said that is an
important notion when you consider what calculation to use.
Something that auto corrects versus the current Art. IX, Sec.
16, limit. She observed that the latter grows and grows.
4:01:14 PM
CHAIR SHOWER asked her to talk briefly about the effect of
factoring in revenue and what the legislature decides to spend
versus what is available to spend.
MS. SCHULTZ said it would depend on how revenue is weighted. It
can mean that the spending limit calculation is more responsive
to a changing revenue environment, but periods of high revenue
spikes can allow the spending cap to grow more than if spending
alone were the basis.
CHAIR SHOWER said he brought it up because part of the
discussion two years ago was about including factors such as
CPI, inflation, or some combination and he wanted that still to
be part of the discussion.
MS. SCHULTZ said she would be happy to provide more information
if she visits the committee again on this topic.
4:03:19 PM
SENATOR KAWASAKI asked if the graphs include the annual
permanent fund dividend (PFD) payments.
MS. SCHULTZ answered no; the orange UGF spending line does not
include PFD payments because the dividend is not subject to the
appropriation limit.
CHAIR SHOWER commented that the language changed in 2017 to make
it a government expense so including it over time would be an
unreliable representation.
MS. SCHULTZ said SJR 5 specifically excludes the dividend from
the cap.
4:04:15 PM
MS. SCHULTZ said the last graph was forward looking. She
explained that the OMB forecast is based on some assumed
reductions in the next few fiscal years along with an inflation
factor and the DOR forecast is based heavily on the POMV draw,
of which are relatively stable growth factors. She said the
small dotted green line represents UGF revenue going forward if
it were to grow as it did in FY2005 through FY2013.
MS. SCHULTZ directed attention to the solid lines. The gray line
shows the cap if spending follows the Office of Management and
Budget (OMB) 10-year plan and the black line shows the cap with
maximized spending. She said she was highlighting this because
she did not want to create the notion that SJR 5 overly limits
spending or does not allow responsiveness. She also pointed out
that the highest possible cap, based on normal inflation and
population measures, is higher than the projected revenue.
However, if revenue were to increase in a year, the
appropriation could be more than it might otherwise be.
4:06:22 PM
CHAIR SHOWER mentioned the amendment to this provision two years
ago that created a waterfall fund. The notion was that in years
with high revenue, capital expenses could be increased to catch
up on things like infrastructure projects. The question is how
to do that without going in the hole again, he said.
MS. SCHULTZ responded that specifying where revenue beyond the
cap would be directed is an important policy conversation for
this committee to have.
CHAIR SHOWER said he would like that provision worked into a
graph to help the committee see how that may play out and where
it may be appropriate.
4:07:53 PM
MS. SCHULTZ said she would be happy to work with committee
members and staff outside of meetings to look at modeling and
the spreadsheets.
4:08:06 PM
CHAIR SHOWER held SJR 5 in committee.
SJR 7-CONST. AM: STATE TAX; VOTER APPROVAL
4:08:06 PM
CHAIR SHOWER announced the consideration of SENATE JOINT
RESOLUTION NO. 7 Proposing amendments to the Constitution of the
State of Alaska relating to prohibiting the establishment of a
state tax without the approval of the voters of the state; and
relating to the initiative process.
4:08:13 PM
MIKE BARNHILL, Deputy Commissioner, Department of Revenue,
Juneau, Alaska, stated that SJR 7 amends Art. IX, Sec. 1,
Constitution of the State of Alaska to require voter approval
for any new tax enacted by the legislature. It was similar to
Senate Joint Resolution 4 that this committee considered two
years ago.
He reminded members that the Alaska Constitution already has two
forms of direct democracy. These are the people's power to
initiate laws through initiative and the people's power to
repeal laws enacted by the legislature through referendum. SJR 7
adds a new form of direct democracy to the constitution,
functionally authorizing an automatic referendum on new taxes.
The people already have the power to initiate a referendum to
repeal a tax measure enacted by the legislature and SJR 7 makes
it automatic by placing it in the constitution.
MR BARNHILL said the second part of SJR 7 amends the people's
constitutional power of initiative by requiring legislative
approval with a majority vote in joint session of any new tax
enacted by initiative. Functionally, it is a form of checks and
balances. He described this as a new partnership between the
people and the legislature.
4:11:10 PM
SENATOR COSTELLO asked if the majority vote requirement means 31
votes regardless of the votes in the individual bodies or a
majority of the votes in each body.
MR. BARNHILL replied he reads it as a majority vote of 31 in a
joint session.
