Legislature(2019 - 2020)ADAMS ROOM 519

05/03/2019 01:30 PM FINANCE

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Audio Topic
01:30:27 PM Start
01:31:01 PM HB96
01:45:33 PM HB102
02:56:14 PM HB131
02:56:50 PM Presentation: Appropriation Limit by Office of Management and Budget
04:01:09 PM Recessed to the Call of the Chair: the Meeting Reconvened on Saturday, May 4, 2019 at 12:00 P.m.
04:01:09 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 5/4/19 at 12:00 pm --
+ HB 102 RENTAL VEHICLE BY PRIVATE OWNER TELECONFERENCED
Heard & Held
-- Public Testimony --
+= HB 49 CRIMES; SENTENCING;MENT. ILLNESS;EVIDENCE TELECONFERENCED
Scheduled but Not Heard
+= HB 145 PROPERTY CRIME; MOTOR VEHICLE THEFT TOOLS TELECONFERENCED
<Bill Hearing Canceled>
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 96 PIONEERS' HOME AND VETERANS' HOME RATES TELECONFERENCED
Moved CSHB 96(FIN) Out of Committee
+= HB 131 APPROPRIATION LIMIT TELECONFERENCED
Heard & Held
+ Presentation: Appropriation Limit by TELECONFERENCED
Ed King, Chief Economist, Office of Management
and Budget
HOUSE BILL NO. 131                                                                                                            
                                                                                                                                
     "An Act relating to an appropriation limit; relating                                                                       
     to the budget responsibilities of the governor; and                                                                        
     providing for an effective date."                                                                                          
                                                                                                                                
2:56:14 PM                                                                                                                    
                                                                                                                                
^PRESENTATION: APPROPRIATION  LIMIT BY OFFICE  OF MANAGEMENT                                                                  
AND BUDGET                                                                                                                    
                                                                                                                                
Co-Chair Wilson had asked for  a comparison of spending. She                                                                    
had been working with Vice-Chair Ortiz and his staff.                                                                           
                                                                                                                                
2:56:50 PM                                                                                                                    
                                                                                                                                
ED KING,  CHIEF ECONOMIST, OFFICE OF  MANAGEMENT AND BUDGET,                                                                    
introduced  the  PowerPoint  presentation: "  Comparison  of                                                                    
Various  Appropriation Limit  Proposals."  He  asked if  the                                                                    
committee  wanted  him  to skip  some  of  the  introductory                                                                    
slides if necessary.                                                                                                            
                                                                                                                                
Co-Chair  Wilson remarked  that  the  finance committee  had                                                                    
nowhere else to be.                                                                                                             
                                                                                                                                
Mr.  King began  with the  graph on  slide 2:  "UGF Spending                                                                    
History." The  slide showed an  illustration of  the history                                                                    
of spending  and why a  spending limit was important  to the                                                                    
governor. In  1977, when  oil started  flowing on  the North                                                                    
Slope, the  revenues of the state  increased dramatically as                                                                    
did  spending which  generated  a desire  by  the public  to                                                                    
introduce  a  spending  limit within  the  constitution.  In                                                                    
1982, after  a 264  percent increase in  government spending                                                                    
the people voted  to limit the spending.  Over the following                                                                    
25 years  spending was kept  relatively in-check.  The state                                                                    
had  20 years  where spending  barely moved  other than  the                                                                    
volatility in some of the  revenues generated. The state had                                                                    
fairly  flat spending  for  2 decades  until  2005 when  oil                                                                    
prices started  to escalate  at a  meteoric rate.  The state                                                                    
saw the 264+ percent  increase in undesignated general funds                                                                    
(UGF) spending reminiscent of what  was seen in the  80s. It                                                                    
brought to mind  the question of whether  the spending limit                                                                    
was actually being effective. In  both instances where there                                                                    
was  an  increase  in  spending, there  was  a  decrease  in                                                                    
spending. However, it was much  quicker to increase spending                                                                    
than  to cut  it back.  In the  current fiscal  environment,                                                                    
spending was  far above what  it was before the  increase in                                                                    
revenue was experienced.                                                                                                        
                                                                                                                                
Mr.  King  reviewed  slide  3:  "UGF  Spending  History  and                                                                    
Different Limits." He reported  that the spending limit that                                                                    
was  currently in  the constitution,  the $2.5  billion that                                                                    
grew  with  population  and  inflation  represented  by  the                                                                    
dotted black  line, grew overtime regardless  of whether the                                                                    
government was actually growing  or not. The limit continued                                                                    
to grow  based on  the previous year's  limit, not  based on                                                                    
the previous  year's spending or  revenues. It  continued to                                                                    
grow  regardless of  any circumstances  occurring. He  noted                                                                    
the blue  area represented  agency operations, the  red area                                                                    
represented  statewide items  such as  debt service  and oil                                                                    
tax  credits,  and the  grey  area  represented the  capital                                                                    
budget.  All three  classifications  of government  spending                                                                    
had  increased  over  the  period  on  the  chart.  He  also                                                                    
included a couple of other  representations. The dotted line                                                                    
in the  middle represented what  would have happened  if the                                                                    
one-half of  inflation and population that  was contemplated                                                                    
in  House Joint  Resolution (HJR)  7 were  to have  been put                                                                    
into place rather than the  full consideration of population                                                                    
and inflation. The rate of  increase was about half as much.                                                                    
The black  dashed line below  tracked actual  spending which                                                                    
was adjusting  every year. It  was the language that  was in                                                                    
the current constitutional amendment  before both bodies. He                                                                    
suggested  that because  the limit  was adjusting  to actual                                                                    
spending, it  never detached from what  actual spending was.                                                                    
When  revenues  increased, it  would  not  have allowed  the                                                                    
increase to  occur. Otherwise, it  just tracked  what actual                                                                    
spending was, and when an  increase occurred it stayed flat.                                                                    
It showed what  the spending would have looked  like had the                                                                    
provision  already   been  in   the  constitution.   It  was                                                                    
consistent with what it was in 2004 adjusted for inflation.                                                                     
                                                                                                                                
Mr. King  also presented  one other  idea. He  reported that                                                                    
the red dashed  line was representative of  what the current                                                                    
limit would  have been if,  instead of pegging  the spending                                                                    
to the  high level  of spending  in the   80s, the  base was                                                                    
pegged  to the  level  of spending  before  the increase  in                                                                    
revenues in  1982 and  using the same  language that  was in                                                                    
the constitution.  He added that the  1975 spending adjusted                                                                    
for  full inflation  and population  would  be right  around                                                                    
what agency operations were the  previous year. It was about                                                                    
$500 million or $600 million  below the total budget because                                                                    
of the  other items.  The way the  limit was  structured had                                                                    
meaningful impacts on how the limit grew over time.                                                                             
                                                                                                                                
