Legislature(2019 - 2020)ADAMS 519

03/11/2020 01:30 PM FINANCE

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01:36:59 PM Start
01:38:01 PM HB306
03:19:03 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 300                                                                                                            
     "An  Act relating  to deposits  into the  dividend fund                                                                    
     and  income of  and  appropriations  from the  earnings                                                                    
     reserve account;  relating to the  community assistance                                                                    
     program; and providing for an effective date."                                                                             
HOUSE BILL NO. 306                                                                                                            
     "An  Act relating  to deposits  into the  dividend fund                                                                    
     and  income of  and  appropriations  from the  earnings                                                                    
     reserve   account;   establishing  a   permanent   fund                                                                    
     dividend  task force;  and providing  for an  effective                                                                    
1:38:01 PM                                                                                                                    
PAT  PITNEY, DIRECTOR,  LEGISLATIVE  FINANCE DIVISION,  made                                                                    
opening  remarks and  introduced  a PowerPoint  presentation                                                                    
titled "HB 300  and HB 306 Modeling  Overview: House Finance                                                                    
Committee," dated March 11, 2020  (copy on file). She shared                                                                    
that  the  presentation  used  static  modeling  projections                                                                    
because  it  was  much easier  to  explain,  especially  for                                                                    
individuals  looking at  the materials  on the  website. The                                                                    
projections were built on updated  oil and percent of market                                                                    
value (POMV) forecasts. She noted  the updates had been made                                                                    
due to  the dramatic change  in the  market and drop  in oil                                                                    
price in  the past  couple of weeks.  She detailed  that oil                                                                    
futures were trading at $40 per  barrel, which was as good a                                                                    
price  predictor  as  anything. The  Department  of  Revenue                                                                    
(DOR) typically  came out with  an updated  forecast towards                                                                    
the end  of March;  however, because the  drop in  price had                                                                    
been  so dramatic,  the Legislative  Finance Division  (LFD)                                                                    
felt it would  be irresponsible to assume  the forecast from                                                                    
the previous fall would come to fruition.                                                                                       
Co-Chair Johnston shared that she  was happy with the method                                                                    
LFD had selected. She detailed  that a recent revenue report                                                                    
provided by DOR specified that  the fall [2019] forecast had                                                                    
placed  significant  emphasis  on the  futures  market.  She                                                                    
asked what assumption  LFD used regarding the  draw from the                                                                    
Permanent Fund.                                                                                                                 
Ms. Pitney answered that the  question would be addressed in                                                                    
the presentation.                                                                                                               
ALEXEI  PAINTER,  ANALYST,   LEGISLATIVE  FINANCE  DIVISION,                                                                    
began on slide  2 titled "Assumption: Oil  Price." He shared                                                                    
that DOR's  spring forecast  would be  coming out  soon. The                                                                    
fall forecast had assumed an oil  price of $59 per barrel in                                                                    
FY 21,  which had been  based on  the futures market  at the                                                                    
time.  He  noted there  was  no  direct futures  market  for                                                                    
Alaska  North Slope  (ANS)  crude;  therefore, the  forecast                                                                    
typically  used  the futures  market  for  Brent, a  global,                                                                    
waterborne crude for all of  the various crude oils moved on                                                                    
tankers.  Generally, ANS  crude  tracked  closely to  Brent,                                                                    
which made it  a good stand-in for the ANS  price. As of the                                                                    
previous  day,  ANS crude  was  about  $37 per  barrel.  The                                                                    
models  in the  presentation used  a base  price of  $40 per                                                                    
barrel for  FY 21.  He elaborated  that the  future's market                                                                    
for Brent showed prices climbing  to $40 per barrel sometime                                                                    
during  FY 21.  He  noted that  if he  were  to prepare  the                                                                    
models on  the current  day, he would  likely have  used $41                                                                    
per barrel.                                                                                                                     
Mr. Painter  continued to address slide  2. The presentation                                                                    
assumed  the  average  would  be  $40  per  barrel  for  the                                                                    
remainder of FY 20, which  may be overoptimistic, but it was                                                                    
a nice round  number. He reported that $40  per barrel would                                                                    
result  in a  revenue reduction  from the  fall forecast  of                                                                    
about $300 million in FY 20.  He explained it would mean the                                                                    
price  for the  fiscal  year  of about  $55  versus the  $63                                                                    
projected in the fall.                                                                                                          
1:42:34 PM                                                                                                                    
Mr.  Painter  stated  that   combined  with  the  governor's                                                                    
supplementals it  would result  in a  deficit of  about $800                                                                    
million in FY  20. For FY 21, the impact  of the lower price                                                                    
assumption  was about  $550 million.  He clarified  that the                                                                    
data only pertained to the oil  market and did not factor in                                                                    
any tax changes due to  the Coronavirus or any other factors                                                                    
that  could   impact  tax  revenue.  He   highlighted  other                                                                    
potential impacts  to revenue. He detailed  that the revenue                                                                    
forecast had  called for about  $50 million  of unrestricted                                                                    
investment revenue  (interest earned on the  state's savings                                                                    
accounts). However,  in the  low interest  rate environment,                                                                    
$50 million may be high. He  relayed that in 2019, the state                                                                    
had received  approximately $16 million of  corporate income                                                                    
taxes from the tourism industry,  but with the hit to cruise                                                                    
ships  in the  current  year,  the number  may  be high.  He                                                                    
reasoned  that a  reduction  of $550  million  was likely  a                                                                    
little  on the  conservative  side if  oil  prices held.  He                                                                    
reiterated  that  LFD  had used  round  numbers  that  could                                                                    
easily be accessed until the spring forecast was published.                                                                     
Co-Chair  Johnston asked  about  any impact  to the  fishing                                                                    
Mr.  Painter answered  that there  would likely  be a  price                                                                    
impact on  fish in the  coming summer,  but he did  not know                                                                    
what the scale  would be. He noted that a  reduction of $600                                                                    
million may be more  realistic when including the secondary,                                                                    
non-petroleum impacts of the Coronavirus.                                                                                       
1:44:45 PM                                                                                                                    
Mr.  Painter  turned  to slide  3  titled  "Assumption:  Oil                                                                    
Production." The  first bullet specified that  LFD was still                                                                    
using the fall production  forecast. To date, production had                                                                    
been  slightly below  the  forecast,  but not  significantly                                                                    
compared to  the price difference. The  fall forecast showed                                                                    
production  of  just under  500,000  per  day for  the  next                                                                    
decade  - the  number declined  a  bit and  was expected  to                                                                    
rebound  as new  fields were  presumed to  come online.  The                                                                    
fiscal  model  also included  the  low  and high  production                                                                    
forecasts prepared  by the  Department of  Natural Resources                                                                    
(DNR). He detailed  that the low forecast  assumed that very                                                                    
few  or  no new  developments  would  succeed, which  showed                                                                    
production steadily  declining to  about 320,000  barrels by                                                                    
FY  29.  The high  forecast  reflected  the optimistic  case                                                                    
assuming that most or all  of the potential new developments                                                                    
succeeding and  showed production of nearly  700,000 barrels                                                                    
per day  in FY  29. He reminded  committee members  that the                                                                    
data  was based  on the  fall forecast  and it  was possible                                                                    
that with a  different oil price assumption,  DNR may revise                                                                    
its production forecast in the spring.                                                                                          
1:46:00 PM                                                                                                                    
Mr. Painter turned to slide  4 titled "Assumption: Permanent                                                                    
Fund Earnings."  He highlighted that market  performance had                                                                    
not been  great during  the current  year. The  LFD modeling                                                                    
used  the Alaska  Permanent  Fund  Corporation's (APFC)  low                                                                    
return scenario for FY 20  of -0.52 percent, which would put                                                                    
the total Permanent  Fund balance at about  $63.5 billion at                                                                    
the end of FY 20. He  noted the current balance was close to                                                                    
the  $63.5 billion.  He shared  that LFD  believed it  was a                                                                    
reasonable  return   to  assume   given  the   stock  market                                                                    
performance  for FY  20.  The modeling  also  used the  APFC                                                                    
forecast of a 7 percent total  return beginning in FY 21. He                                                                    
pointed  out  that the  low  return  scenario still  assumed                                                                    
there was a  positive statutory net income in  FY 20 despite                                                                    
the  negative total  return, which  was reasonable  based on                                                                    
the amount  already realized. He  noted that  the reductions                                                                    
in the stock  market essentially brought the  market back to                                                                    
2018  levels. He  elaborated  that while  it  looked like  a                                                                    
substantial  decline,  APFC  may have  purchased  the  stock                                                                    
prior  to 2018  and gains  may  still be  realized when  the                                                                    
assets  were sold  when APFC  rebalanced its  portfolio. The                                                                    
market  performance in  the  past two  years  had been  very                                                                    
positive  and the  current declines  were unwinding  some of                                                                    
those  increases. He  clarified that  the situation  was not                                                                    
like the one in 2008 when assets had been sold at a loss.                                                                       
Representative  Carpenter asked  if Mr.  Painter had  stated                                                                    
the projected  Permanent Fund balance  was $63.5  billion by                                                                    
the end of the calendar year.                                                                                                   
Mr. Painter clarified  that the number pertained  to the end                                                                    
of the current fiscal year.                                                                                                     
Vice-Chair Ortiz  asked if the current  projected fund value                                                                    
was  $63.5 billion  despite the  recent total  of about  $67                                                                    
Mr.  Painter replied  that as  of  earlier in  the day,  the                                                                    
previous day's  Permanent Fund balance had  been about $63.5                                                                    
billion (approximately the level  of the low return scenario                                                                    
for the end of the fiscal year).                                                                                                
Representative Josephson  asked what may have  been realized                                                                    
that was protected from a bear market or recession.                                                                             
Mr.  Painter responded  that APFC  had about  $1 billion  to                                                                    