4:11:53 PM
SENATOR REINBOLD pointed out that Alaska's government is a
representative republic, which means that the voters elect
people to make decisions on things such as taxes. She said she
does not like taxes but she feels that this administration is
tying the hands and reducing the power of the legislature.
CHAIR SHOWER referred to the last sentence in the proposed new
subsection (c) and asked if this would be interpreted to apply
to only this provision for a tax increase that the voters
approve by initiative or if the judiciary could interpret it to
apply to any initiative.
4:13:43 PM
MR. BARNHILL directed attention to the language on page 2, line
7 that confines the application to an initiative that
establishes a state tax. He said that triggers the legislature's
ability to approve the initiated law by a majority vote in joint
session.
CHAIR SHOWER expressed concern about how the court might
interpret that and said the committee would take a harder look.
4:14:50 PM
MR. BARNHILL said that in 1955 the direct democracy elements of
initiative and referendum were added to the representative
democracy in the Alaska Constitution. That is part of Alaska's
legal heritage and the governor is proposing to automate a
referendum in the sole instance of legislative enactment of a
new tax.
4:16:22 PM
MR. BARNHILL proceeded to slide 7 and described other states
that have similar constitutional provisions regarding voter
approval of new or increased taxes.
Colorado, in 1992, amended its constitution to add the Taxpayer
Bill of Rights (TABOR). He noted that TABOR was essentially a
combination of SJR 5 and SJR 7. It requires voter approval of
any new tax or increase to existing taxes at the state and local
level. Notably, Colorado voters approved a marijuana tax in 2013
and certain tobacco tax increases in 2020.
4:17:55 PM
SENATOR COSTELLO asked if he had a definition of tax.
MR. BARNHILL said the Department of Revenue's view was that a
tax includes a broad-based sales tax, a broad-based income tax,
and an excise tax. It does not include user fees, such as court
filings tied to a specific service to defray the cost of that
service.
4:19:23 PM
SENATOR COSTELLO asked if a reduction in the permanent fund
dividend (PFD) would be considered a tax.
MR. BARNHILL answered no.
CHAIR SHOWER asked Mr. Milks if he had anything to add to the
definition.
4:19:51 PM
BILL MILKS, Assistant Attorney General, Labor and State Affairs
Section, Civil Division, Department of Law, Juneau, Alaska, said
the framers put the term "tax" in the constitution and the basic
definition came from dictionaries used at that time. It was a
charge levied by the government on persons or property for a
public purpose. He agreed with Mr. Barnhill that user fees were
different and would not be considered a tax.
4:21:27 PM
SENATOR KAWASAKI relayed that years ago in Fairbanks, property
taxes paid for the garbage utility. Then the assembly changed
that tax to a fee so it would be outside of the revenue cap.
There was vigorous debate because residents inside the city were
required to get the garbage utility but apartment complexes of
more than four could contract with a private vendor. He asked,
under that circumstance, if that was a fee or hidden tax.
MR. BARNHILL said it was difficult to assess but from a policy
perspective, it sounded more like a fee than a tax. It was tied
to a specific function and the purpose was to defray the cost of
that specific function. That is different from revenue raised
broadly for the purpose of funding public services generally. He
added that he could see the argument going both ways. He
deferred further explanation to Mr. Milks.
4:23:29 PM
MR. MILKS said Mr. Barnhill's explanation was reasonable but it
was difficult to assess the example.
SENATOR KAWASAKI posed the hypothetical example of increasing
the cost of what the Division of Motor Vehicles (DMV) charges
far more than the cost to operate the division. He asked if that
would be considered a tax.
MR. BARNHILL said it would be difficult to say categorically one
way or the other in that situation.
MR. MILKS agreed with Mr. Barnhill.
4:27:09 PM
SENATOR REINBOLD asked how SJR 7 answers to Art. IX of the
Alaska Constitution that says, "The power of taxation shall
never be surrendered. This power shall not be suspended or
contracted away, except as provided in this article."
MR. BARNHILL replied the resolution proposes to amend the
constitution so it would fall under the existing words, "except
as provided in this article."
CHAIR SHOWER asked if he was saying that the resolution would be
constitutional because it would amend [Art. IX, Sec. 1] of the
Alaska Constitution.
MR. BARNHILL agreed.
SENATOR REINBOLD questioned whether it made sense to allow and
not allow something in the same sentence.
CHAIR SHOWER asked Mr. Milks to give a more precise legal
definition of the process.
4:29:16 PM
MR. MILKS explained that the constitution currently says that
the power of taxation shall never be surrendered or contracted
away except as provided in [Art IX, Sec.1]. SJR 7 adds two new
subsections to that article that address the separate question
of establishing a state tax.
