09/08/2021 01:30 PM Senate JUDICIARY

                SJR 301-CONST. AM: APPROP LIMIT                                                                             
                                                                                                                                
1:33:25 PM                                                                                                                    
CHAIR  HOLLAND  announced  the   consideration  of  SENATE  JOINT                                                               
RESOLUTION NO.  301 Proposing amendments  to the  Constitution of                                                               
the  State of  Alaska  relating to  an  appropriation limit;  and                                                               
relating to the budget reserve fund.                                                                                            
                                                                                                                                
1:33:43 PM                                                                                                                    
CHAIR HOLLAND recognized Senator Reinbold's presence.                                                                           
                                                                                                                                
CHAIR HOLLAND opened public testimony on SJR 301.                                                                               
                                                                                                                                
1:34:16 PM                                                                                                                    
QUINN TOWNSEND,  Policy Manager, Alaska Policy  Forum, Anchorage,                                                               
Alaska, read the following written testimony:                                                                                   
                                                                                                                                
     Chair Holland  and members of the  Judiciary Committee,                                                                    
     thank you  for the opportunity  to testify today.  I am                                                                    
     Quinn Townsend  testifying on  behalf of  Alaska Policy                                                                    
     Forum.                                                                                                                     
                                                                                                                                
     Alaska has had a history of high spending during times                                                                     
       of economic growth that has led to fiscal problems                                                                       
     today.  One  mechanism  to reign  in  the  tendency  to                                                                    
     increase  spending when  times are  good is  through an                                                                    
     appropriation limit,  or spending cap.  Implementing an                                                                    
     effective  spending  cap  will  help  stabilize  future                                                                    
     state budgets and can encourage private sector growth.                                                                     
                                                                                                                                
     Economic  literature  shows  that  a  spending  cap  is                                                                    
     beneficial in curbing the growth  of state spending, as                                                                    
     long  as it  is  structured correctly.  There are  four                                                                    
     main aspects   that    are   integral   to    a   well-                                                                    
     designed cap: how it  is enforced, what it  limits, how                                                                    
     it   limits  spending   growth,  and how   it  can   be                                                                    
     overridden.                                                                                                                
                                                                                                                                
1:35:15 PM                                                                                                                    
MS. TOWNSEND continued:                                                                                                         
                                                                                                                                
     First, how  should a  spending cap  be enforced?  To be                                                                    
     effective,  limits  need  to be  constitutional  rather                                                                    
     than  statutory.  Constitutional limits are  much  more                                                                    
     resilient  to  the  ups  and  downs  of  politics  than                                                                    
     statutory   limits. This   means  that   constitutional                                                                    
     spending     caps     are     more     binding     than                                                                    
     statutory constraints.                                                                                                     
                                                                                                                                
     Second, what  should a spending cap  limit? Ineffective                                                                    
     spending  caps  allow  for workarounds  and  loopholes,                                                                    
     such   as  only   including  appropriations   from  tax                                                                    
     revenues. Instead, the base of  spending limited by the                                                                    
     cap needs  to be  broad. All  state expenditures  for a                                                                    
     fiscal  year  should  be  covered,  not  just  budgeted                                                                    
     general  revenue  fund  items. This  includes fee-  and                                                                    
     user charge-based activity.                                                                                                
                                                                                                                                
     Third,  how does  an effective  spending cap  limit the                                                                    
     growth  of  state  spending?  Economic  literature  has                                                                    
     demonstrated  that  the  most  effective  spending  cap                                                                    
     grows by population and  inflation rather than personal                                                                    
     income  or  another  economic  measure.  However,  that                                                                    
     literature also  acknowledges that Alaska's  economy is                                                                    
     unique and  typically excludes the state  from national                                                                    
     analyses.  Therefore, using  a running  average of  GDP                                                                    
     minus government  services to reflect  Alaska's private                                                                    
     sector  may  also be  an  effective  growth rate,  even                                                                    
     though  it  is  not   a  mechanism  that  other  states                                                                    
     typically use.                                                                                                             
                                                                                                                                
1:36:42 PM                                                                                                                    
     Fourth, what are  the ways to override  a spending cap?                                                                    
     An   effective  spending   cap   should  be   extremely                                                                    
     difficult to override and have  few exceptions, such as                                                                    
     disasters. To  allow spending  beyond the  limit should                                                                    
     require either  a vote of  the people,  a supermajority                                                                    
     legislative vote, or even both.                                                                                            
                                                                                                                                
     Alaska  needs an  effective  limit  on state  spending.                                                                    
     Every dollar spent  by the state is a  dollar not being                                                                    
     used by the private sector.  Alaska also needs a strong                                                                    
     private   sector,  especially   now  as   Alaskans  are                                                                    
     recovering from  the economic effects of  the pandemic.                                                                    
     Alaska  Policy Forum  encourages the  implementation of                                                                    
     an effective constitutional appropriation limit.                                                                           
                                                                                                                                
     Again, thank you for the opportunity to testify.                                                                           
                                                                                                                                
1:38:39 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:39:00 PM                                                                                                                    
CHAIR HOLLAND reconvened the meeting.                                                                                           
                                                                                                                                
1:39:18 PM                                                                                                                    
VIOLET  APALAYAK, representing  self, Dillingham,  Alaska, stated                                                               
that  late  Governor Jay  Hammond's  wife,  Bella, was  from  the                                                               
region.  She  referred to  his  book,  Diapering the  Devil:  How                                                               
Alaska  Helped  Staunch Befouling  by  Mismanaged  Oil Wealth:  A                                                               
Lesson for  Other Oil Rich  Nations. She offered her  support for                                                               
issues other  than SJR 301.  She offered support  for restriction                                                               
of disposal  sites under  the Clean Water  Act, Section  404 (c),                                                               
and requiring  Alaska Native cultural  courses in  Alaska history                                                               
curriculum.  She recalled  that then  Governor Hammond  suggested                                                               
that  tax  revenue   from  natural  resources  be   placed  in  a                                                               
conservatively  managed  account  and   issuing  a  new  dividend                                                               
earnings  stock. In  closing, she  stated support  for protecting                                                               
the permanent fund into perpetuity.                                                                                             
                                                                                                                                
1:42:17 PM                                                                                                                    
DON  DYER, President,  Mat-Su  Economic Development  Corporation,                                                               
Palmer,  Alaska,  stated support  for  SJR  301. He  offered  his                                                               
belief that the structure is  based on common sense and practical                                                               
ways  of  accomplishing  things   to  provide  the  right  budget                                                               
controls   in  Alaska.   It  will   also   help  drive   economic                                                               
development.  He  emphasized  elements, including  the  five-year                                                               
rolling average, which can be  adjusted annually but is capped at                                                               
14  percent. He  stated  the spending  cap could  be  a boon  for                                                               
investment in  Alaska because it would  provide predictability to                                                               
Alaska's   budget  and   it   guarantees  constitutional   budget                                                               
controls. He stated support for basing the cap on GDP.                                                                          
                                                                                                                                
1:44:42 PM                                                                                                                    
CHAIR HOLLAND closed public testimony on SJR 301.                                                                               
                                                                                                                                
[SJR 301 was held in committee.]