$1.5 billion  in dividends, interest,  and real  estate rent                                                                    
that  came  into  statutory net  income  regardless  of  the                                                                    
market.   Additionally,   gains    were   already   realized                                                                    
throughout  the  year prior  to  the  stock market  decline,                                                                    
which would  not be erased. He  added that even as  APFC may                                                                    
shed some old stocks, if  they were purchased prior to 2017,                                                                    
a  gain  would  be  realized even  though  the  stocks  were                                                                    
significantly below  their peak. He explained  that the peak                                                                    
may have been several months  back, but there would still be                                                                    
a gain from when the stocks were purchased.                                                                                     
1:49:44 PM                                                                                                                    
Mr.  Painter moved  to slide  5 titled  "Other Assumptions."                                                                    
The default budget assumption used  by LFD was that spending                                                                    
would  be the  governor's  amended  operating, capital,  and                                                                    
supplemental budgets growing with  inflation. He noted there                                                                    
were some scenarios in the  presentation that used different                                                                    
assumptions. The modeling  assumed that supplemental budgets                                                                    
in future years would be $50  million as opposed to the $300                                                                    
million supplemental in the current  year because it assumed                                                                    
most of  the spending was  being corrected in  the operating                                                                    
budget  for FY  21. The  LFD modeling  assumed CBR  earnings                                                                    
were from  the fall  Revenue Sources  Book. The  CBR deposit                                                                    
assumption was modified from DOR's  assumption due to higher                                                                    
deposits received so far in FY  20. He added that the number                                                                    
was a  bit higher than  the fall forecast, but  LFD believed                                                                    
it would be corrected in the spring forecast.                                                                                   
Mr. Painter  relayed that the modeling  scenarios assumed no                                                                    
inflation-proofing  for four  years due  to intent  language                                                                    
included  with  the  $4  billion   transfer  in  FY  20.  He                                                                    
elaborated that  the intent language had  specified it would                                                                    
serve  as inflation  proofing for  eight years,  but it  had                                                                    
been  attached  to  a  $9.4   billion  transfer,  which  the                                                                    
governor  had vetoed  down  to $4  billion.  The $4  billion                                                                    
counted for  roughly four years  of inflation  proofing. The                                                                    
House  budget adopted  by the  House had  included inflation                                                                    
proofing;  however,  the  LFD modeling  default  assumptions                                                                    
ignored  what  had   taken  place  and  was   based  on  the                                                                    
governor's budget.                                                                                                              
Representative   Carpenter  asked   about  the   $4  billion                                                                    
transfer.  He  queried  the  balance   of  the  ERA  at  the                                                                    
beginning and end of FY 20.                                                                                                     
Mr.  Painter responded  that  he did  not  have the  numbers                                                                    
immediately  available.  He  noted  the  question  would  be                                                                    
easier to address during the modeling.                                                                                          
Co-Chair Johnston  asked what inflation assumption  was used                                                                    
in the presentation.                                                                                                            
Mr.  Painter replied  that LFD  used the  rate 2.25  percent                                                                    
forecast by the state's  investment advisor Callan. He noted                                                                    
the figure may be a bit high  in the near-term and a bit low                                                                    
in the long-term. He added  that LFD had used the assumption                                                                    
for a number of years.                                                                                                          
1:52:20 PM                                                                                                                    
Mr.  Painter  turned to  an  LFD  model for  the  governor's                                                                    
amended  budget on  slide 6.  He began  with the  upper left                                                                    
chart showing  UGF revenue/budget from  FY 19 to FY  29. The                                                                    
blue bars reflected  traditional petroleum and non-petroleum                                                                    
revenue,  green   bars  represented   draws  from   the  ERA                                                                    
according  to some  sort of  statutory  formula, the  orange                                                                    
bars reflected draws from savings  accounts like the CBR and                                                                    
Statutory  Budget Reserve  (SBR),  the dotted  line was  the                                                                    
total  budget,  and the  solid  black  line was  the  budget                                                                    
without  PFDs.  He  explained that  the  governor's  initial                                                                    
budget had  been balanced  out of  the CBR  at an  oil price                                                                    
assumption of  $40. He highlighted  that the orange  bar did                                                                    
not quite meet the dotted  total budget line, indicating the                                                                    
CBR  would  run out  and  there  would  need to  be  another                                                                    
deficit filler  in the  governor's FY  21 budget.  The white                                                                    
space on the chart between the bars  from FY 22 to FY 29 and                                                                    
the dotted  total budget line reflected  there was currently                                                                    
no planned  way to  meet the  budget gap.  The gap  could be                                                                    
filled with the ERA or some  other method, but LFD would not                                                                    
necessarily tell  the legislature what the  method needed to                                                                    
Mr.  Painter moved  to  the middle  left  chart showing  the                                                                    
state's budget reserves  on slide 6. The  tiny yellow sliver                                                                    
in the  FY 19 bar  reflected the  remainder of the  SBR. The                                                                    
orange portion  of the bars  for FY  19 and FY  20 reflected                                                                    
the CBR,  which ran out  sometime in  FY 21. The  green bars                                                                    
showed  the ERA.  He  noted that  the ERA  was  not truly  a                                                                    
budget  reserve because  there was  a planned  way the  draw                                                                    
would be  spent. For  the purpose of  the modeling,  the ERA                                                                    
had been counted under budget reserves.                                                                                         
Mr. Painter addressed the table  at the bottom left of slide                                                                    
6 showing the underlying numbers  used in some of the charts                                                                    
including the ERA  balance, the surplus or  deficit, the CBR                                                                    
and SBR  balances, and the  percentage of the  budget coming                                                                    
from savings.                                                                                                                   
1:54:49 PM                                                                                                                    
Mr. Painter moved  to the graph on the  top right reflecting                                                                    
the  PFD  check going  to  Alaskans.  The governor's  budget                                                                    
included a PFD of about $3,000 in FY 21.                                                                                        
Co-Chair Johnston  asked for more  detail. She  referenced a                                                                    
five-year lookback and drawing from  the ERA. She pointed to                                                                    
the charts  on the top and  middle left of slide  6. She was                                                                    
surprised the dividend continued to climb.                                                                                      
Mr. Painter  answered that the  scenario on slide 6  did not                                                                    
necessarily  assume  the  ERA  would be  used  to  fill  the                                                                    
deficit. The  projection merely indicated what  the dividend                                                                    
would  be under  current  statute if  extra  funds were  not                                                                    
drawn from  the ERA. He noted  that the funds would  have to                                                                    
be drawn  from somewhere to  meet the $2.5  billion deficit,                                                                    
presumably the funds would come  from the ERA and could cost                                                                    
the dividend.  He reiterated  that the  scenario on  slide 6                                                                    
did  not  assume any  use  of  the  ERA beyond  the  current                                                                    
Mr. Painter  continued to  review slide 6.  He pointed  to a                                                                    
chart  showing the  impact of  ERA draws  on POMV.  He noted                                                                    
that the  chart removed the five-year  average. He explained                                                                    
that one of the challenges  with the model was because there                                                                    
was a  lagging five-year average  for the POMV draw,  a one-                                                                    
year draw from the ERA would  not show up for several years,                                                                    
making it difficult to see  the impact. Therefore, the chart                                                                    
removed the five-year average and  showed the entire impact.                                                                    
For example, if $1 billion was  drawn from the ERA, it would                                                                    
reduce the POMV by 5 percent  or $50 million. If the deficit                                                                    
were filled by the ERA it  would result in a decrease in the                                                                    
POMV  to  about  $2.7  billion instead  of  an  increase  to                                                                    
$3.8  billion  by FY  29.  He  concluded  there would  be  a                                                                    
significant decline  in the  POMV draw  if the  deficit were                                                                    
filled with the ERA.                                                                                                            
1:57:47 PM                                                                                                                    
Co-Chair Johnston  surmised that  the line  representing the                                                                    
dividend check was  not part of the model. She  did not know                                                                    
how the dividends would be obtained.                                                                                            
Mr. Painter clarified that the  model did not assume how the                                                                    
deficit would be filled. He  explained that LFD did not want                                                                    
to assume the legislature would  cut the dividend, draw from                                                                    
the ERA, or cut from education or any item in particular.                                                                       
Co-Chair Johnston surmised that it was called "fairy dust."                                                                     
Mr.  Painter explained  the scenario  showed the  system was                                                                    
Co-Chair Johnston could see a  large disconnect and believed                                                                    
the  chart showing  the dividend  check was  built on  fairy                                                                    
dust. She  thought they should  be looking at the  lower two                                                                    
models on the right.                                                                                                            
Representative Sullivan-Leonard  asked about  the FY  20 ERA                                                                    
numbers.   She   asked   how  LFD   had   arrived   at   the                                                                    
$12.698 billion for the ERA.                                                                                                    
Mr.  Painter  responded  it  was the  total  under  the  low                                                                    
scenario provided by APFC.  The corporation's old projection                                                                    
for  statutory net  income for  FY  20 would  be the  ending                                                                    
balance in the forecast.                                                                                                        
Representative  Sullivan-Leonard believed  they had  started                                                                    
with  an  ERA balance  of  $18  billion and  had  subtracted                                                                    
approximately $3  billion for POMV and  another $4.6 billion                                                                    
or $5  billion for the  corpus. She estimated  the remaining                                                                    
balance at closer to $10 billion.  She would like to see the                                                                    
real numbers that would be used.                                                                                                
Mr. Painter  answered that the  difference was  the incoming                                                                    
earnings  for FY  21. He  elaborated that  even with  a zero                                                                    
total  return  there would  still  be  statutory net  income                                                                    
entering the  ERA. The ERA would  still get income in  FY 21                                                                    
and already  had, despite the  negative total return  in the                                                                    
