Legislature(2001 - 2002)
03/25/2002 09:27 AM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 304
An Act relating to disposition of income of the
permanent fund; and providing for an effective date.
Co-Chair Mulder MOVED to ADOPT the work draft, #22-LS1207\B,
Cook, 3/25/02. Representative Davies OBJECTED for
discussion purposes.
Representative Davies inquired the changes made to the work
draft.
Co-Chair Williams outlined the changes that had been made to
the draft:
· Delay effective date for changing to POMV
until June 29, 2003.
· Intend to transfer $300 million dollars from
the earnings reserve to the general fund in
2002 (for the FY03 budget).
· Language referring to the dividend as being
$1540 this October, since the State will be
leaving the current formula in effect until
next year. He emphasized that nothing would
change with this year's dividend.
Representative Croft observed that the changes would delay
it for a year and the 7% would then be in effect. He asked
if it would change the percent of distribution from 45% to
55% mix-government.
Co-Chair Mulder restated the MOTION to ADOPT the work draft
"B" as the working document before the Committee. Co-Chair
Williams OBJECTED.
Representative Lancaster observed that the rate of return
had been changed from 7.95% to 8.25%. He noted information
listed on the spreadsheets. [Copies on File].
Discussion followed amongst Committee members regarding
information contained on the spreadsheet.
Co-Chair Williams stated that the payout 7.65% would be
delayed starting in FY04.
Representative Davies commented on the delay and how that
would affect the Capital Budget Reserve (CBR). One of the
tests used was determining what would be left in the CBR and
what the impact would be.
Representative Hudson commented that this is a work in
progress. The Committee had passed the sales tax, which
would generate $250 million dollars. Taking that into
consideration and the $300 million proposed dollars from the
legislation, the State would be about $250 million dollars
short. He commented that with all the pieces of legislation
passed, the State would be down to a $300 million dollar
draw rather than $750 million dollar draw.
Co-Chair Williams WITHDREW his OBJECTION to adopting the
work draft. There being NO further OBJECTION, the work
draft was adopted.
Representative Hudson MOVED to report CS HB 304 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. Representative Croft OBJECTED.
Representative Croft indicated his concern that there is not
a spreadsheet available regarding how it would affect the
CBR and reiterated his concern with how the legislation will
affect poor Alaskans.
Co-Chair Williams noted that the bill previously passed had
a pay out of 7.65%, which was agreed to by the Permanent
Fund Corporation. He claimed, with that amount, there is
enough remaining in the general fund to not have to deal
with taxes of any kind. He reiterated that he did not
support any taxation and believed that the proposed solution
would be appropriate.
Co-Chair Williams stated that the manner in which the
original bill was written, there was $258 million dollars in
FY05 to cover the capital projects. He added that those
projects would be cut back. The State should not be taxed
economically when the State is depressed. He recommended
keeping the original numbers. He claimed that it is not
right to tax the people of the State when there exists a
dividend. Co-Chair Williams emphasized that Alaska is the
largest, socialist State in the world. Alaska should be
able to manage it finances. He urged that the bill not be
passed.
Co-Chair Mulder provided the idea of the legislation and the
spreadsheet. With CS HB 304 (FIN) and if HB 303 and HB 229
were to be put in place, the estimated $300 million from HB
304 and $150 million dollars additional tax revenues, the
net amount would total $450 million dollars. Offsetting
that is the fact that the oil revenue spring forecast for
FY03, if spending is held in line, the oil market is now
healthier, the State would be considering a draw estimate of
about $750 million dollars absent any new revenues. The
$750 million minus the $450 million dollars would be about a
$300 million dollar draw from the CBR. The balance in the
CBR would be in excess of $2 billion dollars.
Representative Davies claimed that the only way that is a
"healthy" outlook for the CBR is if people are willing to
consider that the State will not be able to do anything in
the future to address infrastructure concerns.
TAPE HFC 02 - 65, Side A
Representative Davies stated that is not a "rosy" picture
for the State of Alaska.
Co-Chair Mulder stated that was only a "capsule" view of
where the State would be at the conclusion of FY03. There
will be a 2% growth allotment, and with the percent of
market value (POMV) provisions related to permanent fund
earnings, as well as the additional revenue generated from
State tax dollars, those amounts would go a long way to
filling that gap.
Co-Chair Mulder asked if a spreadsheet would be needed to
move the bill from Committee.
Representative Croft replied that it was not needed as he
assumed that there were enough votes to move the bill from
Committee. He indicated for the record that he did not want
the proposal to move forward.
Representative Whitaker asked about the infrastructure
development in the capital budget.
Co-Chair Mulder responded that in relation to HB 304 and
because it has been delayed for a year, there will be no
effect on the upcoming capital budget. He claimed that in
the future, there would be a $250 million dollar stream
moving toward infrastructure development. He added that
there would be capital to provide more than an adequate
stream for school construction, maintenance and road
construction.
Representative Whitaker asked if for FY03, the capital
budget would be somewhere in the range of $100-$150 million
dollars.
Co-Chair Williams noted that the capital budget would be
$114 million dollars, which would be rolled to $193 million
dollars. He thought that it would be a 50/50 split.
Representative Whitaker asked if it were a fair conclusion,
that given the adoption of HB 304, there would be a
significant growth in the capital budget this year for the
State of Alaska.
Representative Davies asked if that growth would be general
fund dollars.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Harris, Hudson, Lancaster, Whitaker,
Bunde, Mulder
OPPOSED: Williams, Davies, Moses, Croft
The MOTION PASSED (6-4).
CS HB 304 (FIN) was reported out of Committee with a "do
pass" recommendation and a new fiscal note by the Department
of Revenue.
| Document Name | Date/Time | Subjects |
|---|