02/04/1994 01:15 PM House JUD

  HJR 48 - RESTRUCTURE PERMANENT FUND                                          
                                                                               
  Number 548                                                                   
                                                                               
  MARY A. NORDALE, a Juneau attorney representing herself,                     
  testified against HJR 48.  She presented a written statement                 
  to the committee for the record.  Ms. Nordale objected to                    
  HJR 48 because it replaces the precision of the language of                  
  Article IX, Section 15 (mineral, with very imprecise                         
  language); it requires taxes, severance and income, to be                    
  deposited into the fund; and it specifies an investment                      
  strategy that, if interpreted correctly, will yield less,                    
  rather than more revenues for the support of government.                     
  She also opposed the resolution because, if adopted, it will                 
  insure that entitlement programs will dominate state                         
  government, it would leave as revenue sources for the                        
  support of general government only incomes taxes, it will                    
  impair the state's credit and will chill natural resource                    
  development.                                                                 
                                                                               
  Number 643                                                                   
                                                                               
  REP. PORTER referred Ms. Nordale to point number four in her                 
  written statement, which states if adopted entitlement                       
  programs would dominate state spending, and asked for her                    
  reasoning on that point.                                                     
                                                                               
  Number 650                                                                   
                                                                               
  MS. NORDALE replied that when you get a very static sum of                   
  money, you get vested interests in the status quo, which is                  
  dominated at this particular time by entitlement programs.                   
  She explained that population growth and inflation increase                  
  those, but they don't change them, so the longer the static                  
  income exists, the more likely the vested interest of the                    
  entitlement programs becomes and you get into a hamstrung                    
  situation.                                                                   
                                                                               
  Number 657                                                                   
                                                                               
  The committee discussed Ms. Nordale's comments.                              
                                                                               
  Number 719                                                                   
                                                                               
  JOHN WILLIAMS, Mayor of Kenai, testified he was representing                 
  the opinions of the City of Kenai, the City of Soldotna, the                 
  City of Homer, and the Kenai Peninsula Caucus, all of whom                   
  have taken a very positive attitude towards HJR 48 and                       
  support of the Cremo plan, or a variation of the plan that                   
  would do basically what the Cremo plan would be expected to                  
  do.                                                                          
                                                                               
  MAYOR WILLIAMS concluded there has to be a change, and the                   
  time for that change is now, and this legislature has the                    
  opportunity to become the developers of a legacy for our                     
  children for years to come; or on the other hand, they can                   
  always go down in history as the wrecking ball that refused                  
  to take the time and opportunity to create a good solid                      
  place for Alaska.  He added that the Cremo plan lays the                     
  groundwork for the creation of that plan.                                    
                                                                               
  TAPE 94-17, SIDE B                                                           
  Number 000                                                                   
                                                                               
  MAYOR WILLIAMS and the committee discussed various aspects                   
  of the Cremo plan.                                                           
                                                                               
  Number 101                                                                   
                                                                               
  VINCENT O'REILLY testified via teleconference from Kenai in                  
  opposition to HJR 48 and supported Ms. Nordale's earlier                     
  testimony.  Mr. O'Reilly acknowledge that the legislature                    
  was faced with a fiscal gap, and said the legislature has a                  
  budget mechanism process that encourages unpredictable                       
  fluctuations of revenue available for appropriation, which                   
  places unbearable pressure on legislators to appropriate                     
  wisely and appropriately, with the result of creating a boom                 
  bust cycle.  Mr. O'Reilly reiterated his objection to HJR 48                 
  and referred to Ms. Nordale's comments.                                      
                                                                               
  Number 241                                                                   
                                                                               
  REP. PHILLIPS said she had a question that would be a big                    
  premise if the legislature is to be successful in doing a                    
  plan such as this, and that is, overall the message                          
  legislators are getting is no new taxes until you cut the                    
  budget, but in order for a plan like this to be successful,                  
  we are going to have to put taxes on it in order to have                     
  enough revenues.  She told Mr. O'Reilly, with the two                        
  conflicting opinions on taxes now, that is going to be one                   
  of the main questions they deal with.                                        
                                                                               
  Discussion regarding taxes and Rep. Phillips comments                        
  ensued.                                                                      
                                                                               
  Number 420                                                                   
                                                                               
  JAMES ELSON, testifying via teleconference from Kenai, said                  
  he has been employed in the private sector for about 25                      
  years and wanted to approach his comments from a different                   
  point of view.  He agreed that another approach to the                       
  budget must be found, but the thing that concerned him is                    
  the nonrenewable resource concept, and that we can put money                 
  from nonrenewable resources in the permanent fund and                        
  nurture it, so it becomes a renewable resource.  Mr. Elson                   
  said his other concern was that whatever the state does                      
  within its own budget has a significant impact on the                        
  private economy.  He said the Cremo plan seems to be the                     
  best option, it may not be the answer, but he urged the                      
  legislature to find some way to stabilize state government                   
  spending.                                                                    
                                                                               
  Number 518                                                                   
                                                                               
  ROGER CREMO, author of the plan that led to introduction of                  
  HJR 48, testified via teleconference and discussed comments                  
  made by Ms. Nordale.  He said he was opposed to using taxes                  
  in the savings fund, but said he found it hard to consider                   
  the type of taxes considered here, but surely a broad tax on                 
  the people, income, sales or property tax have no place in                   
  the fund.  Mr. Cremo indicated he didn't understand the                      
  entitlement points and ruining the state's credit that Ms.                   
  Nordale made and couldn't comment there.                                     
                                                                               
  MR. CREMO discussed HJR 48 at length with the committee.                     
                                                                               
  Number 679                                                                   
                                                                               
  REP. MARK HANLEY, House Finance Committee Vice Chair,                        
  testified that all the questions were good, and they brought                 
  forth a good debate in which to work out a plan.  Rep.                       
  Hanley indicated that he thought the legislature first                       
  needed to look at the current system to see if the                           
  legislature can sustain what it's doing, see if it is a                      
  viable system, and what kind of problems are we going to                     
  arrive at if we continue down this road.                                     
                                                                               
  Rep. Hanley said Ms. Nordale brought up some good points for                 
  discussion, but he doesn't think cash drives resource                        
  development; stability and reasonable regulations drive                      
  development; and let the private sector do the development                   
  and bring in the resources.                                                  
                                                                               
  Rep. Hanley continued, saying he thought the Cremo plan was                  
  a constitutional plan; we could change the constitutional                    
  spending limit, the constitutional budget reserve and a lot                  
  of other things.  He pointed out that a lot of the problems                  
  people have pointed out about the Cremo plan can be                          
  attributed to the current system, and he didn't think that                   
  was a good reason to be extremely critical of it.                            
                                                                               
  Number 780                                                                   
                                                                               
  The committee continued to discuss the testimony regarding                   
  HJR 48.                                                                      
                                                                               
  Number 838                                                                   
                                                                               
  REP. PORTER asked the committee for their consideration of                   
  assigning HJR 48 to a subcommittee to help address the                       
  concerns that have come up and then come back and discuss                    
  the specifics with the full committee.                                       
                                                                               
  TAPE 94-18, SIDE A                                                           
  Number 000                                                                   
                                                                               
  The committee discussed Rep. Porter's suggestion.                            
                                                                               
  Number 104                                                                   
                                                                               
  REP. PORTER appointed Rep. Phillips to chair a subcommittee                  
  on HJR 48 made up of Reps. James, Nordlund and Green.