Representative Sullivan-Leonard asked  Mr. Painter to follow                                                                    
up with the  information. She believed the  balance would be                                                                    
$10 billion.                                                                                                                    
Mr. Painter answered that he would follow up.                                                                                   
2:01:25 PM                                                                                                                    
Co-Chair Johnston  thought Mr.  Painter had made  an earlier                                                                    
statement that earnings were $1.8 billion.                                                                                      
Mr.  Painter  clarified  that  he   had  not  specified  the                                                                    
earnings amount, which  were 5.27 percent of  the total fund                                                                    
value. There  was a stable  $1 billion to $1.5  billion, but                                                                    
"they've  already exceeded  that  for the  fiscal year."  He                                                                    
believed the total  would be about $3 billion,  but he would                                                                    
have  to  switch  to  the dynamic  model  to  determine  the                                                                    
Ms.  Pitney  added  there  were  four  components  including                                                                    
current value,  draws, statutory  net income  (achieved when                                                                    
stock was  sold), and unrealized  loss that changed  year to                                                                    
Representative    Sullivan-Leonard    answered   that    she                                                                    
understood that.                                                                                                                
Mr. Painter moved  to a dynamic model that  he clarified was                                                                    
not part of  the presentation (copy not on  file). He looked                                                                    
at  FY 20  and noted  that part  of the  difficulty was  the                                                                    
difference  between  the  cash  balance and  the  total  ERA                                                                    
balance. He  pointed out that  the ending FY 19  balance had                                                                    
been about  $18.5 billion. He  elaborated that  $3.2 billion                                                                    
in statutory  net income  had come in  and $4.6  billion had                                                                    
been  removed  for inflation  proofing  and  the POMV  draw,                                                                    
resulting  in   a  balance  of   $12.7  billion   after  the                                                                    
allocation of unrealized  gains. He had not  planned to talk                                                                    
about the allocation of unrealized  gains. He clarified that                                                                    
the cash  balance of the  ERA at the end  of FY 18  had been                                                                    
$16 billion,  not $18  billion. The  other $2.5  billion was                                                                    
comprised  of  unrealized gains  that  had  to be  allocated                                                                    
between the ERA and the  principal (split up proportioned to                                                                    
the value). The ending FY  18 balance was $18.5 billion. The                                                                    
cash balance was $11.7 billion at  the end of FY 20 and some                                                                    
of the  unrealized gains  were allocated  to the  ERA, which                                                                    
resulted in a balance of $12.7 billion.                                                                                         
Mr. Painter  explained that  if they  were sticking  only to                                                                    
cash balances  and ignoring the  unrealized gains,  which he                                                                    
believed  was  a  much  better   way  to  look  at  it  (but                                                                    
unfortunately  it  was  not  how  the  financial  statements                                                                    
looked),  the  balance  went  from   $16  billion  to  $11.7                                                                    
billion.  He clarified  that total  balances would  be $18.5                                                                    
billion  down to  $12.7 billion.  He thought  the difference                                                                    
between the cash versus the  amount including the unrealized                                                                    
gains may be the source of confusion.                                                                                           
2:04:30 PM                                                                                                                    
Mr. Painter  returned to  slide 6 and  reviewed a  bar chart                                                                    
showing  the Permanent  Fund balance  (second chart  down on                                                                    
the right side  of the slide). The chart compared  the FY 20                                                                    
total  balance   grown  with  inflation  [to   the  scenario                                                                    
principal and  scenario ERA]. He  highlighted the  drop from                                                                    
FY 19  to FY 20 and  growth with inflation reflected  by the                                                                    
red  bars. The  chart also  included bars  showing the  fund                                                                    
principal  and  ERA. He  noted  that  without any  unplanned                                                                    
draws  the   Permanent  Fund  would  nearly   keep  up  with                                                                    
inflation  - it  was slightly  below inflation  due to  poor                                                                    
earnings in FY 20.                                                                                                              
Mr. Painter explained that the  information in the middle of                                                                    
slide  6  included  the data  and  assumptions  driving  the                                                                    
graphs.  The  variables  would  change  with  the  different                                                                    
modeling   scenarios   presented.    He   noted   that   the                                                                    
highlighting should help to show  anything that was changing                                                                    
between  modeling. Anything  that  was  not highlighted  was                                                                    
reflective of the governor's  budget, the default assumption                                                                    
used in the  scenarios. The data showed a $40  price of oil,                                                                    
the low FY  20 investment return in the  Permanent Fund, and                                                                    
7 percent going forward. The  modeling used the POMV draw as                                                                    
specified in  SB 26 and  the statutory  dividend calculation                                                                    
of 50 percent of statutory net income.                                                                                          
2:06:14 PM                                                                                                                    
Representative Wool  looked at the graph  showing the impact                                                                    
of ERA  draws on POMV. He  reasoned that it was  an isolated                                                                    
graph  because  if it  were  implemented,  the entire  slide                                                                    
would  change, including  the graphs  showing the  Permanent                                                                    
Fund balance  and UGF revenue/budget.  He noted that  all of                                                                    
the   green  bars   reflecting   POMV  draws   in  the   UGF                                                                    
revenue/budget  chart would  be  significantly less  because                                                                    
the ERA  would be  much smaller.  He asked  for verification                                                                    
that the graph  showing the impact of ERA draws  on the POMV                                                                    
was an isolated study.                                                                                                          
Mr.  Painter  replied   affirmatively.  He  elaborated  that                                                                    
previously  there had  been  an  assumption the  legislature                                                                    
would go  into the ERA. He  explained that LFD did  not want                                                                    
to use  an assumption that  the legislature would  break the                                                                    
law it  passed the  previous year.  The chart  was a  way to                                                                    
show what  the impact  would be if  the deficit  were filled                                                                    
via funds from  the ERA. He clarified it was  not to suggest                                                                    
it was the  only option or the option  the legislature would                                                                    
Representative Wool  looked at  the top right  chart showing                                                                    
the dividend check  at the statutory level and  the top left                                                                    
showing the  budget and revenue.  He thought the  two charts                                                                    
were inconsistent without more revenue.                                                                                         
Mr. Painter believed  the point of any  scenario showing the                                                                    
white  space  was to  indicate  that  the scenario  was  not                                                                    
workable. The white space indicated  there was a gap between                                                                    
revenue and  the budget. He  did not  know that it  would be                                                                    
the governor's plan,  but it was the  governor's budget with                                                                    
no other  changes. The chart  showed a gap beginning  in the                                                                    
next fiscal year.                                                                                                               
Mr. Painter  highlighted that  at $40  oil, the  budget less                                                                    
dividends line  was above available  revenue. He  noted that                                                                    
even with  no dividend there  would still be a  deficit with                                                                    
an oil price of $40 through FY 29.                                                                                              
2:08:46 PM                                                                                                                    
Representative  Carpenter looked  at the  top left  chart on                                                                    
slide 6  and pointed  to the black  spending line.  He asked                                                                    
what an annual 2.5 percent  growth [in inflation] equaled in                                                                    
a dollar figure.                                                                                                                
Mr. Painter answered  that he did not recall  the number off                                                                    
the top  of his head.  He noted  that the 2.25  percent only                                                                    
applied  to the  agency operations  and capital  budget, not                                                                    
the  statewide  items   including  retirement  payments.  He                                                                    
explained  it   was  roughly  the   $4  billion   in  agency                                                                    
operations and  capital budget combined that  were moving at                                                                    
2.25 percent (about $50 million per year).                                                                                      
Mr.  Painter  moved  to  a  modeling  scenario  on  slide  7                                                                    
reflecting HB 306 where 20 percent  of the POMV draw went to                                                                    
the PFD and  80 percent went to the General  Fund. While the                                                                    
deficit would  be reduced under  the scenario, a  deficit of                                                                    
$800 million  remained in FY  21 after  supplementals, which                                                                    
would grow to  about $1 billion after the  POMV draw dropped                                                                    
down to 5  percent in the coming year. The  CBR would extend                                                                    
through  FY  22  (instead  of   FY  21),  but  it  would  be                                                                    
insufficient  to get  through FY  23 without  other changes.                                                                    
The  dividend started  at just  under  $1,000 and  gradually                                                                    
increased to $1,000 over the period shown.                                                                                      
Co-Chair  Johnston remarked  that the  scenario looked  much                                                                    
different  than  modeling  the committee  had  seen  at  the                                                                    
beginning of  session. She observed that  it highlighted the                                                                    
volatility  in  revenue.  Previously,  the  information  had                                                                    
provided a glidepath  for the CBR, albeit  not a substantial                                                                    
one. She noted how quickly things had changed.                                                                                  
2:11:40 PM                                                                                                                    
Mr. Painter  moved to  slide 8 showing  the same  charts for                                                                    
HB 300  that included 15 percent  of the POMV draw  going to                                                                    
the dividend. The slide showed  a $300 million increase over                                                                    
the governor's budget reflecting  a community dividend where                                                                    
10 percent of the POMV would  go to communities as well as a                                                                    
small  increase to  the University.  The  slide also  showed                                                                    
10  percent of  the POMV  draw going  to the  capital budget                                                                    
(about  $300   million  versus  the  $140   million  in  the                                                                    
governor's budget).  He detailed that although  the scenario                                                                    
had a  lower dividend,  due to  spending increases  the bill                                                                    
would result  in a deficit  in FY  21 of about  $1.1 billion                                                                    
rising to  about $1.3  billion and  larger in  future years.                                                                    
The  scenario assumed  that none  of the  community dividend                                                                    
was  used  to  offset  state expenditures.  He  intended  to                                                                    
provide some examples that would  work a little differently.                                                                    
He pointed  to the dividend  check chart on the  upper right                                                                    
of  the slide  that matched  information heard  the previous                                                                    