3:01:45 PM                                                                                                                    
                                                                                                                                
Mr.  King  addressed  slide  4:  "Sources  of  UGF  Spending                                                                    
Growth."  He explained  that  when he  showed  the graph  of                                                                    
escalated  spending, much  of the  time  the question  arose                                                                    
about  how the  state spent  its money.  The chart  showed a                                                                    
breakout  of  the different  ways  the  state increased  its                                                                    
spending from  2005 to 2013  and where the cuts  occurred in                                                                    
the years  that followed. He highlighted  that a significant                                                                    
amount  of   capital  budget   spending  occurred   and  was                                                                    
represented  in  grey.   Other  changes  occurred  including                                                                    
changes  to agency  operations, the  retirement system,  and                                                                    
oil tax  credits which  all contributed  to the  increase in                                                                    
spending.  He pointed  to the  black  bars that  represented                                                                    
actual  agency operations  spending in  2005 continued  over                                                                    
time and adjusted  for inflation. The red  bar showed agency                                                                    
operations   that  had   grown  more   than  inflation.   It                                                                    
represented  real growth  in operations.  In 2013,  the real                                                                    
operations growth was $1.3 billion  above what it would have                                                                    
been in  2005. Since then,  about half had been  pulled back                                                                    
out  of  the budget.  The  state  was currently  about  $750                                                                    
million above what inflation would have allowed.                                                                                
                                                                                                                                
Representative  Josephson  wondered  why,  relative  to  Mr.                                                                    
King's previous  comment about the  $750 million  above what                                                                    
inflation would  have allowed,  he did  not see  anything so                                                                    
large on the chart. He asked about the numbers.                                                                                 
                                                                                                                                
Mr. King  responded that  the numbers  were provided  by the                                                                    
Legislative Finance  Division. He  took the  2005 operations                                                                    
and inflated  it with actual inflation.  The actual spending                                                                    
was $750 million above that level.                                                                                              
                                                                                                                                
Representative  Josephson relayed  that in  oil tax  credits                                                                    
alone,  Mr.  King  had  $100  million  and  other  statewide                                                                    
growth.  Public  Employees'  Retirement  System  (PERS)  and                                                                    
Teachers' Retirement System (TRS)  were more substantial. He                                                                    
asked how the  numbers were backed out in  deriving the $750                                                                    
million difference.                                                                                                             
                                                                                                                                
Mr. King  responded affirmatively. They were  separated. The                                                                    
$750 million  was in addition  to the  PERS and TRS  and the                                                                    
oil  tax   credit  contributions.  The  total   increase  in                                                                    
spending was just over $1.2  billion above what an inflation                                                                    
adjustment would have allowed.                                                                                                  
                                                                                                                                
Co-Chair  Wilson  asked  committee  members  to  hold  their                                                                    
questions until Mr. King finished his presentation.                                                                             
                                                                                                                                
Mr. King  detailed the  bar graph on  slide 5:  "UGF Revenue                                                                    
and Expenditure  History." He relayed that  another question                                                                    
that  occurred  had  to  do with  revenue  and  response  to                                                                    
revenue. It  was accurate that the  legislature responded to                                                                    
changes  in revenues.  On the  chart he  plotted the  5-year                                                                    
average  revenue  against  actual spending.  He  thought  it                                                                    
correlated  well. It  was a  fact that  the legislature  was                                                                    
responding  to changes  in  revenues which  was  one of  the                                                                    
reasons the  interest in  a spending limit  was so  high. If                                                                    
there was  another increase in  revenues in the  future, the                                                                    
governor  did not  want  to see  a  substantial increase  in                                                                    
spending.                                                                                                                       
                                                                                                                                
Co-Chair Wilson  wondered if the legislature  did not reduce                                                                    
the  budget by  $750  million whether  it  would change  the                                                                    
spending cap  proposed by  the governor.  She was  trying to                                                                    
determine the starting point and  how it would change if the                                                                    
legislature was not at the specified amount.                                                                                    
                                                                                                                                
Mr.   King   explained    that   the   governor's   proposed                                                                    
constitutional  amendment  took  the  previous  3  years  of                                                                    
budgets  (actual  appropriations)  and  reset  the  spending                                                                    
limit  for  the following  year.  If  the legislature  spent                                                                    
below  the limit,  the  following year  the  limit would  go                                                                    
down.                                                                                                                           
                                                                                                                                
Co-Chair Wilson  asked for  the reset  amount for  the first                                                                    
year. Mr.  King responded  that if  the spending  limit went                                                                    
into effect in the following  year, the spending limit would                                                                    
be slightly more  than $5.3 billion which was  more than the                                                                    
body was  contemplating spending. Therefore, the  year after                                                                    
that the  limit would go  down because the average  would go                                                                    
down. He would point out  the transition period later in his                                                                    
presentation.                                                                                                                   
                                                                                                                                
Co-Chair  Wilson  asked if  the  average  would continue  to                                                                    
decrease each year  the state spent less.  Mr. King replied,                                                                    
"That's correct.  The limit adjusts  to the actual  needs of                                                                    
the government."                                                                                                                
                                                                                                                                
3:06:53 PM                                                                                                                    
                                                                                                                                
Mr.  King  discussed the  table  on  slide 6:  "Limit  Rules                                                                    
Comparison." The  chart showed a side-by-side  comparison of                                                                    
the different  versions of the  spending limit.  It compared                                                                    
the  House and  Senate  versions of  the statutory  spending                                                                    
limit  as well  as  the  House and  Senate  versions of  the                                                                    
constitutional spending  limit put forward by  the governor.                                                                    
The  current constitution  spending  limit  rules were  also                                                                    
included. He  broke out  a few  spending categories  to show                                                                    
how they were  similar and how there were  different. In all                                                                    
the  proposals  federal  funds  and  things  that  were  not                                                                    
included  in the  general fund  were all  excluded from  the                                                                    
cap.                                                                                                                            
                                                                                                                                
Mr.  King relayed  another item  excluded from  the cap  was                                                                    
disaster relief and things that  were part of the budget but                                                                    
not  considered spending.  For  example, transferring  money                                                                    
from  one   account  to  another  without   spending  it  or                                                                    
duplicated    funds,    like   interagency    receipts    or                                                                    
reappropriations, were not considered spending.                                                                                 
                                                                                                                                