SENATOR REINBOLD asked him to read the constitution with the
addition of the two new subsections.
MR. MILKS directed attention to page 1, line 9 of the resolution
and explained that the new subsections would fall immediately
after the existing language in Art. IX, Sec. 1. The new
subsections set the rules regarding establishing a state tax.
SENATOR REINBOLD observed that it sounds like, "it's shall not
and then we're going to."
4:31:29 PM
MS. SCHULTZ said an example in the constitution appears in Art.
IX, Sec 7, the anti-dedication fund clause. As originally
drafted, it prohibited the dedication of state funds. That was
amended in 1976 to add "except as provided in Sec. 15, which
allowed the creation of the permanent fund.
SENATOR REINBOLD said the people voted to support the permanent
fund and the dividend and now it is being taken. She said she
appreciated Senator Costello's question about the permanent fund
because many people feel the reduction in the dividend is a tax.
She said she was not a fan of taxes, but this resolution gave
her pause.
CHAIR SHOWER asked if the Department of Law could provide a
written explanation, with examples, about how it was done
before.
MR. MILKS agreed to do so.
4:34:14 PM
SENATOR HOLLAND asked how many tax proposals Colorado voters
rejected after the passage of TABOR.
MR. BARNHILL said he would follow up with the information. He
recalled that a number of taxes in Colorado failed from 1992 to
the present.
CHAIR SHOWER asked him to provide the information by the next
hearing on the resolution.
4:35:17 PM
MR. BARNHILL continued the presentation on slide 7 regarding
states that require voter approval of new or increased taxes. He
said he included Missouri and Washington to show the variation.
The constitutional provision in Missouri requires voter approval
of tax increases of $50 million or more, adjusted for inflation.
In 2018, voters defeated Proposition D to increase gasoline
taxes by $400 million.
He explained that the state of Washington has a constitutional
provision that requires voter approval of certain increases to
real and personal property taxes referred to as "levy lid
lifts." In recent years, voters approved 75 percent of proposed
levy lid lifts. Further, California has a constitutional
provision that requires voter approval of general local taxes
and special local taxes.
CHAIR SHOWER asked him to provide information on any other
states that have enacted similar constitutional provisions.
MR. BARNHILL replied that these four are the states that have
amended their constitutions; there may be more examples at the
local level.
4:37:13 PM
MR. BARNHILL displayed slide 8 and highlighted that the National
Council of State Legislatures has summarized the pros and cons
of the experiences of states from a policy perspective. They
call the amendments proposed in SJR 5 and SJR 7 "tax and
expenditure limitations." He noted that the link to the entire
article was on slide 10. It exhaustively lists and categorizes
the states, the nature of the tax, and expenditure limitations.
A sample of the pros of a tax and expenditure limitation
includes make government more accountable and efficient; foster
public prioritization of programs and services; and voter
consent to new taxes may increase tax compliance. He noted the
latter was from a study of Eastern Bloc countries post communism
and the use of the referendum to engage voters and improve tax
compliance. The researchers found a positive relationship.
A sample of the cons of a tax and expenditure limitation
includes: more difficulty raising new revenue; waiting for voter
consent can delay implementation and collection of new revenues
(which may be an issue for Alaska that needs revenue soon); and
it shifts fiscal decision making away from elected
representatives (as Senator Reinbold pointed out).
MR. BARNHILL advised that slides 9 and 10 are cut and paste from
the National Council of State Legislatures webpage of more pros
of "Tax and Expenditure Limitations" for policy makers to
consider.
4:40:25 PM
SENATOR KAWASAKI mentioned discussions in past years about
locking in the price of natural gas. He described it as a
contingency that the legislature did over a number of years so
oil companies could figure out on the books how the gas line
would work in the future. He asked what SJR 7 does to the
situation in which the legislature enacts a longer-term tax that
the industry agreed to but is then subject to the will of the
people.
MR. BARNHILL clarified that Senator Kawasaki was talking about
locking in the tax rate for a number of years to make the
economics of the gas line predictable over a longer period. He
offered his understanding that three attorneys general
considered this at separate times and rendered three opinions
expressing different views on the time a tax rate could be
locked in. He deferred further discussion to Mr. Milks.
4:42:04 PM
MR. MILKS said the constitutional provision on taxing power
would still be there so the question is whether the legislature
can agree to limit potential to adjust a tax for a certain
period. He offered to follow up with more information if the
chair wished.
CHAIR SHOWER said he would rather have more information than
less even if it leads down a bit of a rabbit hole.