2:12:54 PM                                                                                                                    
Mr. Painter moved to slide  9 and provided a different model                                                                    
for HB  300. He detailed  that the community  dividend would                                                                    
be 5 percent of the POMV  draw instead of 10 percent and the                                                                    
capital budget  would be  5 percent of  the draw  instead of                                                                    
10  percent. The  scenario resulted  in a  budget change  of                                                                    
$150 million  instead of  $300 million  and a  lower capital                                                                    
budget assumption as well. The  scenario looked very similar                                                                    
to  the   other  bill   in  terms   of  deficits   of  about                                                                    
$800 million in  FY 21 growing to about $1  billion in FY 22                                                                    
as the POMV draw reduced from  5.25 percent to 5 percent. He                                                                    
noted that the dividend number was essentially identical.                                                                       
Representative  Wool  asked if  there  was  a scenario  that                                                                    
would address school bond debt reimbursement.                                                                                   
Mr. Painter  turned to scenario  5 on slide 10  that assumed                                                                    
all of  the budget  increases were paid  for by  cost shifts                                                                    
and not assuming where they  would be (the assumption was no                                                                    
cost increase  due to  the bill).  The scenario  assumed the                                                                    
increased community amount would  be used to reduce expenses                                                                    
elsewhere. The  scenario showed a  smaller deficit  of about                                                                    
$650 million in FY 21 and $800 million in other years.                                                                          
2:14:58 PM                                                                                                                    
Mr.  Painter  turned to  slide  11  and addressed  "Governor                                                                    
Scenario 5 (Balanced)." He detailed  that the governor's 10-                                                                    
year   plan  published   in  December   had  included   five                                                                    
scenarios. The  balanced scenario included a  mix of reduced                                                                    
spending,  reduced spending  growth,  and some  sort of  tax                                                                    
that would raise  $500 million. He noted that he  had used a                                                                    
sales tax in the model on slide  11, but it could be any tax                                                                    
(the type  had not been  specified in the  governor's plan).                                                                    
The  scenario  also  switched the  PFD  formula  from  being                                                                    
50  percent of  statutory net  income to  50 percent  of the                                                                    
POMV  draw.   He  relayed  that  under   the  fall  forecast                                                                    
assumptions  the  plan  roughly balanced  the  budget.  With                                                                    
reduced assumptions,  the scenario would leave  a deficit of                                                                    
about $1.2  billion, which  would decline  over time  due to                                                                    
the  reduced spending  growth rate  based on  the governor's                                                                    
spending cap included in the  plan. The scenario assumed the                                                                    
growth  would  be  about half  inflation.  He  believed  the                                                                    
governor's spending  cap allowed  for that amount  of growth                                                                    
going forward.                                                                                                                  
2:16:26 PM                                                                                                                    
Ms.  Pitney pointed  to the  bottom  left of  the slide  and                                                                    
highlighted the  red boxes indicating  the depletion  of the                                                                    
CBR  and  SBR. She  relayed  that  under  all of  the  model                                                                    
scenarios  the longest  the savings  would last  was through                                                                    
FY  22.  She  elaborated  that  the  state's  dependence  on                                                                    
traditional savings  in the SBR  and CBR was over  under the                                                                    
scenarios. When  oil prices  had crashed  in 2014  there had                                                                    
been over $15 billion in  the two accounts. She relayed that                                                                    
at the time,  they had been looking at plans  that would run                                                                    
from 5 to 15 years.  Whereas, currently they were looking at                                                                    
plans that were one to two years.                                                                                               
Co-Chair Johnston  added that even  under a scenario  with a                                                                    
projected fund  balance of $65 million  in the CBR in  FY 22                                                                    
and $1  million in  FY 23, there  had been  an understanding                                                                    
that cash  management needed  a minimum  of $500  million at                                                                    
any given time.  She stated that the CBR would  no longer be                                                                    
available as a cash management  fund. She thought they would                                                                    
need a  legal opinion on  whether the legislature  could use                                                                    
the Permanent Fund  in place of the CBR (even  though in the                                                                    
Comprehensive Annual  Financial Report (CAFR)  the Permanent                                                                    
Fund was a fund balance).                                                                                                       
Representative   Sullivan-Leonard    looked   at   "Governor                                                                    
Scenario  5  (Balanced)" on  slide  11.  She referenced  the                                                                    
budget  reductions  of  about $500  million  highlighted  in                                                                    
yellow [in the middle of the  slide] and the potential for a                                                                    
3 percent  sales tax also  highlighted in yellow.  She asked                                                                    
about the projected income for a sales tax.                                                                                     
Mr. Painter answered that LFD's  assumption was $500 million                                                                    
for a  3 percent sales  tax, which  was based on  the fiscal                                                                    
note to  a bill  introduced by  former Governor  Bill Walker                                                                    
about  four years  back. He  noted that  Governor Dunleavy's                                                                    
plan did not  specify what tax would be used,  it had merely                                                                    
listed  new  revenue  at $500  million.  He  explained  that                                                                    
because the  sales tax happened  to be the right  amount, he                                                                    
had  used it  in the  model. He  noted that  it could  be an                                                                    
income tax, an industry tax, or some other source.                                                                              
Representative Sullivan-Leonard asked  for verification that                                                                    
with  the   additional  revenue  there  would   still  be  a                                                                    
$1.2 billion deficit.                                                                                                           
Mr. Painter  replied in the affirmative.  He elaborated that                                                                    
it was partly due to the  delay in implementation and a tax.                                                                    
The model  optimistically assumed that new  revenue could be                                                                    
in place by  January 1, which would result in  half a year's                                                                    
revenue. He  explained that  the deficit in  FY 22  would be                                                                    
reduced because of the full year of revenue.                                                                                    
2:20:03 PM                                                                                                                    
Vice-Chair  Ortiz   looked  at  the  3   percent  sales  tax                                                                    
generating $500 million  in the middle section  of slide 11.                                                                    
He asked if  LFD knew what time of year  most of the revenue                                                                    
would  be collected.  He  provided  a hypothetical  scenario                                                                    
where  there  was  contemplation  of a  seasonal  sales  tax                                                                    
targeting  the  tourist season.  He  asked  whether LFD  had                                                                    
information indicating  how much revenue would  be generated                                                                    
based on more  revenue coming in during  the summer compared                                                                    
to winter.                                                                                                                      
Mr.  Painter answered  that he  would have  to work  on some                                                                    
modeling.  He  shared  that  he had  looked  at  studies  of                                                                    
seasonal sales  tax in the  past and  one of the  big issues                                                                    
was  whether local  purchases could  be timed  around it  or                                                                    
not. For example, sometimes in  places with extreme seasonal                                                                    
sales taxes, people did not  purchase cars in the summer and                                                                    
waited until fall.  He noted there may still  be an increase                                                                    
because in  a normal  year there  were many  tourists making                                                                    
purchases  in  Alaska. He  believed  the  modeling would  be                                                                    
complex and LFD  would have to work with DOR  to get an idea                                                                    
of the true impact.                                                                                                             
Co-Chair Johnston  thought modeling of a  seasonal sales tax                                                                    
would have  to show  the kind  of sales  tax, the  number of                                                                    
exemptions, and any cap.                                                                                                        
2:22:04 PM                                                                                                                    
Representative  Josephson  referenced scenario  6  "Governor                                                                    
Scenario  5 (Balanced)  on slide  11. He  remarked that  the                                                                    
growing deficit  reflected oil price slumps,  which would be                                                                    
more impactful in FY 21.  He asked for verification that the                                                                    
drop  off reflected  half  a year's  sales  tax receipts  in                                                                    
FY 22.                                                                                                                          
Mr.  Painter  answered  that  the  primary  reason  for  the                                                                    
deficit increase from FY 20 to  FY 21 was the dividend going                                                                    
from the  $1,600 paid  in FY  20 to 50  percent of  the POMV                                                                    
draw  under the  scenario  on  slide 11.  There  was also  a                                                                    
revenue difference. The  decrease from FY 21 to FY  22 was a                                                                    
result  of the  full implementation  of the  sales tax.  The                                                                    
continued reduction was due to  spending growing slower than                                                                    
inflation in the scenario. He  detailed that because revenue                                                                    
roughly  increased  with  inflation,   it  would  cause  the                                                                    
deficit to shrink over time.                                                                                                    
Representative Wool  looked at  the black  line representing                                                                    
the budget [less  dividends] in the chart on  the upper left                                                                    
side  of slide  11.  He referenced  Mr. Painter's  statement                                                                    
that the number would not  increase with inflation. He asked                                                                    
what it  would look like  if there  was an increase  at half                                                                    
the rate  of inflation.  He remarked  that the  budget would                                                                    
increase slowly over time, but  healthcare and Medicaid were                                                                    
increasing   faster   than   some  items.   He   asked   for                                                                    
verification the  increase would have  to be offset  by cuts                                                                    
to education,  transportation, public  safety, and  more. He                                                                    
asked if cuts would be necessary to keep the low growth.                                                                        
Ms.  Pitney  agreed. She  detailed  that  for items  growing                                                                    
faster  than inflation,  choices would  have to  be made  to                                                                    
reduce or eliminate to keep the budget down.                                                                                    
Representative  Wool   surmised  that  based  on   what  had                                                                    
occurred  with the  attempted budget  cuts  in the  previous                                                                    
year, a  slow growth  budget scenario  was easier  said than                                                                    
done.  He believed  there would  have to  be some  political                                                                    
will to have a low growth budget.                                                                                               
2:24:58 PM                                                                                                                    
Ms. Pitney answered that over  the last five years there had                                                                    
been  a  10  percent  reduction. As  the  pressure  to  keep                                                                    
spending  down had  been significant  over the  past several                                                                    