Mr. King mentioned that general  debt obligation service was                                                                    
also excluded.  Things that  were included  in the  cap were                                                                    
agency  operations  and  capital   projects.  The  bottom  5                                                                    
categories listed  on the chart  were where  the differences                                                                    
could be seen in the  version comparisons. Revenue bond debt                                                                    
services was excluded in all  the versions except for in the                                                                    
current  constitution. Other  designated general  funds were                                                                    
excluded  in the  constitution  and  in both  constitutional                                                                    
amendments.  However,  it  was  excluded  in  the  statutory                                                                    
versions.  In both  HB 131  [Legislation introduced  in 2019                                                                    
regarding an  appropriation limit]  and its  companion bill,                                                                    
SB 104, the  designated general funds lived  outside the cap                                                                    
which  meant  they could  grow  without  limit. Whereas,  in                                                                    
House Joint  Resolution (HJR)  7 [Legislation  introduced in                                                                    
2019 - Short Title: Const.  Am: Approp. Limit; Reserve Fund]                                                                    
and  its companion  bill, Senate  Joint Resolution  (SJR) 6,                                                                    
they were  included in the  cap and part of  the limitation.                                                                    
School  debt reimbursement  was excluded  in HB  131 because                                                                    
the language indicated all debt service.                                                                                        
                                                                                                                                
Mr. King elaborated  that in the working draft  version K of                                                                    
SB  104 there  was  a provision  that specifically  included                                                                    
school  debt reimbursement.  In HJR 7  and SJR  6 they  were                                                                    
included  in the  cap by  necessity.  The Public  Employees'                                                                    
Retirement   System  (PERS)   and  TRS   contributions  were                                                                    
included because they were not  considered to be actual debt                                                                    
of  the state  even though  they were  an obligation  of the                                                                    
state. He pointed  out that there was some  ambiguity in the                                                                    
current version  of HB 131  that came  up because in  SB 104                                                                    
language was  included to specifically exclude  PERS and TRS                                                                    
contributions  which  raised  the question  whether  it  was                                                                    
otherwise   included.   Lastly,    in   the   constitutional                                                                    
provisions Permanent  Fund Dividends were excluded  from the                                                                    
cap.  In   the  statutory   proposals  the   Permanent  Fund                                                                    
Dividends were under the cap.                                                                                                   
                                                                                                                                
3:10:28 PM                                                                                                                    
                                                                                                                                
Mr.  King continued  to slide  7: "Limit  Rules Comparison."                                                                    
The 3  moving pieces of  the bills included the  base limit.                                                                    
The current version of the bill  had a $5 billion limit. The                                                                    
senate  version  increased  the limit  to  $6  billion.  The                                                                    
governor's  proposed  constitutional  limit in  both  bodies                                                                    
used an adjusting  average every year and reset  to a 3-year                                                                    
average. The  current constitution  had a $2.5  billion base                                                                    
and was based on 1982. The others were based on 2020.                                                                           
                                                                                                                                
Mr.  King relayed  that in  terms of  how the  limit changed                                                                    
over  time, the  version in  front  of the  committee had  a                                                                    
5-year  average inflation  adjustment. He  pointed out  that                                                                    
the language  indicated that  the amount  did not  grow over                                                                    
time -the  last 5 years  of inflation  was pegged to  the $5                                                                    
billion. In  the Senate's committee substitute  the language                                                                    
was changed  to the 5-year  average since 2020.  The average                                                                    
was  adjusting  based on  the  5-year  average of  inflation                                                                    
allowing the rate  to grow at the rate of  inflation. In the                                                                    
governor's  original  proposal,   the  escalation  rule  was                                                                    
one-half  of  the  prior  year's  inflation  and  population                                                                    
growth, but  it was capped at  2 percent. If there  was high                                                                    
inflation or population  in a year, it would not  be able to                                                                    
grow more than 2 percent.                                                                                                       
                                                                                                                                
Mr. King continued that in  the Senate's version of the bill                                                                    
currently in the Senate Finance  Committee it was changed to                                                                    
the average  of the  previous 5 years  of inflation  and was                                                                    
tied   to  the   average  of   the  3   previous  years   of                                                                    
appropriations.  The  current  constitution allowed  a  full                                                                    
rate of inflation and  population growth year-after-year. It                                                                    
allowed the rate  to grow based on  inflation. The exception                                                                    
applicable to  the capital budget  was that the  limit could                                                                    
be broken  for capital projects.  In the version  before the                                                                    
committee there  was no exception.  In the  Senate's version                                                                    
and committee  substitute included a 5  percent kicker above                                                                    
the  limit. He  indicated  that in  the governor's  proposal                                                                    
there was no exception.  However, in the Senate's substitute                                                                    
a 10 percent deviation was  allowed if funds were available.                                                                    
The current  constitution stated  that although there  was a                                                                    
limit,  it could  be broken  with  a super  majority of  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
Co-Chair  Wilson asked  for clarity  about capital  projects                                                                    
and exceptions to  the capital budget cap.  Mr. King relayed                                                                    
that in  the current version the  term "Capital Improvement"                                                                    
which was  interpreted as brick  and mortar.  The provisions                                                                    
in  the Senate's  version  of  the constitutional  amendment                                                                    
contained the  same language.  From a  statutory perspective                                                                    
it was  difficult to interpret  because the  legislature had                                                                    
the authority  to appropriate and could  include anything it                                                                    
wanted  to. He  noted  that for  the  constitution it  would                                                                    
depend  on how  the court  interpreted the  phrase, "Capital                                                                    
improvement." He  asserted that just  because it was  in the                                                                    
capital budget did not mean it qualified.                                                                                       
                                                                                                                                
Mr.  King  talked  about the  spending  trend  reflected  on                                                                    
slide 8: "UGF  Spending Trend." The slide  showed the growth                                                                    
rate of the budget since 2000.  From 2004 to 2013 the budget                                                                    
grew about 14 percent per  year. The 15-year average rate of                                                                    
growth of the  budget was 4.6 percent, much  higher than the                                                                    
rate of inflation. He conveyed  that when looking forward on                                                                    
how  the  limit was  changing  and  how government  spending                                                                    
could  be  expected to  change,  there  was some  historical                                                                    
context that might be reasonable to assume.                                                                                     
                                                                                                                                
3:15:03 PM                                                                                                                    
                                                                                                                                
Mr. King turned  to the graph on slide  9: "Revenues, Target                                                                    
Budget (4  percent growth),  and HB  131 Spending  Limit ($5                                                                    
billion  plus  inflation)."  The  slide  showed  the  target                                                                    
budget at a  4 percent growth rate which  was represented by                                                                    
the  black bars.  The red  dashed line  showed the  spending                                                                    
limit  in  HB  131  of  $5 billion.  If  the  budget  target                                                                    
exceeded the budget limit, it would not allow it to grow.                                                                       
                                                                                                                                