SENATOR REINBOLD asked if it would be considered a statewide tax
if the legislature applied the same tax formula on all mining
products; if SJR 7 would limit the legislature's ability to
establish such a tax; and if such a limitation would undermine
the representative republic.
MR. BARNHILL opined that a new tax on mining products would be
subject to SJR 7.
SENATOR REINBOLD asked if SJR 7 would prevent the administration
from raising fees in any way or if it was just another step for
revenue.
MR. BARNHILL replied nothing in the resolution controls costs or
reduces the budget. With respect to raising fees, he said that
state agencies that have regulatory authority to assess fees
would still be able to do so.
SENATOR REINBOLD asked Mr. Milks to state for the record whether
the administration believes Alaska is a representative democracy
or a representative republic.
4:47:52 PM
MR. MILKS explained that the Alaska Constitution sets out that
both the legislature and the people can enact laws and both can
repeal laws enacted by either one. The people can repeal a law
through referendum and the legislature can repeal a law passed
through initiative after two years. SJR 7 follows that model.
CHAIR SHOWER asked whether Alaska is a representative democracy
or a representative republic.
4:49:37 PM
MR. MILKS replied Alaska has a representative form of government
by having a legislative branch and a direct democracy component,
which is the people's power to enact laws through initiative.
Laws are made through a representative republic model and a
direct democracy model. He advised that Art. 1, Sec 2 identifies
the source of government.
MR. BARNHILL added that the US Constitution Art. IV, Sec. 4
states that, "The United States shall guarantee to every State
in this Union a Republican Form of Government." He said he views
the terms representative democracy and representative republic
as synonymous. Importantly, multiple states have added direct
democracy features to their constitution and those additions
have never been found to violate the guarantee of the
constitutionally required republican form of government.
4:52:24 PM
SENATOR KAWASAKI asked if Section 2 of the resolution would
apply to modification of an existing tax. For example, the
mining license tax that was created in 1959 was modified several
years ago to change the progressivity in each of the tiers.
MR. BARNHILL answered no; a tax modification would not be
covered.
SENATOR KAWASAKI listed the existing taxes on fish and mining
licenses and asked if he was saying that changes to the
percentages on those existing taxes would not be included in the
proposed Art. IX, Sec. 1(b).
MR. BARNHILL said yes.
CHAIR SHOWER asked if this could be interpreted to apply to more
things than intended.
4:54:42 PM
MR. BARNHILL replied, "It clearly just applies to a new tax."
SENATOR REINBOLD said she had a real problem with Section 2
based on concerns about a representative republic versus a
representative democracy.
MR. BARNHILL said he believes subsection (c) in Section 2 of the
resolution should help the concern about a direct democracy
taking away from the elements of a representative republic,
because it essentially restores that legislative power with
respect to initiated taxes.
SENATOR REINBOLD emphasized that this was not transparent
government and it caused her pause.
4:58:24 PM
CHAIR SHOWER said he had some of the same concerns, but the
legislature has recourse when laws are enacted through
initiative.
[SJR 7 was held in committee.]
4:59:52 PM
There being no further business to come before the committee,
Chair Shower adjourned the Senate State Affairs Standing
Committee meeting at 4:59 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01.19.21 Permanent Fund; Dividend TL - Senate.pdf |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| 01.1921 Permanent Fund; Income; Dividend TL - Senate.pdf |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| SB0053-1-2-012521-GOV-Y.PDF |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| SB0053-2-2-012521-REV-N.PDF |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| SB0053-3-2-012521-REV-Y.PDF |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| SB0053A.PDF |
SSTA 2/4/2021 3:30:00 PM |
SB 53 |
| 01.19.21 Approp Limit; Budget Reserve TL.pdf |
SSTA 2/4/2021 3:30:00 PM |
SJR 5 |
| SJR005A.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 5 |
| SJR005-1-2-012221-GOV-N.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 5 |
| SJR006-1-2-012221-GOV-N.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 6 |
| SJR006A.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 6 |
| 01.19.21 Taxation Limitation TL - Senate.pdf |
SSTA 2/4/2021 3:30:00 PM |
SJR 7 |
| SJR007-1-2-012221-GOV-N.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 7 |
| SJR007A.PDF |
SSTA 2/4/2021 3:30:00 PM |
SJR 7 |
| SJR 7 Sectional Analysis.pdf |
SSTA 2/4/2021 3:30:00 PM |
SJR 7 |
| SJR 5 Sectional Analysis.pdf |
SSTA 2/4/2021 3:30:00 PM |
SJR 5 |
| SJR5 and SJR7 - OMB and DOR presentation.pdf |
SSTA 2/4/2021 3:30:00 PM |
SJR 5 SJR 7 |