years, there  were things like  the recent 7  percent salary                                                                    
increase for troopers  that would take over any  of the cost                                                                    
pressure push  down. She elaborated that  other things would                                                                    
pop  up  and  in  order to  accommodate  those  things  some                                                                    
services needed to be eliminated.                                                                                               
Representative  Wool referenced  the  Alaska Marine  Highway                                                                    
System  (AMHS)  and  reasoned  that  if  someone  wanted  to                                                                    
increase  its  functionality  it  would be  an  upward  cost                                                                    
pressure  that  would  need  to  be  compensated  for  by  a                                                                    
decrease in another area.                                                                                                       
Ms. Pitney agreed.                                                                                                              
Mr. Painter  moved to  slide 12  and highlighted  a scenario                                                                    
titled "7.  50/50 of Statutory  Net Income  After Inflation-                                                                    
Proofing."  He relayed  that  the  current dividend  statute                                                                    
calculated  the 50  percent of  statutory net  income before                                                                    
inflation proofing,  meaning inflation proofing came  out of                                                                    
the  government's  share. The  scenario  would  result in  a                                                                    
similar   dividend  to   the  scenario   on  slide   11.  He                                                                    
highlighted  that the  dividend tracked  closely to  current                                                                    
statute;  it was  slightly lower  as the  inflation proofing                                                                    
was borne  by the dividend as  well as by the  General Fund.                                                                    
The scenario would result in  deficits of about $1.6 billion                                                                    
in FY 21  and rising in future years based  on no changes to                                                                    
spending or anything else.                                                                                                      
2:27:04 PM                                                                                                                    
Mr.  Painter turned  to  slide 13  and  reviewed a  scenario                                                                    
showing  a $1,600  dividend with  a  progressive payment  in                                                                    
lieu of  taxes (PILT) where  the dividend was  reduced based                                                                    
on a  recipient's income.  He elaborated  that based  on the                                                                    
amounts  given to  him, the  reduction projection  was about                                                                    
$400 million of the cost  of a $1,600 dividend. He explained                                                                    
that if  there was a  structure where  a portion of  the PFD                                                                    
would be held back for  higher income recipients and a lower                                                                    
income person  would receive most  or all of their  PFD, the                                                                    
cost of  the dividend would  be reduced by about  40 percent                                                                    
or $400 million. Specifically, an  individual would see a 20                                                                    
percent reduction  in their PFD  starting at  income between                                                                    
$25,000 and  $50,000 and a  person making up to  $100,000 or                                                                    
more would see an 80  percent reduction. The scenario showed                                                                    
a $1,600 PFD,  although many people would  receive less. The                                                                    
scenario would result in a  deficit of about $850 million in                                                                    
FY 21, leveling out at about $1 billion going forward.                                                                          
Representative Merrick  asked if children would  receive the                                                                    
full $1,600 PFD, assuming they were not working.                                                                                
Mr.  Painter confirmed  that the  scenario assumed  children                                                                    
would receive the  entire PFD unless they were  a minor with                                                                    
a significant income.                                                                                                           
Representative  Josephson asked  for  verification that  the                                                                    
dividend was income-based under the scenario [on slide 13].                                                                     
Mr. Painter replied affirmatively.  He elaborated that under                                                                    
the  scenario  people with  low  income  and children  would                                                                    
receive a higher dividend than people with higher incomes.                                                                      
2:29:27 PM                                                                                                                    
Vice-Chair  Ortiz asked  what kind  of administrative  costs                                                                    
would be  added to  distributing the PFD  if the  change was                                                                    
made to the PFD program.                                                                                                        
Mr. Painter replied that he did not know.                                                                                       
Vice-Chair Ortiz  reasoned that added calculations  would be                                                                    
necessary, meaning there would be  some added costs at least                                                                    
in the short-term.                                                                                                              
Mr. Painter responded that there  would be some cost because                                                                    
presumably  there would  have to  be some  sort of  document                                                                    
submitted that employees would check.                                                                                           
Co-Chair Johnston  assumed the  process would be  similar to                                                                    
having a tax audit.                                                                                                             
Representative  Carpenter asked  for  verification that  the                                                                    
modeling used a $40 price of  oil going forward. He asked if                                                                    
the projections assumed that $40 oil would be the new norm.                                                                     
Mr. Painter agreed.                                                                                                             
Representative Wool referenced  Mr. Painter's statement that                                                                    
a  person earning  over  $100,000 would  get  20 percent  of                                                                    
their PFD.  He estimated  the amount at  $320. He  asked for                                                                    
verification  that a  person would  still get  $320 if  they                                                                    
earned $100,000, $200,000, or more.                                                                                             
Mr.  Painter answered  it was  the assumption  based on  the                                                                    
scenarios LFD  had been asked  to prepare. He  elaborated on                                                                    
Representative Carpenter's  previous question.  He explained                                                                    
that DOR  had changed  its methodology so  that in  the past                                                                    
fall it  had taken  the future's market  value for  the next                                                                    
fiscal year  and increased it with  inflation going forward.                                                                    
He explained  that it did  not necessarily have to  be DOR's                                                                    
assumption,  but  the  methodology  had  been  used  in  its                                                                    
forecast. In order  to replicate the data, LFD  had used the                                                                    
same  process  in its  models.  He  noted that  the  futures                                                                    
market  grew   a  little  faster  than   inflation  and  was                                                                    
projected  to  hit  $50  around   the  fall  of  FY  23.  He                                                                    
highlighted that over the long-term,  the assumption used in                                                                    
the  modeling  may be  a  more  conservative than  what  the                                                                    
futures  market  would  indicate.  He  reiterated  that  the                                                                    
modeling used  the methodology in  the fall  forecast, which                                                                    
was LFD's best guess in the absence of a spring forecast.                                                                       
2:32:22 PM                                                                                                                    
Ms. Pitney added  that if oil prices went to  $50 per barrel                                                                    
in  three  years'  time,  the   numbers  would  change  only                                                                    
moderately by $200 million to $300 million.                                                                                     
Mr. Painter moved  to scenario 9 on slide  14, which assumed                                                                    
all royalties  except those dedicated  to the  Public School                                                                    
Trust Fund would go into  the Permanent Fund rather than the                                                                    
current  constitutional dedication  of  25  percent plus  25                                                                    
percent  from newer  oil fields.  The  scenario assumed  the                                                                    
growth rate would be limited to  half a percent and a budget                                                                    
reduction of  about $500 million  phased in over  two years.                                                                    
The scenario  kept a minimum  CBR balance of $1  billion and                                                                    
filled the deficit  from the ERA. He noted it  was the first                                                                    
scenario  that  filled the  deficit  from  some method.  The                                                                    
dividend  formula  would be  50  percent  of royalties  even                                                                    
though they were going to the  General Fund - it would be an                                                                    
amount equal to  50 percent of royalties plus  10 percent of                                                                    
the earnings of the Permanent  Fund. He noted that the slide                                                                    
showed  10  percent of  statutory  net  income, but  it  was                                                                    
really 10  percent of  the most  recent year's  earnings. It                                                                    
was functionally  very similar to the  average, but slightly                                                                    
different  in the  first year.  The scenario  resulted in  a                                                                    
deficit of  about $1 billion  that would decrease  over time                                                                    
due to the lower spending growth rate.                                                                                          
2:34:36 PM                                                                                                                    
Co-Chair  Johnston  stated  that the  model  reflected  that                                                                    
currently  a good  majority of  the  state's royalties  came                                                                    
from  oil  income. She  surmised  that  the state's  overall                                                                    
revenue picture would decline.                                                                                                  
Mr. Painter  answered in the  affirmative. He  detailed that                                                                    
UGF revenue  would be  reduced under  the $40  oil scenario,                                                                    
though slightly less than under the fall forecast.                                                                              
Co-Chair Johnston asked if the  difference was an additional                                                                    
draw from the ERA apart from the structured draw.                                                                               
Mr. Painter  agreed it  was the  assumption in  the scenario                                                                    
[on slide  14]. He noted that  the budget change would  be a                                                                    
reduction of  $500 million  phased in  over two  years ($250                                                                    
million in each year).                                                                                                          
2:35:59 PM                                                                                                                    
Representative LeBon noted  that at one time  there had been                                                                    
consideration of a state income  tax. He detailed that there                                                                    
had been  a cost associated  with setting up DOR  to collect                                                                    
the tax.  He asked how many  DOR employees would need  to be                                                                    
added and what  the annual cost of collecting  the tax would                                                                    
Ms. Pitney answered that the  latest figures were between $8                                                                    
million  to $12  million for  the collection  of a  sales or                                                                    
income tax.  She did not have  a breakdown of the  number of                                                                    
employees needed, but 50 to 60  percent of the cost would be                                                                    
people  costs.  The  remainder  of the  cost  would  be  for                                                                    
contractual services and other support.                                                                                         
Representative LeBon considered  the administrative costs of                                                                    
a PILT. He asked how much  it would cost to administer a PFD                                                                    
where individuals making income  above a certain level would                                                                    
receive  no PFD.  He  questioned how  the  state would  test                                                                    
individuals' income. He wondered  if Alaskans would be asked                                                                    
to share income  information or if it would be  on the honor                                                                    
system subject to  audit. He reasoned that with  the goal of                                                                    
increasing  income, a  sales or  income tax  would cost  the                                                                    
state  more to  administer  than  a PILT.  He  asked if  the                                                                    