Mr. King  continued that with  a budget growth of  4 percent                                                                    
and  a spending  limit of  less than  4 percent,  they would                                                                    
eventually converge.  The stacked bar showed  how items were                                                                    
paid.  The  bottom portion  of  the  bars (shown  in  black)                                                                    
represented   UGF  revenues,   mostly   oil  revenues.   The                                                                    
remainder of the stack (denoted  in green, green hashes, and                                                                    
purple  combined) represented  the percent  of market  value                                                                    
(POMV). The green portion of the  bar was what was left over                                                                    
after deducting  the statutory PFD. The  top area [including                                                                    
the   purple  and   green  hashed   portions  of   the  bar]                                                                    
represented  the  PFD  calculation.  The  green  hashed  bar                                                                    
represented what  should have  been given  to the  people as                                                                    
part of their PFD but  was diverted for government spending.                                                                    
He  reported that  the  limit could  be  distributed to  the                                                                    
people  only  above what  the  government  was spending  and                                                                    
below because  the limit included  the PFD. In  other words,                                                                    
any amount more than the  PFD could not be distributed. Even                                                                    
if  there were  enough revenues  to  pay a  larger PFD,  the                                                                    
legislature was prohibited to do  so because the law did not                                                                    
allow it.                                                                                                                       
                                                                                                                                
Mr. King continued  to explain that in all the  cases he was                                                                    
presenting,  there was  revenue exceeding  the limit,  which                                                                    
meant  there  was money  available  to  pay a  greater  PFD.                                                                    
However, the legislature  was prohibited to do  so. The only                                                                    
way to pay a  PFD (if the PFD was under  the limit) would be                                                                    
to  decrease government  spending. Even  with more  revenues                                                                    
from  additional   taxes,  the   limit  would   not  change.                                                                    
Therefore, a  larger dividend  could not be  paid even  if a                                                                    
tax was  raised. The difficulty  of including the  PFD under                                                                    
the limit  was that  it inserted conflict  with the  PFD and                                                                    
government  spending  with  no  other  options  of  revenue.                                                                    
Revenues  more  than what  the  legislature  was allowed  to                                                                    
spend were  above the line.  Therefore, the money  stayed in                                                                    
the bank rather than being distributed.                                                                                         
                                                                                                                                
Representative Josephson  thought he  heard Mr.  King saying                                                                    
that under the  new proposed bill, the  legislature would be                                                                    
hemming in  its capacity  to pay  a larger  dividend because                                                                    
the state  could raise  revenue above the  red line  but not                                                                    
spend  it  on  a  dividend. He  wondered  if  he  understood                                                                    
correctly.  Mr.  King responded  that  he  was correct.  The                                                                    
legislature  could not  spend the  excess money  on anything                                                                    
under the  cap including  larger government or  larger PFDs.                                                                    
The limit  was not  actually limiting government  growth, it                                                                    
was only limiting the legislature's ability to pay the PFD.                                                                     
                                                                                                                                
Representative Josephson  was struck  by some  irony because                                                                    
the  administration  also  hemmed  in  expenditures  by  not                                                                    
allowing  any real  discussion of  other  revenue. Mr.  King                                                                    
responded that  the governor's  proposed spending  limit did                                                                    
not include  the PFD. Therefore,  the PFD was  unlimited. It                                                                    
would prevent  the government from growing,  which the limit                                                                    
was  intended to  do.  By implication,  it  meant the  state                                                                    
could raise more  revenues but could not spend  them. He did                                                                    
not follow the representative's question.                                                                                       
                                                                                                                                
Co-Chair Wilson suggested  that in HB 131,  by including the                                                                    
dividend in the  cap with the intention  of keeping spending                                                                    
down, it might have the  opposite effect. The dividend might                                                                    
get  squished rather  than reducing  spending. She  supposed                                                                    
that  the government  could increase  its revenues,  but the                                                                    
legislature  would still  be limited  to how  much it  could                                                                    
spend with  a spending limit  in place based on  the average                                                                    
spending for  the previous 3  years and inflation.  In other                                                                    
words, it was  not about how much revenue  was generated, it                                                                    
was about the limit in spending.                                                                                                
                                                                                                                                
Mr.  King added  that  if the  legislature  wanted to  raise                                                                    
government  spending by  raising new  revenues, it  could be                                                                    
done under  the limit. However, to  do so, a tax  would have                                                                    
to be implemented, and because  the PFD was under the limit,                                                                    
it crowded  out the PFD.  As a  result, people would  end up                                                                    
getting both  a tax and  a cut to  their PFD because  of the                                                                    
PFD being under the limit.                                                                                                      
                                                                                                                                
Co-Chair Wilson  asked about what  should be inside  the cap                                                                    
and what  should be  outside the  cap. She  wondered whether                                                                    
there would  be more  pressure on  how much  the legislature                                                                    
was spending  if the PFD  was outside  of the cap.  Mr. King                                                                    
responded that  if the PFD was  outside of the cap,  the cap                                                                    
would  only  apply to  spending.  The  limit would  only  be                                                                    
controlling  government spending  - it  was not  controlling                                                                    
the PFD and  how much was being distributed. It  would be up                                                                    
to  the legislature  to decide  or the  people to  decide if                                                                    
they wanted to put it in the constitution.                                                                                      
                                                                                                                                
3:22:25 PM                                                                                                                    
                                                                                                                                
Mr. King continued to slide  10: "Revenues, Target Budget (4                                                                    
percent growth), and HB 131  Spending Limit ($6 billion plus                                                                    
inflation)."  He  relayed  that in  the  Senate's  committee                                                                    
substitute  version  of  the bill  the  spending  limit  was                                                                    
increased to  $6 billion which  was reflected on  the slide.                                                                    
Because  there was  room under  the  limit, the  legislature                                                                    
could  raise  more  revenues  and  grow  government  without                                                                    
cutting the  PFD further. He  pointed out that  the spending                                                                    
limit was not  limiting anything. It was  hovering above the                                                                    
spending  limits.  If the  intent  was  to limit  government                                                                    
spending, it was not working the way it was intended.                                                                           
                                                                                                                                
Co-Chair  Wilson did  not think  the charts  reflected where                                                                    
the state wanted  to go. She thought perhaps  the PFD should                                                                    
be  kept outside  of the  spending cap.  Mr. King  responded                                                                    
that she was correct in  that the consequence of putting the                                                                    
PFD  inside the  cap  was  that it  competed  for the  other                                                                    
budget. He  pointed out that  the statutory  calculation for                                                                    
the PFD  was represented in  purple and the  hashed portion.                                                                    
The hash was the portion of  what should be the PFD that was                                                                    
being diverted to government to get to the spending target.                                                                     
                                                                                                                                
Vice-Chair  Johnston  asked  if   the  chart  reflected  the                                                                    
current POMV. Mr.  King replied that the  green, hashed, and                                                                    
purple bars added together was  the POMV. The green was left                                                                    
over after removing the statutory PFD.                                                                                          
                                                                                                                                
Vice-Chair Johnston  clarified that  the green,  hashed, and                                                                    
purple  equaled  the  POMV. Mr.  King  responded,  "That  is                                                                    
correct."                                                                                                                       
                                                                                                                                
Co-Chair Wilson noted the chart was very helpful.                                                                               
                                                                                                                                
