10/29/2003 07:00 PM Senate JUD

            SJR 19-CONST. AM: PERMANENT FUND INCOME                                                                         
                                                                                                                                
CHAIR SEEKINS noted that Senator  Lincoln, sponsor of SJR 19, has                                                               
asked Representative Croft to present  SJR 19 to the committee at                                                               
this time.                                                                                                                      
                                                                                                                                
REPRESENTATIVE ERIC  CROFT told members that  Senator Lincoln was                                                               
tending to an  emergency in Rampart and asked him  to address the                                                               
committee because he  is the sponsor of  companion legislation in                                                               
the House, HJR  3. He said when he and  Senator Lincoln presented                                                               
to  the  Senate  Judiciary  Committee during  session,  the  main                                                               
discussion was  about an asserted  potential tax  difficulty with                                                               
SJR 19  He noted the  permanent fund is  tax exempt at  this time                                                               
but SJR  19 would constitutionally protect  the dividend. Whether                                                               
doing  that would  affect  the  public purpose  of  the fund  and                                                               
imperil its tax-free status is  in question. His review of recent                                                               
cases over  the last two years  led him to believe  that a change                                                               
in  the tax  status  was  not within  the  realm of  possibility.                                                               
Attorney General Renkes recently  commissioned an outside firm to                                                               
research  the  question and  has  sent  a letter  to  legislators                                                               
confirming  that constitutionally  protecting  the dividend  will                                                               
not imperil the fund's tax status.                                                                                              
                                                                                                                                
REPRESENTATIVE CROFT  submitted that  SJR 19 provides  a spending                                                               
limit that  makes the  most sense  from an  individual taxpayer's                                                               
perspective. He wants the spending  limit to reflect the limit on                                                               
how  much  legislators  can  take  out of  his  pocket.  He  said                                                               
limiting either  input or output  could create a  spending limit.                                                               
It  makes  the most  sense  to  him to  limit  input  - how  much                                                               
government can take from his  pocket and to require government to                                                               
live  within that  limit.  He  said the  output  limits can  have                                                               
unintended consequences and stated:                                                                                             
                                                                                                                                
     The one used now is a  suit that's way, way too big. It                                                                    
     doesn't fit  and you could  guess wrong and fit  a suit                                                                    
     for the  next 20 or  30 or 40 years  that unnecessarily                                                                    
     constrained  what we  spent on  education and  roads or                                                                    
     police  officers. It's  really  hard  to predict  those                                                                    
     things.                                                                                                                    
                                                                                                                                
REPRESENTATIVE CROFT said  what is predictable is  the amount you                                                               
do not want government to take  from individuals. SJR 19 is a way                                                               
to constrain  the size of  government and, more  importantly, the                                                               
amount  it can  take from  individuals. He  said making  sure the                                                               
Legislature cannot touch the dividend  is crucial to the oncoming                                                               
debate  of  whether  or  not the  structure  of  calculating  the                                                               
earnings of the fund is changed.  He pointed out there is a large                                                               
mistrust of the Legislature on  this issue, some of that mistrust                                                               
is warranted.  He said so  many politicians have promised  not to                                                               
use the  dividend without a  vote of  the people.   Many Alaskans                                                               
are concerned  that the POMV,  despite its merits, will  become a                                                               
Trojan  horse.  It  could  become   the  justification  vote  for                                                               
legislators to  say a  vote was  taken and they  can now  use the                                                               
dividend.  Legislators  can  prove   they  don't  intend  to  use                                                               
people's dividends by enacting SJR  19, the companion legislation                                                               
that enshrines the dividend in the Constitution.                                                                                
                                                                                                                                
REPRESENTATIVE CROFT summarized by saying  SJR 19 will not create                                                               
tax problems,  it creates a real  spending limit in terms  of how                                                               
much it can  take from people's pockets, and it  will be vital to                                                               
convincing  Alaskans that  the POMV  or any  other change  to the                                                               
permanent fund is appropriate.                                                                                                  
                                                                                                                                
SENATOR  OGAN  asked  if  AS  37  and AS  43,  as  cited  in  the                                                               
resolutions,  would constitutionally  protect  the hold  harmless                                                               
agreement.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  CROFT  said  he  would  get  an  answer  to  that                                                               
question to Senator  Ogan.  He then said he  meant to mention the                                                               
provisions  in  the  statute  that directly  relate  to  how  the                                                               
dividend  would  be calculated.  He  was  not  sure if  the  hold                                                               
harmless provision is in that  same provision, but offered to get                                                               
that information to the committee.                                                                                              
                                                                                                                                
SENATOR OGAN said the [hold  harmless provision] is not something                                                               
he  wants  to  constitutionally  protect;   he  would  prefer  to                                                               
eliminate it.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS  noted that  no one  was present  to testify  so he                                                               
closed  testimony on  SJR  19. He  announced  that the  committee                                                               
would  meet the  following  day  at 7:00  p.m.  at the  Anchorage                                                               
Legislative Information  Office and would take  testimony at that                                                               
time. He then adjourned the meeting.