statement was fair.                                                                                                             
Ms. Pitney replied that she  did not have enough information                                                                    
to say that it would be significantly less expensive.                                                                           
2:38:17 PM                                                                                                                    
Mr. Painter added that it  would depend on the structure. He                                                                    
reasoned that a significant  number of individuals would not                                                                    
file  for the  PFD  if individuals  above  a certain  income                                                                    
would not  be eligible versus  if they were eligible  for at                                                                    
least some  amount. He continued  that it would  also depend                                                                    
on how  large the  dividend was  because it  would determine                                                                    
how  much incentive  there would  be for  a person  to prove                                                                    
their income was low enough.                                                                                                    
Representative  Josephson assumed  a flat  tax that  did not                                                                    
require  people to  itemize  and  avoided complicated  state                                                                    
schedules would  be cheaper and  easier to  implement rather                                                                    
than an income tax with variable rates.                                                                                         
Mr. Painter  responded that his recollection  of hearings on                                                                    
HB 115 [2017 proposed  income tax legislation] several years                                                                    
back  confirmed   the  assumption  made   by  Representative                                                                    
Josephson.  He reasoned  that  using the  federal  tax as  a                                                                    
basis  made  it simpler  to  administer  - the  state  could                                                                    
piggyback on  the Internal Revenue Service's  work by basing                                                                    
the tax off of federal returns.                                                                                                 
Representative Merrick  asked if there was  any data showing                                                                    
how much  Alaskan Permanent Fund  money went to  the federal                                                                    
government in taxes.                                                                                                            
Mr. Painter responded  that the last real study  he had seen                                                                    
was  from  the  1980s.  He  had been  asked  to  provide  an                                                                    
estimation  for the  Permanent Fund  Working  Group and  his                                                                    
best guess  at the time had  been about 15 percent  based on                                                                    
current federal tax rates.                                                                                                      
2:40:32 PM                                                                                                                    
Co-Chair Johnston  looked at scenario 9  (slide 14) compared                                                                    
to scenario  2 (slide  7). She observed  that the  growth in                                                                    
the fund and the impact on  the ERA draw were quite similar.                                                                    
She asked  for verification that the  significant difference                                                                    
between the two scenarios was the CBR.                                                                                          
Mr.  Painter answered  that essentially  the difference  was                                                                    
holding the  $1 billion in the  CBR instead of the  ERA. The                                                                    
requestor had asked to show  how the deficit would be filled                                                                    
in one  of the scenarios  but not  the other. The  effect in                                                                    
the end was  fairly similar based on the  forecast - because                                                                    
the dividend would be based on  oil revenue in part - it was                                                                    
a bit more sensitive to oil forecast.                                                                                           
Representative Josephson  asked about  the money  being held                                                                    
in the  ERA instead of  the CBR  in the former  scenario. He                                                                    
asked if Mr. Painter was referring to the ERA overdraw.                                                                         
Mr.  Painter  answered  that  the  difference  he  had  been                                                                    
referencing was  whether $1 billion  was kept in the  CBR or                                                                    
not. The difference  was which account the  $1 billion would                                                                    
be in; the assumption did  not assume there would be another                                                                    
$1 billion in the system.                                                                                                       
2:42:39 PM                                                                                                                    
Mr. Painter moved  to scenario 10 on slide  15. The scenario                                                                    
allocated one-third  of the  POMV draw  to the  dividend. He                                                                    
believed the House version of SB  26 had called for the same                                                                    
dividend level  used in  scenario 10 and  HB 115  had called                                                                    
for a  tax. The scenario resulted  in a PFD of  about $1,500                                                                    
per year and left a deficit  in FY 21 of about $1.2 billion,                                                                    
rising  to  $1.4  billion and  $1.5  billion  in  subsequent                                                                    
years. He relayed  that the CBR would run out  at the end of                                                                    
FY 22.  He noted the small  amount showing on the  slide was                                                                    
an error.                                                                                                                       
Co-Chair Johnston asked to return  to scenario 1 showing the                                                                    
governor's   amended  budget   (slide  6).   She  took   the                                                                    
information  they  had  started  with in  terms  of  revenue                                                                    
sources for  the current and  next year. She noted  that the                                                                    
working group  had used scenarios  with a net  dividend. She                                                                    
asked what the net dividend would be in the current year.                                                                       
Mr. Painter  responded that  the dividend  would be  zero if                                                                    
the  surplus was  going to  the  dividend because  in FY  21                                                                    
going  forward  at $40  oil,  the  size  of the  budget  was                                                                    
greater than revenue even before paying a dividend.                                                                             
2:44:44 PM                                                                                                                    
Representative Carpenter  referred to scenario 9  (slide 14)                                                                    
and asked  why the revenue in  the upper left was  much less                                                                    
than all of the other projections.                                                                                              
Mr.  Painter answered  that it  was  due to  the portion  of                                                                    
royalties  being redirected  from  the General  Fund to  the                                                                    
Permanent Fund.                                                                                                                 
Representative   Carpenter  asked   what  happened   to  the                                                                    
Permanent Fund  value in the  long-term when $1  billion was                                                                    
Mr.  Painter answered  that he  had a  20-year model  of the                                                                    
Permanent Fund  that was  not part  of the  presentation. He                                                                    
reported  that scenario  9 spent  extra to  meet the  budget                                                                    
deficit, but in the absence  of that extra spending it would                                                                    
result in  inflation adjusted growth to  the Permanent Fund.                                                                    
He elaborated that SB 26  did not lead to inflation adjusted                                                                    
growth in the Permanent Fund  because the 5 percent POMV was                                                                    
essentially all  of the real  earnings projected.  While the                                                                    
Permanent  Fund seemed  to grow  in nominal  terms, in  real                                                                    
terms  it was  pretty level.  He explained  that adding  the                                                                    
additional royalties would  be a way to  cause the Permanent                                                                    
Fund value to increase.                                                                                                         
Representative Carpenter asked if  any of the projections or                                                                    
models in  the presentation  counted for  the $1  billion in                                                                    
annual inflation proofing that would be needed.                                                                                 
Mr. Painter  replied that the  scenarios assumed  no further                                                                    
inflation  proofing  for  four years.  For  the  projections                                                                    
beyond  four years  it was  the reason  the ERA  balance was                                                                    
declining. He returned  to scenario 2 (slide  7) and pointed                                                                    
out that  the ERA  increased and  flattened out  because the                                                                    
inflation proofing  amount plus the POMV  draw accounted for                                                                    
the entire annual earnings of the Permanent Fund.                                                                               
2:47:20 PM                                                                                                                    
Co-Chair  Johnston   asked  Mr.  Painter  to   describe  the                                                                    
difference between nominal and real.                                                                                            
Mr. Painter  replied that nominal reflected  dollars "as you                                                                    
see them" and  real numbers were adjusted  for inflation. He                                                                    
used  $1  billion  as  an example  and  detailed  that  when                                                                    
looking  out 10  to 20  years when  2.25 percent  growth was                                                                    
included it was  a significantly larger amount  for the same                                                                    
buying power. He explained that  in real dollars, $1 billion                                                                    
today was $1 billion in FY  29, but in nominal dollars there                                                                    
would be a larger amount.  He expounded that the budget line                                                                    
on  slide 7  reflected  nominal dollars  and increased  over                                                                    
time. He explained  that in real terms,  when accounting for                                                                    
inflation,  the budget  was flat  because it  grew with  the                                                                    
rate of inflation.                                                                                                              
Representative  Josephson referenced  the presentation  from                                                                    
the previous day  ["HB 306: A Path Forward"  (copy on file)]                                                                    
and recalled that slide 16  had shown a balanced budget with                                                                    
an  80/20 [POMV  split between  government services  and the                                                                    
PFD  respectively] reform  based  on the  fall forecast.  He                                                                    
surmised that the  primary difference was due  to the effect                                                                    
of  "the  Russia and  Saudi  shenanigans"  [that lead  to  a                                                                    
precipitous decline in oil price],  the Coronavirus, and the                                                                    
downturn in stocks. He asked  if that was the primary reason                                                                    
it  was  not  possible  to  "have  yesterday's  presentation                                                                    
Mr. Painter replied  that one week earlier  he had testified                                                                    
before the  Senate Finance Committee  that revenue  would be                                                                    
down $100  million to $200  million. He explained  that even                                                                    
at that time,  revenue had been below the  forecast, but not                                                                    
nearly  as much  as was  projected in  the current  week. He                                                                    
agreed  that  the presentation  from  the  previous day  was                                                                    
based on the fall forecast,  which had been made obsolete by                                                                    
activities in the past week.                                                                                                    
Co-Chair   Johnston   asked   for  verification   that   the                                                                    
governor's budget  was in deficit  spending even with  a net                                                                    
Mr. Painter replied in the affirmative.                                                                                         
Co-Chair  Johnston remarked  that the  state would  still be                                                                    
drawing from  the CBR. She  asked Mr. Painter to  include it                                                                    
in a model for the committee.                                                                                                   
2:50:10 PM                                                                                                                    
Mr. Painter turned  to the dynamic model and  shared that he                                                                    
had  initially  referred to  the  scenario  as the  balanced                                                                    
budget  dividend. He  noted the  scenario did  not eliminate                                                                    
the  Permanent Fund  Dividend  Division  and maintained  its                                                                    
budget. He noted  "we do that out of our  budget, not out of                                                                    
theirs."  The  scenario showed  that  with  a zero  dividend                                                                    
there was a  continued deficit due to  the supplemental. The                                                                    