Mr. King highlighted that the  chart showed the distribution                                                                    
of money  from the  POMV that was  going in  each direction.                                                                    
The green  was about  a third of  the total  bar. Therefore,                                                                    
two-thirds was  the calculated POMV  and one-third  was what                                                                    
was left  over from the POMV  after the PFD payment.  If the                                                                    
calculation were  to change  to 50 percent  of the  POMV, it                                                                    
would not  change the numbers,  just the colors of  the bar.                                                                    
The green  would go higher,  and the hash would  turn green.                                                                    
It did not change anything. The  same amount of PFD would be                                                                    
paid.                                                                                                                           
                                                                                                                                
Co-Chair Wilson referred to  the governor's proposed budget.                                                                    
She  asked  for  clarification  as to  how  the  bars  would                                                                    
change.  Mr. King  responded that  the specific  graphic did                                                                    
not contain  the 3-year adjustment.  The chart  included the                                                                    
statutory  provision  allowing  growth  with  inflation.  He                                                                    
relayed  that if  the budget  was  cut further  to what  the                                                                    
governor  proposed,  the black  line  would  shift down.  It                                                                    
would mean that  the hashmark, instead of  being diverted to                                                                    
government, would turn purple and  would go to the people of                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Co-Chair  Wilson  suggested  that  even  though  the  5-year                                                                    
average was  not accounted  for in the  chart, 202  would be                                                                    
part of the average and  the numbers would continue to reset                                                                    
the  spending   cap  down  a  certain   percentage  for  the                                                                    
following year.  Mr. King responded  that if the  base could                                                                    
readjust to  spending like  in the  constitutional amendment                                                                    
proposal, her  statement would be  true. House Bill  131 did                                                                    
not adjust for the spending level.                                                                                              
                                                                                                                                
Representative Josephson  asked for clarity around  what the                                                                    
chart  would look  like if  the  governor's intensions  were                                                                    
achieved. Mr. King responded that  the governor intended for                                                                    
the legislature  to pay  the full PFD  and the  budget would                                                                    
have to be moved down to the green to do so.                                                                                    
                                                                                                                                
Representative  Josephson suggested  neither body  [House or                                                                    
Senate]  could come  close to  what was  being proposed.  He                                                                    
asked why the bill was a practical path forward.                                                                                
                                                                                                                                
Co-Chair  Wilson  commented  that   it  was  not  about  how                                                                    
practical the  proposal was, rather,  it was about  what the                                                                    
bills did. The committee was  trying to learn what the bills                                                                    
did. She  thought that it  was an entirely  different policy                                                                    
discussion as to  why the legislature spent  more money than                                                                    
it  needed  to.  She  asked  Mr. King  to  continue  to  the                                                                    
following slide.                                                                                                                
                                                                                                                                
3:28:17 PM                                                                                                                    
                                                                                                                                
Mr.  King  presented  scenario  1  on  slide  11:  "Randomly                                                                    
Generated  Scenario  1." He  indicated  that  in looking  at                                                                    
spending  limits under  static conditions  where there  were                                                                    
nice  smooth lines,  projections were  flat, and  everything                                                                    
appeared easy. It was not  how reality worked. He thought it                                                                    
was  important to  look at  what circumstances  were created                                                                    
when volatility was introduced.  The following 2 slides were                                                                    
reflective  of  the  computer  randomly  generating  an  oil                                                                    
price, oil  production level,  investment return  level, and                                                                    
inflation  level.  It  looked at  what  happened  under  the                                                                    
different provisions when volatility  could occur. The slide                                                                    
showed one scenario showing 2  provisions. He could not show                                                                    
the  line  on  the  same   chart  because  when  there  were                                                                    
different impacts  on the savings accounts,  there were also                                                                    
different impacts on investment returns.                                                                                        
                                                                                                                                
He relayed  that in  the scenario oil  prices spiked  up and                                                                    
down and  up again,  as well  as investment  returns jumping                                                                    
around. Under the  $5 billion limit, there  were small PFD's                                                                    
that went away over time.  There were enough revenues to pay                                                                    
a  larger PFD,  but the  limit would  not allow  it. On  the                                                                    
right the  limit was  a $6 billion.  However, the  limit was                                                                    
not  limiting   anything  unless  oil  prices   went  up  or                                                                    
investment returns  went up  significantly. When  it limited                                                                    
something, it limited  the PFD. Unless the  body was willing                                                                    
to reduce  the black line  further, they could pay  a larger                                                                    
PFD. However, that was not what the limit was doing.                                                                            
                                                                                                                                
Mr.  King  moved  to  the   second  scenario  on  slide  12:                                                                    
"Randomly Generated  Scenario 2."  The slide  showed another                                                                    
scenario  where the  oil prices  were different  as well  as                                                                    
investment  returns.  He  highlighted  that  the  limit  was                                                                    
restricting  the  PFD   distributions,  although  there  was                                                                    
revenue to pay  for them. On the righthand  chart showed the                                                                    
$6  billion which  only limited  in high  revenue years.  He                                                                    
pointed  out  that  there  was  something  interesting  that                                                                    
happened   in  a   couple  of   the   scenarios  where   the                                                                    
distribution of  the POMV got  what was left over  after the                                                                    
PFD  calculation got  very small  in some  circumstances. He                                                                    
thought it was worth paying attention to.                                                                                       
                                                                                                                                
3:30:57 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Johnston  needed  to   know  how  Mr.  King  was                                                                    
modeling  the scenarios.  She  wondered  if the  operational                                                                    
budget was growing in his examples.                                                                                             
                                                                                                                                
Mr.  King responded  that  the model  was  setting the  2020                                                                    
number  at  the  level  the legislature  was  proposing.  It                                                                    
started   at  the   level  of   proposed  spending   by  the                                                                    
legislature. Each  year the  budget attempted  to grow  at a                                                                    
rate of 4  percent - slightly lower than  the historic rate.                                                                    
The  model indicated  to try  to  grow the  government at  4                                                                    
percent  if allowed.  Once  the budget  ran  up against  the                                                                    
limit, it was  not allowed to grow, therefore  the limit was                                                                    
controlled. On the  left it showed the $5  billion limit and                                                                    
that government  growth was limited  in 2027. On  the right,                                                                    
because  of  the higher  limit,  the  growth could  continue                                                                    
causing smaller  investment returns.  More outflow  of money                                                                    
being  taken  from  the savings  accounts  lead  to  smaller                                                                    
returns.                                                                                                                        
                                                                                                                                
Vice-Chair Johnston  was concerned with the  modeling of the                                                                    
revenue. She wondered how he reached the revenue amounts.                                                                       
                                                                                                                                
