Legislature(2001 - 2002)
04/11/2001 01:44 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO.3
An Act relating to deposits to the Alaska permanent
fund from mineral lease rentals, royalties, royalty
sale proceeds, net profit shares under AS 38.05.180(f)
and (g), federal mineral revenue sharing payments
received by the state from mineral leases, and bonuses
received by the state from mineral leases, and limiting
deposits from those sources to the 25 percent required
under art. IX, sec. 15, Constitution of the State of
Alaska; and providing for an effective date.
REPRESENTATIVE NORMAN ROKEBURG noted that the legislation
would return the percentage of all mineral lease royalties
and bonuses deposited into the Permanent Fund to the
constitutionally mandated 25% percent. HB 3 proposes
changes to a statute, not the Constitution. He advised that
the surplus situation with State revenues no longer exists
today. He claimed that it is time for the State to redirect
the extra 25% to the General Fund. Passage of the bill
would generate an estimated $29 million dollars per year
over the next thirteen years. As Prudhoe Bay and Kuparuk
fields, which currently contribute to the general fund at a
25% rate diminish, the State needs to replace that
production with new, smaller satellite fields contributing
at the same 25% rate, not at the 50% rate.
Representative Rokeburg claimed that while the State can and
should continue to make budget reductions, it would be
foolish to ignore the source of general fund revenue in
solving the budget problem. Prudent fiscal management
requires a statutory change. HB 3 would be a small step in
the right direction. He urged the Committee's support of
what he called "fiscally prudent" legislation.
JIM KELLY, DIRECTOR OF COMMUNICATIONS, ALASKA PERMANENT FUND
CORPORATION (APFC), DEPARTMENT OF REVENUE, provided
information to Committee members. [Copy on File]. He noted
that the impact on oil contributions would total $333
million dollars between 2001-2011. The impact on per capita
dividends would total $90 million dollars over the same
eleven years. He offered to answer questions of the
Committee.
In response to queries by Representative Croft, Mr. Kelly
explained that it would be the income earned on the oil
revenues and would be averaged over five years. A reduction
taken in oil revenues would amount to $40 million dollars a
year. That would amount to the expected income earned on
the $40 million dollars.
Representative Harris asked if the effect on the dividend
would be higher than the Capital Budget Reserve (CBR). Mr.
Kelly replied that the amount of money coming out of the CBR
for FY02 was approximately $500 billion dollars. That is
more than the legislation proposes to take over the next ten
years. To replace that with Permanent Fund income, the
impact would be much more dramatic. The market during the
past few months has reduced the dividend by more than the
bill would reduce it over the next ten years.
Representative Hudson noted his support for the legislation.
The total revenue received from oil at the original time was
over $3.5 billion dollars. Currently, oil revenues are at
$800-$900 billion dollars. He stressed that oil provides
the State two dividends.
· It provides the permanent fund dividends; and
· It provides for the funding of essential services
of government.
Representative Hudson stated that funding has been deposited
in excess to the statutory requirement. He observed that
the Legislature has been an outstanding trustee. At this
time, there is not enough funding in the second dividend for
essential services. It is time to redirect the income
stream to where it was originally. The 25% contribution
would be the number excluding the bonus originally given.
The bonus should be stopped, allowing the State of Alaska to
provide an income stream and continue to provide essential
services.
Representative Hudson MOVED to report HB 3 out of Committee
with the accompanying fiscal note. Representative Davies
OBJECTED for the purpose of discussion.
Representative J. Davies agreed that HB 3 was a piece of a
long-range fiscal plan, but he emphasized that it is a
"small" piece relative to what the problem is. He expressed
concern that the State's fiscal problem is being addressed
"piece meal". Representative J. Davies WITHDREW his
OBJECTION.
Representative Croft OBJECTED and stressed that there has
been no comprehensive discussion on a fiscal plan. He
reiterated that no components of a plan have been addressed
to date. Representative Croft maintained that there should
be a comprehensive discussion and indicated that a five-year
fiscal plan should raise revenues.
Representative Harris commented that the legislation would
raise revenues into the General Fund that otherwise, would
not have been available.
Representative Rokeberg disagreed with the indication that
the legislation was a mistake except as part of a total
plan.
A roll call vote was taken on the motion.
IN FAVOR: Bunde, Davies, Harris, Hudson, Lancaster,
Williams
OPPOSED: Croft
Representatives Moses, Foster, Mulder, and Whittaker were
absent from the vote.
The MOTION PASSED (6-1).
HB 3 was reported out of Committee with a "do pass"
recommendation and with a fiscal note by Department of
Revenue dated 3/13/01.
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