scenario  would show  a  balanced budget  if  there were  no                                                                    
supplementals.  He  elaborated  that  the  CBR  value  would                                                                    
increase  over  time because  there  would  be earnings  and                                                                    
deposits but no draws.                                                                                                          
Co-Chair Johnston asked  if there had ever been  a year with                                                                    
no supplemental.                                                                                                                
Mr. Painter answered that there had  not been a year with no                                                                    
supplemental, but  supplemental budgets had been  very small                                                                    
in some years.  He noted there had been a  massive oil price                                                                    
crash  in FY  15 and  he believed  the budget  had ended  up                                                                    
negative overall. He noted he would have to double check.                                                                       
Co-Chair  Johnston  asked  for  the  deficit  shown  on  the                                                                    
dynamic model.                                                                                                                  
Mr. Painter  replied that  the dynamic  model showed  a zero                                                                    
deficit in FY 21.                                                                                                               
Co-Chair  Johnston asked  for the  FY 20  deficit under  the                                                                    
Mr.  Painter  responded that  the  FY  20 deficit  was  $638                                                                    
million based on the dividend paid the previous fall.                                                                           
Co-Chair Johnston  asked what  the deficit  would be  if the                                                                    
supplemental was $50 million.                                                                                                   
Mr.  Painter answered  that the  scenario would  show a  $50                                                                    
million  deficit   due  to  the  supplemental   because  the                                                                    
information  would   not  be  known  when   calculating  the                                                                    
dividend each year.                                                                                                             
2:52:08 PM                                                                                                                    
Representative   Josephson  predicted   there  would   be  a                                                                    
significant CBR draw  to pay a modest dividend.  He asked if                                                                    
the  danger  in  delaying  serious  revenue  discussions  to                                                                    
January was principally because of  the need to stand up the                                                                    
new revenue  generation systems. Alternatively,  he wondered                                                                    
if there was something about a  further draw on the CBR from                                                                    
$2 billion  to $1.3  billion or $1.4  billion that  would be                                                                    
damaging.  He noted  his  question  assumed the  legislature                                                                    
moved quickly to a revenue discussion in January.                                                                               
Mr. Painter responded that the  danger in delaying was there                                                                    
would be some time to set up,  but it would mean only a half                                                                    
a year's  revenue in the  first year. He elaborated  that if                                                                    
session ended with  the expectation of a  $1 billion balance                                                                    
in the  CBR and there  was a tax  proposed in the  next year                                                                    
that  would entirely  fill the  deficit,  the deficit  would                                                                    
only be  half filled in  the coming year. He  explained that                                                                    
it would  be necessary  to leave  a bit of  a runway  if the                                                                    
proposal was for a tax to fill the deficit.                                                                                     
Representative Wool  returned to scenario  8 on slide  13 of                                                                    
the  presentation. He  looked at  the budget  curve (in  the                                                                    
chart on the  upper left of the slide) that  dipped and went                                                                    
forward at  the rate of  inflation. He noted a  $400 million                                                                    
budget change and did not  understand where it came from. He                                                                    
believed  the  scenario included  a  PFD  that would  differ                                                                    
based  on a  person's income.  He  thought it  would mean  a                                                                    
change  in  the PFD  curve  and  not  the budget  curve.  He                                                                    
reasoned  there  would  still   be  spending  on  government                                                                    
services,  but there  would be  a  decrease in  the PFD.  He                                                                    
noted the budget line did not include dividends.                                                                                
Mr.  Painter  agreed.   He  noted  that  for   the  sake  of                                                                    
simplicity,  the  modeling assumed  it  would  be a  general                                                                    
budget change. He confirmed that  the true impact would be a                                                                    
reduction to the dividend cost, not to the budget.                                                                              
2:55:06 PM                                                                                                                    
Co-Chair Johnston requested an additional model.                                                                                
Mr. Painter asked for clarification.                                                                                            
Co-Chair  Johnston replied  she  was interested  in the  net                                                                    
Mr. Painter  answered that a  more accurate way to  show the                                                                    
modeling  would  be  to  stop   paying  the  Permanent  Fund                                                                    
Dividend  Division and  show a  zero  dividend. There  would                                                                    
still  be  a deficit  in  that  period.  He would  send  the                                                                    
information to the committee.                                                                                                   
Ms.  Pitney added  that with  oil prices  of $40  per barrel                                                                    
there was  no scenario without  a deficit with  any dividend                                                                    
or the  current spending level. At  an oil price of  $50 per                                                                    
barrel, the scenario was nearly  the same. The deficit would                                                                    
be less, but it would still  exist. She detailed that at the                                                                    
current  spending level  and with  no  dividend, the  budget                                                                    
would  not be  balanced until  oil prices  reached the  mid-                                                                    
Co-Chair  Foster  asked  for   the  surplus  amount  in  the                                                                    
governor's  budget at  current spending  levels. He  thought                                                                    
the surplus was around $435 million, not including the PFD.                                                                     
Mr. Painter  answered that that Co-Chair  Foster's statement                                                                    
was correct when using the fall forecast.                                                                                       
Co-Chair Foster believed that with  the projection of oil at                                                                    
$40 per  barrel for FY 20  and FY 21, the  state was looking                                                                    
at  a shortfall.  He noted  that  Ms. Pitney  had shown  one                                                                    
scenario  where  the shortfall  could  be  as low  as  -$300                                                                    
million for  FY 20 and -$515  million for FY 21  for a total                                                                    
shortfall of $815  million. He reasoned that  factoring in a                                                                    
surplus of  $435 million combined  with a  revenue shortfall                                                                    
of $815 million was another way of looking at the deficit.                                                                      
Ms. Pitney  added that under the  governor's amended budget,                                                                    
the CBR would  be completely depleted and  funding would not                                                                    
be sufficient to get through the FY 21 period.                                                                                  
2:58:01 PM                                                                                                                    
Representative Josephson remarked  that depressed oil prices                                                                    
would impact  exploration development unless  the companies'                                                                    
own  expertise suggested  a brighter  future. He  elaborated                                                                    
that  the  initiative  would  arguably  solve  some  of  the                                                                    
problems  but   could  seriously  depress   exploration  and                                                                    
Ms. Pitney agreed  that the two in combination  did not bode                                                                    
well. She  added that at  oil prices  of $40 per  barrel, an                                                                    
increase  to  the minimum  tax  did  not add  a  significant                                                                    
amount of money. She stated, "they're at the very bottom."                                                                      
Representative Wool  reasoned that the forecasts  were a big                                                                    
part of the discussion. He  remarked on the volatility - oil                                                                    
prices  had been  $60  per barrel  fairly  recently and  had                                                                    
declined to $40. He recognized  that low oil prices impacted                                                                    
production.  He noted  there could  be a  geopolitical event                                                                    
that  increased the  price again;  it was  his understanding                                                                    
that some of the decrease was  a result of a political event                                                                    
and not  only a  result of  the Coronavirus.  He highlighted                                                                    
the  complexity of  the issue.  He  asked if  the state  was                                                                    
trying to be  less responsive to the price of  oil in making                                                                    
the budgetary  projections or decisions.  He wondered  if it                                                                    
was advisable  to look at  the 10-year projections  based on                                                                    
an unknown price.  He remarked that experts  were saying not                                                                    
to expect  a big  rise. He  found it  sobering to  know that                                                                    
even  without paying  a  dividend there  was  a deficit.  He                                                                    
considered how to deal with  the problem. He elaborated that                                                                    
the legislature  had already  stated it did  not want  to go                                                                    
into  the ERA  and he  had not  heard many  people say  they                                                                    
wanted  a  zero   dividend.  He  stated  the   issue  was  a                                                                    
conundrum.   He  observed   that   the   scenarios  in   the                                                                    
presentation were  grim. He  considered reducing  the budget                                                                    
lower than inflation  and could not imagine  what that would                                                                    
do to the state's economy.                                                                                                      
3:01:24 PM                                                                                                                    
Co-Chair  Johnston noted  it had  been  almost standard  for                                                                    
geopolitical situations to increase the  price of oil in the                                                                    
past.  She highlighted  a recent  event in  the Middle  East                                                                    
that had  increased the price  of oil  for two days  only to                                                                    
result in a drop. She  thought they needed to begin thinking                                                                    
of a new era and could not  continue to think as they had in                                                                    
the past.                                                                                                                       
Representative  Wool added  that  numerous investment  banks                                                                    
were saying they did not want  to invest in certain kinds of                                                                    
carbon  extraction for  political or  environmental reasons.                                                                    
He believed it was also playing into the situation.                                                                             
Co-Chair  Johnston  referenced  one  [oil]  company  heavily                                                                    
involved in Alaska had a breakeven point of $40 per barrel.                                                                     
Representative  Josephson  stated   that  traditionally  the                                                                    
number bandied  about in  the 1980s and  1990s was  that the                                                                    
state was 90  percent dependent on oil.  He highlighted that                                                                    
the number had been reduced to  40 percent, but it was still                                                                    
far too high.                                                                                                                   
3:03:22 PM                                                                                                                    
Ms. Pitney  answered that under  the old forecast  the state                                                                    
had  been  40  percent  dependent  on  oil;  the  state  was                                                                    
currently 30  percent dependent on  oil. She  detailed there                                                                    
were two main  sources, each with their  own volatility (oil                                                                    
was  more volatile).  She  explained  that price  reductions                                                                    
were less problematic than they  used to be. For example, in                                                                    
2015 when  prices had  dropped, the  forecast had  gone from                                                                    