Mr. King explained  that the model was  calculating what the                                                                    
anticipated  royalty  and tax  payments  would  be from  oil                                                                    
companies by  allowing the oil  price and  production levels                                                                    
to  be   randomly  generated  within  the   distribution  he                                                                    
defined. It was  between $40 to $120 and  bounced around. In                                                                    
the production world there were  three cases: high, low, and                                                                    
medium.   He  used   them  as   parameters.   There  was   a                                                                    
distribution the  computer could select within  the confines                                                                    
of  production  projections.   For  investment  returns,  it                                                                    
figured  out what  was  being spent.  If  there were  excess                                                                    
revenues,  the  savings  rules were  followed.  The  savings                                                                    
accounts received  a return on  their asset levels  based on                                                                    
the  defined distribution  - the  historic performance  of a                                                                    
particular fund.  The actual  POMV beginning  in 2022  was 5                                                                    
percent of  the total fund  value. The combination of  the 4                                                                    
components made up  the entire POMV which  was calculated in                                                                    
the  way SB  26  [Legislation passed  in  2018 regarding  an                                                                    
appropriation limit, the Permanent  Fund, the Permanent Fund                                                                    
Dividend, and the Permanent Fund Earnings] contemplated.                                                                        
                                                                                                                                
3:35:07 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Johnston asked  Mr. King  if he  was basing  the                                                                    
revenue on a  consistent forecast derived from  based on the                                                                    
most recent revenue  forecast other than the  POMV. Mr. King                                                                    
indicated that  he was  using all the  current laws  and the                                                                    
revenue  forecast  as  the baseline  forecast  defining  the                                                                    
random  distribution.  The  model was  a  scenario  randomly                                                                    
generated within the distributions.  The purpose was to show                                                                    
what  volatility  might  do. Vice-Chair  Johnston  would  be                                                                    
interested  in doing  additional  modeling  with Mr.  King's                                                                    
tool.                                                                                                                           
                                                                                                                                
Co-Chair Wilson  mentioned there was an  assumed growth rate                                                                    
of 4 percent.  She thought it would be interesting  to see a                                                                    
model reflecting  other growth  rates such  as 1  percent, 2                                                                    
percent, or  3 percent.  She wondered if  the purple  was on                                                                    
the  bottom and  fulfilled first.  She thought  the modeling                                                                    
showed  the  PFD  getting squished  rather  than  government                                                                    
growth  which   was  not  necessarily  the   intent  of  the                                                                    
committee. She thought some other modeling would be nice.                                                                       
                                                                                                                                
Mr.  King  explained  that  the  bars  represented  revenues                                                                    
rather than expenditures. The  chart reflected the statutory                                                                    
calculated PFD,  not what the  legislature actually  paid as                                                                    
the PFD. There was no paying the PFD first.                                                                                     
                                                                                                                                
Co-Chair  Wilson thought  what he  was saying  was that  the                                                                    
amount spent on  government was going up 4  percent per year                                                                    
which was  why the  purple bar ended  in 2025.  She believed                                                                    
Mr.  King  was  assuming  the  state's  spending  would  not                                                                    
decrease.   She  wondered   if   the   graph  would   change                                                                    
significantly  if  the  state  reduced  its  spending  by  2                                                                    
percent.                                                                                                                        
                                                                                                                                
Mr.  King tried  to explain  that  it would  not change  the                                                                    
graph. The  red line would  remain the same. The  only thing                                                                    
that would  be different was  the black line. At  any point,                                                                    
the  legislature could  reduce the  budget and  increase the                                                                    
PFD.                                                                                                                            
                                                                                                                                
Co-Chair  Wilson thought  the  graphs  made the  legislature                                                                    
appear  to  be considering  the  PFD  last. She  wanted  the                                                                    
public to know that the  exercise was about deciding whether                                                                    
the PFD  should be  inside or  outside a  cap. Based  on the                                                                    
graph she  did not think the  PFD should be inside  the cap.                                                                    
She wanted  to see  the state control  its spending.  If the                                                                    
legislature  could  not  reduce  spending on  its  own,  she                                                                    
wondered how  to force  the spending. She  did not  want the                                                                    
dividend  to  be  the  looser.   She  emphasized  trying  to                                                                    
understand what was included in  a spending cap and what was                                                                    
not. She  wondered if the administration  had considered all                                                                    
factors before coming up with their idea.                                                                                       
                                                                                                                                
Mr. King  was not suggesting what  future legislatures might                                                                    
do.  He was  showing that  if the  legislature continued  to                                                                    
grow at  the rate it had  over the previous 15  years, there                                                                    
would be  consequences. The consequence was  putting the PFD                                                                    
under  the limit.  It  forced the  legislature  to make  the                                                                    
decision.  If budget  growth could  be restricted,  a person                                                                    
could  get  a larger  PFD.  However,  it  had not  been  the                                                                    
tendency. If a certain PFD amount was designated, by                                                                            
necessity the  level of spending  would be  constrained. The                                                                    
current budget was not drafted accordingly.                                                                                     
                                                                                                                                
Representative  Knopp  thought  Mr.  King  had  stated  that                                                                    
limiting budget growth would determine  the size of the PFD.                                                                    
He asked if the statement was  accurate that the size of the                                                                    
PFD was  determined by  rate of  return on  investments. Mr.                                                                    
King explained that  under HB 131 if the PFD  was within the                                                                    
limit, there was  only so much money to  spend. Every dollar                                                                    
that was spent on government was  a dollar that could not be                                                                    
spent  on the  PFD  and  vice versa.  He  suggested that  by                                                                    
including the PFD under the  limit, the PFD would be limited                                                                    
by how much was spent on government.                                                                                            
                                                                                                                                
3:40:58 PM                                                                                                                    
                                                                                                                                
Representative Knopp  returned to slides  8 and 9.  He noted                                                                    
Mr. King  spoke of 15 year  averages and showed a  growth of                                                                    
4.6  percent.  He  asked  what   rate  of  growth  Mr.  King                                                                    
recommended under  HB 131. He quoted  AS 37.05.540 regarding                                                                    
appropriation   limits.  He   wondered   why  the   existing                                                                    
appropriation limit was not working.                                                                                            
                                                                                                                                
Mr.  King thought  Representative Knopp  had referenced  the                                                                    
statute   relating  to   the   statutory  limit   associated                                                                    
exclusively  with  the  Alaska   Mental  Health  Trust.  The                                                                    
current constitutional  spending limit allowed the  limit to                                                                    
increase by the  rate of inflation and  population which was                                                                    
less  than  the  4.6  percent  average  growth  through  the                                                                    
previous 1.5  decades. The proposal  by the governor  was to                                                                    
cut  the rate  in  half -  half of  population  and half  of                                                                    
inflation.  The  Senate  suggested  that  a  5-year  average                                                                    
inflation rate  was more  appropriate with  no consideration                                                                    
of population.  It would  be up to  policy makers  to decide                                                                    
what was appropriate.  The idea was that some  limit must be                                                                    
in place if the legislature wanted to have a limit.                                                                             
                                                                                                                                
Representative Josephson pointed to  the lavender bar on the                                                                    
right of slide  12 of the presentation. He asked  if the bar                                                                    
represented  unfunded  Permanent  Fund Dividends.  Mr.  King                                                                    
responded that  it was money available  for distribution for                                                                    
the  PFD but  was unable  to be  distributed because  of the                                                                    
limit in  place. With  $100 oil in  the current  year, there                                                                    
was were  high oil revenues.  There were enough  revenues to                                                                    
pay a larger  PFD, but the limit would not  allow it because                                                                    
the PFD was under the limit.                                                                                                    
                                                                                                                                
Representative  Josephson thought  under the  current random                                                                    
scenario Mr. King  was projecting the dividend  outlay to be                                                                    
about $4  billion. In  other words,  people would  receive a                                                                    
$6000  check.  For  a  family of  four  they  would  receive                                                                    
$24,000.  Mr.  King  answered that  the  randomly  generated                                                                    
scenario   generated   a   dividend    as   large   as   the                                                                    
representative had suggested.                                                                                                   
                                                                                                                                
Representative  Josephson surmised  that  under the  current                                                                    
formula, the  state was on a  track to pay a  family of four                                                                    
$24,000 in  dividends in 10  years. Mr. King  responded that                                                                    
he was  not showing an  actual projection of  future events.                                                                    
It  showed   one  possibility  of  many   outcomes.  In  the                                                                    
particular  year  there  was   a  25  percent  return  which                                                                    
generated  the exceedingly  high  PFD calculation.  However,                                                                    
the POMV number had not caught  up because of the lag in the                                                                    
averaging.  There was  a high  PFD calculation,  even though                                                                    
other scenarios  would generate a smaller  number because of                                                                    
smaller returns.  He was not  suggesting what  would happen,                                                                    
but it was a possible outcome.                                                                                                  
                                                                                                                                
Representative  Knopp had  spoken  to the  LFD director  who                                                                    
affirmed  what he  thought: AS  37.05 did  not refer  to the                                                                    
Alaska   Mental  health   Trust  appropriation.   Section  B                                                                    
outlined what  was exempt  from the  cap. It  also discussed                                                                    
the level  of appropriation. He  wanted Mr. King to  look at                                                                    
the existing statute.  He was wondering why the  cap was not                                                                    
working.                                                                                                                        
                                                                                                                                
3:45:32 PM                                                                                                                    
                                                                                                                                
Mr.  King moved  to  slide  13 and  reviewed  the House  and                                                                    
Senate  joint resolutions  put forward  by the  governor and                                                                    
changed by the  Senate. In the original  provision there was                                                                    
an  allowed   escalation  of   one-half  of   inflation  and                                                                    
population with a maximum of  2 percent. The 2 percent limit                                                                    
did not  actually kick  in in  the baseline  projections. It                                                                    
was  just  half  of  inflation and  population.  The  Senate                                                                    
adjusted  it  to a  5-year  average  adjusted for  inflation                                                                    
without  a consideration  of  population.  It grew  slightly                                                                    
more but  not excessively.  He highlighted that,  because of                                                                    
the 3-year  averaging, there  was a  period where  the state                                                                    
was spending  less than the  limit which required  the limit                                                                    
to be adjusted downward. In  either case, there was a period                                                                    
of transition before the growth trend kicked in.                                                                                
                                                                                                                                
Mr. King looked at slide 14:  "Comparison of No Limit to HJR
7 / SJR 6 Limit." He  explained that because the PFD was not                                                                    
under the limit  there were no hashes. He  clarified that he                                                                    
was only looking at revenue.  The black line represented the                                                                    
target budget.  The dotted  line showed  what the  4 percent                                                                    
budget growth  would look  like. He  continued that  the red                                                                    
dotted line  represented what SJR  6 growth would  look like                                                                    
without  consideration of  spending.  If the  state were  to                                                                    
spend to the  limit every year, there would be  a very small                                                                    
growth rate. The dashed line  showed the adjusting rate down                                                                    
to the actual  amount. In FY 20 he  expected actual spending                                                                    
to  be  below  the  calculated spending  limit  which  would                                                                    
trigger  a reduction  in the  limit.  It trended  down to  a                                                                    
level similar to FY 05 and  grew at the same rate. The chart                                                                    
showed the baseline projection of  revenues projected to the                                                                    
10-year  mark.  It  was  also   the  Alaska  Permanent  Fund                                                                    
Corporation's projection of earnings.                                                                                           
                                                                                                                                
Mr. King  explained that the  green and the  purple combined                                                                    
equaled the POMV.  The purple was the  calculated amount for                                                                    
the PFD. He  pointed out there was a decrease  in revenue in                                                                    
the  near term.  As new  infrastructure was  being developed                                                                    
there would  be an increase in  out years once it  came into                                                                    
production.  Anything  under the  black  line  needed to  be                                                                    
funded  somehow. He  suggested that  because there  were not                                                                    
enough  revenues, there  was a  shortfall between  the black                                                                    
line  and the  green bar  that  needed to  be addressed.  He                                                                    
offered that  because the  PFD was not  under the  limit, it                                                                    
could  be addressed  through  taxes,  savings draws,  budget                                                                    
cuts, or through the PFD. If  the state were to use the PFD,                                                                    
everything above the  line would be distributed  as the PFD.                                                                    
By  comparing the  different  lines,  the potential  impacts                                                                    
could  be seen  showing  how  much of  the  funds would  get                                                                    
diverted  from the  PFD calculation  to  government and  how                                                                    
much could be  distributed. If budget cuts  were made, there                                                                    
would be  a larger PFD  payout. Eventually, without  a limit                                                                    
there  would not  be enough  revenues to  fund the  call for                                                                    
cash.                                                                                                                           
                                                                                                                                
Co-Chair  Wilson  asked  what  percentage  decrease  in  the                                                                    
operating/capital  budgets would  be  needed  to maintain  a                                                                    
full PFD  and keep the  state under  the red line.  Mr. King                                                                    
answered that  cuts would have  to be greater than  what was                                                                    
being  proposed. He  thought an  additional $500  million to                                                                    
$600 million would have to be cut from the budget.                                                                              
                                                                                                                                
3:49:55 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson  asked if they  would have to take  out $2.1                                                                    
billion  in FY  20. Mr.  King replied  that the  state would                                                                    
have approximately $3.8 billion in  revenues to spend on UGF                                                                    
and designated  general funds (DGF). It  was another several                                                                    
hundred million below what was being proposed.                                                                                  
                                                                                                                                
Co-Chair  Wilson noted  the black  dotted line  representing                                                                    
the  budget  growing   at  4  percent.  She   asked  if  the                                                                    
anticipated  growth  rate was  2  percent  per year  in  the                                                                    
Administration's proposal  for SJR  6. Mr. King  replied the                                                                    
anticipated growth rate  was just under 1  percent which was                                                                    
what the limit allowed.                                                                                                         
                                                                                                                                