$3.9 billion  to $1.6 billion  in actual revenue.  She noted                                                                    
there was not  even $1.6 billion in the  actual forecast and                                                                    
revenue  was dropping  significantly below  the number.  She                                                                    
highlighted  the volatility  of  oil and  volatility of  the                                                                    
markets.  She  detailed  that the  volatility  was  somewhat                                                                    
delayed, but the market was still volatile.                                                                                     
Ms. Pitney reported that oil  had increased in 2008 when the                                                                    
market  had crashed,  whereas, the  market had  increased in                                                                    
2014 when oil crashed. Currently,  oil prices and the market                                                                    
were  declining.  Additionally,   Coronavirus  pressure  was                                                                    
resulting in less demand and  less transportation. She noted                                                                    
the supply and demand difference  that was coming into play.                                                                    
She  explained  that both  of  the  state's primary  revenue                                                                    
streams  were on  the  negative end  at  present, which  the                                                                    
state  had no  control over.  The state  currently had  very                                                                    
little of its revenue in  its own control, which was another                                                                    
destabilizer to  the state's budget.  She considered  how to                                                                    
have something  in the state's revenue  stream that followed                                                                    
the success in Alaska.                                                                                                          
3:05:39 PM                                                                                                                    
Representative  Wool  considered  that the  state's  revenue                                                                    
dependency on oil that had  decreased from 90 to 30 percent.                                                                    
He remarked  that if the  decline continued it would  not be                                                                    
good. He  provided a  scenario where  Alaska became  a state                                                                    
that received  most of its  revenue from a  sovereign wealth                                                                    
fund. He  highlighted a  scenario with  a zero  dividend. He                                                                    
assumed  the Permanent  Fund would  grow  and therefore  the                                                                    
POMV  draw would  grow as  well. He  considered that  if oil                                                                    
waned,  the  state  could live  off  savings  and  earnings,                                                                    
assuming the stock market did  not do anything "hyper crazy"                                                                    
over  the course  of time  maintain  a budget  of a  certain                                                                    
Mr. Painter  answered that it  was growing with the  rate of                                                                    
inflation; therefore,  if the budget  also grew at  the rate                                                                    
of inflation, it  was not possible to  shift toward reliance                                                                    
on the  POMV draw,  unless the budget  grew slower  than the                                                                    
draw. Either  the state  would draw less  than 5  percent or                                                                    
the  budget was  growing  slower than  inflation. The  state                                                                    
could  not grow  increasingly  dependent on  POMV, it  would                                                                    
essentially have  to be  the same  percentage of  the budget                                                                    
every year.                                                                                                                     
Representative   Wool  considered   a  scenario   where  the                                                                    
Permanent Fund grew at 6 or  7 percent and the POMV draw was                                                                    
5  percent.  He  noted  the   remaining  would  account  for                                                                    
inflation.  He  surmised  that   the  5  percent  draw  plus                                                                    
inflation was about  the current growth, which is  how the 5                                                                    
percent had been selected.                                                                                                      
Mr. Painter nodded affirmatively.                                                                                               
Representative  Sullivan-Leonard asked  which of  the models                                                                    
presented offered  the most security  to reduce  the deficit                                                                    
and offer revenue and CBR security.                                                                                             
Ms.  Pitney  replied that  each  of  the models  were  major                                                                    
policy calls. She pointed to  the dynamic model currently on                                                                    
the screen and noted it did  not have a dividend and the CBR                                                                    
was not  depleted for  seven years. She  explained it  was a                                                                    
policy call  versus a scenario where  additional revenue was                                                                    
added  or service  cost reductions  were made.  She believed                                                                    
that following the  governor's significant supplemental that                                                                    
had come in after reductions  from the previous year, people                                                                    
were realizing that reductions were  harder than what seemed                                                                    
to  be the  case.  She noted  there could  be  revenue or  a                                                                    
change to  the dividend.  The security of  the CBR  left the                                                                    
state in a  good position to ensure that  the POMV continued                                                                    
to take the  same proportion of the budget  going forward as                                                                    
it did at present.                                                                                                              
Ms.  Pitney  continued  that protecting  the  value  of  the                                                                    
Permanent  Fund so  that it  grew  in real  terms and  could                                                                    
cover the same proportion of the  budget in the future as it                                                                    
did  at present  was likely  the biggest  security question.                                                                    
Additionally, she  considered what was prudent  to expect in                                                                    
oil revenue. She  asked if the state wanted to  plan for $50                                                                    
or  $40. If  the state  planned conservatively  on oil,  she                                                                    
suggested taking  advantage of the  good years in  oil price                                                                    
to make other  policy calls develop other  forms of revenue.                                                                    
Currently,  the largest  proportion  of the  budget was  the                                                                    
POMV and  protecting that revenue  stream going  forward was                                                                    
likely  the most  important consideration,  followed by  the                                                                    
associated policy calls.                                                                                                        
3:11:21 PM                                                                                                                    
Representative  Carpenter  considered a  previous  statement                                                                    
about inflation and  spending. He noted that in  many of the                                                                    
scenarios, current  revenue was  not sufficient to  meet the                                                                    
budget, meaning a tax or  some additional revenue was needed                                                                    
to meet  the spending  level. He pointed  out that  the same                                                                    
would have  to take  place the  following year  and spending                                                                    
was growing  at the  rate of  inflation. He  considered what                                                                    
the  increase in  tax  would have  to be  each  year if  the                                                                    
revenue  problem were  addressed by  a new  income or  sales                                                                    
tax. For example, they could agree  to a $500 million tax in                                                                    
the current  year, but  it would be  more than  $500 million                                                                    
each year going forward in order  to keep up with the growth                                                                    
of government. He asked what that looked like on a graph.                                                                       
Mr. Painter  replied that LFD's assumptions  assumed the tax                                                                    
rates grew  with the rate  of the economy (roughly  the rate                                                                    
of  inflation).  He  stated  it  may  not  be  a  reasonable                                                                    
assumption  if  the  past  few   years  saw  a  decrease  in                                                                    
population. He  noted it  may not  be a  correct assumption,                                                                    
but it was the assumption that was used.                                                                                        
Representative Carpenter remarked that  based on data he had                                                                    
seen he  believed the economy  had grown at about  1 percent                                                                    
from 2006 to 2016. He asked  if it were fair to assume there                                                                    
would be a  tax of any sort grow at  2.25 percent or greater                                                                    
if the economy was only growing at an average of 1 percent.                                                                     
Mr.  Painter  believed  it  was  a  reasonable  concern.  He                                                                    
elaborated that  LFD had used  inflation as the  growth rate                                                                    
for  mostly everything.  He  recognized that  it  may be  an                                                                    
overestimate of how quickly tax revenue may grow.                                                                               
3:13:29 PM                                                                                                                    
Representative  Carpenter asked  what effect  adding a  $500                                                                    
million income  or sales  tax would have  on the  ability to                                                                    
produce  within  the economy.  He  stated  that the  private                                                                    
sector would  take some  sort of hit.  He knew  Institute of                                                                    
Social  and  Economic  Research  (ISER)  had  published  the                                                                    
numbers months  back. He continued that  the situation would                                                                    
start a  spiral where taxes  were increased to keep  up with                                                                    
spending, yet  the increase in  taxes had a  negative impact                                                                    
on the  ability to produce  wealth within the  state through                                                                    
its  economic  engine.  He  highlighted   that  all  of  the                                                                    
scenarios projected  that the spending level  would continue                                                                    
to  increase because  government continued  to increase.  He                                                                    
stressed  that the  state had  a population  of 700,000  and                                                                    
only had  an economy of  a certain size. He  emphasized that                                                                    
if  the problem  were solved  through a  tax, it  would mean                                                                    
increasing  the   tax  to  keep   up  with  the   growth  of                                                                    
Representative Josephson  imagined that  if any  governor of                                                                    
Alaska  were to  go the  National Governor's  Conference and                                                                    
tell the other  governor's that Alaska had a  real problem -                                                                    
that it  had $65  billion and  it was  trying to  remain the                                                                    
only  state that  did not  tax its  people. He  believed the                                                                    
other governors would walk away.  He stressed that the state                                                                    
had the solutions.                                                                                                              
Co-Chair Johnston noted that the  discussions would be held.                                                                    
She did  not want to  drag LFD into policy  discussions. She                                                                    
acknowledged  that Representative  Carpenter's  point was  a                                                                    
good  one. She  highlighted was  necessary to  keep in  mind                                                                    
real cost versus  nominal cost. The modeling  had to account                                                                    
for something and  had to include some  inflation. She noted                                                                    
that  the  president  had  spent time  trying  to  drive  up                                                                    
inflation. There  had been flat  inflation after 2008  - she                                                                    
suggested there  had been deflation  since that  time, which                                                                    
was not desirable. She remarked  that the state did not want                                                                    
an economy of deflation because  the economy would not grow.                                                                    
Currently,  they  were  only modeling  what  they  had.  She                                                                    
suggested  going ISER  to look  at the  impact of  different                                                                    
taxes. She stated that the easy days were gone.                                                                                 
HB  300  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  306  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Johnston reviewed  the  agenda  for the  following                                                                    
day. She provided amendment deadlines for multiple bills.                                                                       

Document Name Date/Time Subjects
HB 306 HB 300 HFC Presentation 3-11-20.pdf HFIN 3/11/2020 1:30:00 PM
HB 300
HB 306
HB 300 Public Testimony Rec'd by 031120 (2).pdf HFIN 3/11/2020 1:30:00 PM
HB 300
HB 306 Public Testimony Rec'd by 031120.pdf HFIN 3/11/2020 1:30:00 PM
HB 306
HB 306 HB 300 Additional Scenario -No dividend, $40 oil 031120.pdf HFIN 3/11/2020 1:30:00 PM
HB 300
HB 306
HB 306 HB 300 Additional Scenario -No dividend, $50 oil 031120.pdf HFIN 3/11/2020 1:30:00 PM
HB 300
HB 306