Co-Chair Wilson  noted the state  had just  signed contracts                                                                    
reflecting a range of zero to  over 4 percent plus 7 percent                                                                    
for public safety. The contracts  did not include steps. She                                                                    
assumed the  number of  employees would  have to  be reduced                                                                    
rather  than   looking  at   salary  reductions.   Mr.  King                                                                    
suggested   that  the   legislature  would   have  to   find                                                                    
efficiencies or reductions.                                                                                                     
                                                                                                                                
Co-Chair Wilson rebutted that the  legislature was not being                                                                    
discussed.  She was  talking about  the administration.  She                                                                    
was trying to figure out  how the administration would apply                                                                    
a  spending  cap based  on  a  1  percent growth  rate  when                                                                    
contracts   were   currently   being  signed   and   without                                                                    
legislation that  would reduce  the rate  to 1  percent. The                                                                    
governor  had offered  legislation that  would increase  the                                                                    
rate to 1.7  percent. The numbers in her head  did not work.                                                                    
She wondered how many positions  would have to be reduced to                                                                    
stay  within  the  1  percent   growth  rate  based  on  the                                                                    
administration's spending limit.                                                                                                
                                                                                                                                
Mr. King responded  that it was a  significant challenge. He                                                                    
did  not  have the  answers.  There  were no  easy  answers.                                                                    
Co-Chair  Wilson  asked who  might  be  able to  answer  her                                                                    
question. She was not trying  to figure out the numbers. She                                                                    
wanted  further  clarification.  Mr. King  replied  that  he                                                                    
would  have to  get  back with  the  representative with  an                                                                    
answer. He  offered that presently the  governor put forward                                                                    
a  proposal  and   it  would  go  through   a  process.  The                                                                    
administration  was willing  to  have  a conversation  about                                                                    
what the  right numbers  should be. Co-Chair  Wilson thought                                                                    
it was  important to  know where the  numbers came  from and                                                                    
what levers  were used.  She wanted  to understand  what had                                                                    
changed to get the numbers right.                                                                                               
                                                                                                                                
3:55:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz asked  Mr.  King if  he  thought that  any                                                                    
constitutional  change would  require a  spending cap.  Once                                                                    
things  were   put  in  the  constitution   it  became  more                                                                    
difficult   to   adjust.   He  wondered   if   things   like                                                                    
inflationary  rates  should  be  taken  into  consideration.                                                                    
There  had  not  been  significant  inflation  in  the  past                                                                    
several years.  He noted the  employment rate of  the nation                                                                    
had dropped below 4 percent. He  asked Mr. King if he agreed                                                                    
that   lowering  unemployment   rates   was  a   significant                                                                    
inflation causation. He thought  inflation could increase up                                                                    
to 6 percent or 7 percent in a few years.                                                                                       
                                                                                                                                
Mr.  King responded  that the  inflation rate  was something                                                                    
the Federal Reserve  tracked and tried to  control. They had                                                                    
done a  great job.  The expectations  for inflation  were in                                                                    
the range  of 2 percent to  2.5 percent for the  next decade                                                                    
or more  based on the  federal target. Vice-Chair  Ortiz was                                                                    
correct  that there  were things  beyond their  control, and                                                                    
anything was possible.                                                                                                          
                                                                                                                                
Vice-Chair Ortiz made the point  that if something was going                                                                    
to be placed  in the constitution a  consideration should be                                                                    
made. Mr. King indicated that  if something was to be placed                                                                    
in  a  document  that  was  rigid,  there  needed  to  be  a                                                                    
mechanism that would adjust to  things like inflation or the                                                                    
rate of  spending to allow  for flexibility. A  fixed number                                                                    
was  currently in  the  constitution and  allowed  it to  be                                                                    
detached  for  the  actual  needs  of  government.  Co-Chair                                                                    
Wilson  comment, "Rigid  but flexible.  Those  two items  go                                                                    
together."                                                                                                                      
                                                                                                                                
Vice-Chair    Johnston   thought    the   current    federal                                                                    
administration was  hoping for  4 percent inflation  to come                                                                    
close  to preventing  the nation's  debt  from growing.  She                                                                    
referred  to page  6  regarding what  was  included and  not                                                                    
included.  In HJR  7 version  A  agency operations,  capital                                                                    
projects, and PERS and TRS  contributions were included. She                                                                    
wondered what  modeling was  used in  contract negotiations.                                                                    
She suggested that  if the legislature was going  to look at                                                                    
agency  operations, it  should first  look at  what modeling                                                                    
was being done. She also  noted that when doing the modeling                                                                    
for HJR  7, Mr.  King included  PERS and  TRS contributions.                                                                    
She suggested  that he would  have to include the  ARM Board                                                                    
and the  cost of  downsizing government. She  suggested that                                                                    
as Mr. King was modeling  all levers needed to be presented.                                                                    
The cost  of downsizing government should  also be included,                                                                    
as it  would be part  of the levers.  She did not  think the                                                                    
legislature  was  getting  a  full  picture  including  cost                                                                    
drivers and levers.                                                                                                             
                                                                                                                                
Co-Chair Wilson  was going to  work with Mr. King  about the                                                                    
levers. She  wanted to  move the  bill through  committee in                                                                    
the  current year,  if possible.  She thanked  Mr. King  for                                                                    
being in the meeting.                                                                                                           
                                                                                                                                
Co-Chair Wilson  indicated that she  would be  recessing the                                                                    
meeting in anticipation of receiving the crime bill.                                                                            
                                                                                                                                
^RECESSED TO THE  CALL OF THE CHAIR:  THE MEETING RECONVENED                                                                  
ON SATURDAY, MAY 4, 2019 AT 12:00 P.M.                                                                                        
                                                                                                                                
4:01:09 PM                                                                                                                    
                                                                                                                                

Document Name Date/Time Subjects
HB 102 Sponsor Statement Version U.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102. Sectional Version U.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102.Backup Support Letter Enterprise.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102 Public Testimony.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 96 Amendment 2 Wilson .pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 96 Amendment 1 Josephson.pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 102 Opposition Letter.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 131 Spending Limit Comparison.pdf HFIN 5/3/2019 1:30:00 PM
HB 131
HB 49 CS WORKDRAFT FINv.E.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 v.E CS FIN Sectional Summary.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 102 Opposition Comptia.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 49 HB 49 Public Testimony Pkt 3.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 Public Testimony Pkt 2.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 DRAFT Fiscal Note Packet.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 Public Testimony PKT 4.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB049CS(FIN)-DPS-PT-DRAFT 05-04-19.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 HB 49 Public Testimony Pkt 3.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 96 Amendment 3 Knopp.pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96