Legislature(2005 - 2006)CAPITOL 120
03/23/2005 08:00 AM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| Chief Administrative Law Judge | |
| HB187 || HB188 | |
| HB91 | |
| HB219 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 91 | TELECONFERENCED | |
| *+ | HB 219 | TELECONFERENCED | |
| += | HB 187 | TELECONFERENCED | |
| += | HB 188 | TELECONFERENCED | |
HB 187 - AMERADA HESS INCOME; CAPITAL INCOME ACCT. HB 188 - STATE OF AK CAPITAL CORP.; BONDS 8:09:37 AM CHAIR McGUIRE announced that the next order of business would be a hearing on two bills: HOUSE BILL NO. 187, "An Act establishing the Alaska capital income account within the Alaska permanent fund; relating to deposits into the account; relating to certain transfers regarding the Amerada Hess settlement to offset the effects of inflation on the Alaska permanent fund; and providing for an effective date."; and HOUSE BILL NO. 188, "An Act establishing the State of Alaska Capital Corporation; authorizing the issuance of bonds by the State of Alaska Capital Corporation to finance capital improvements in the state; and providing for an effective date." CHAIR McGUIRE relayed her intention to move the bills forward, noting that they'd only been referred to the House Judiciary Standing Committee for the purpose of having the issue of bias addressed and this has been done. She said she has asked members to agree, notwithstanding their reservations, to move the bills forward to the House Finance Committee where they will receive a full fiscal analysis. She noted that individual committee members do have concerns about the bills and want to know more about them, and predicted that the committee report will reflect this. 8:11:33 AM REPRESENTATIVE COGHILL moved to report HB 187 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 187 was reported from the House Judiciary Standing Committee. 8:11:50 AM REPRESENTATIVE COGHILL moved to report HB 188 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 188 was reported from the House Judiciary Standing Committee. [HB 187 and HB 188 were reported from the House Judiciary Standing Committee; the hearing on HB 187 and HB 188 resumed later in this meeting.] HB 187 - AMERADA HESS INCOME; CAPITAL INCOME ACCT. HB 188 - STATE OF AK CAPITAL CORP.; BONDS CHAIR McGUIRE resumed the hearing on: HOUSE BILL NO. 187, "An Act establishing the Alaska capital income account within the Alaska permanent fund; relating to deposits into the account; relating to certain transfers regarding the Amerada Hess settlement to offset the effects of inflation on the Alaska permanent fund; and providing for an effective date."; and HOUSE BILL NO. 188, "An Act establishing the State of Alaska Capital Corporation; authorizing the issuance of bonds by the State of Alaska Capital Corporation to finance capital improvements in the state; and providing for an effective date." 8:27:56 AM REPRESENTATIVE GARA, acknowledging that HB 187 and HB 188 have already moved from committee, asked to make comments on them. He said: I think I agree with the chair that those two bills - that had to do with using permanent fund earnings, the [earnings from the settlement of the State v. Amerada Hess, et al. 1 JU-77-847 Civ. (Superior Court, First Judicial District) case], to fund a road construction bond - largely ... [have] a finance implication; the judiciary implications, I think, were pretty narrow, so I see sending [them to the House Finance Committee] as an appropriate thing. But I do want to state on the record - I spent a lot of time with the folks from the [Alaska Permanent Fund Corporation] and Department of Revenue on this bill - that [the] bond is essentially going to be funded this way: for roughly a [$320 million] road bond, we're going to take what's going to average about [$30 million] a year of permanent fund earnings out of the Amerada Hess "account" to fund this bond. Over the course, it's going to be a 17-year bond, roughly. So that's [$30 million] a year, 17 years, it's going to be about [$500 million] in permanent fund earnings to fund this bond. I think the way they've structured it, they're going to get a good bond rate, and so that part doesn't concern me. What concerns me is spending a half billion dollars out of the permanent fund. I can't envision, at this point, supporting this bill when it reaches the [House] floor; that's a lot of money to use from the permanent fund, at a time where I don't think we have to, without a public vote. So I do have concerns about both of those bills, and somebody might try and talk me into changing my mind but, at this point, I don't think it's a wise thing to do. Just one other thing - we've talked about this Amerada Hess account, and the way the law is written, that Amerada Hess money isn't supposed to be used for the permanent fund dividend [PFD]. And that's fine. But that is not a green light to use ... that permanent fund money for state spending. Those are two separate questions. It's okay if you can't use the money for the dividend but I don't think it's okay to take the money out of the permanent fund .... REPRESENTATIVE DAHLSTROM said she appreciates Representative Gara's comments, adding: I echo many of the same things that you have just expressed. And the reason I was comfortable letting it go out of committee was because of the narrow purview that we do have with the judiciary issue, and I'm confident that [the House Finance Committee] will do the necessary research. I don't know how I will be voting on that bill. I have deep concerns about the permanent [fund], have made commitments to my constituents; I have been told in my office from folks from Cheryl Frasca's office that ... there is not a penny coming out of permanent fund earnings, [that] it's all Amerada Hess and it's a totally separate fund. I will continue to research that, but I do feel confident that we did our job in committee with the narrow scope that we have .... REPRESENTATIVE COGHILL said that it certainly is a reasonable question, when there is something invested in the permanent fund, whether those earnings are the same earnings that pay out the dividend. He added: I expect to hear, in the [House Finance Committee], a little further vetting of that particular issue. But to say that they [are] just earnings of the permanent fund ... [and] have never been commingled with the earnings that have paid out [dividends] does raise enough question in my mind [to say] that we need to look at it. Now the bonding issue, that's a totally different question, in my view, of: why would we go into debt when we could pay off a debt. And I think that's one of the questions we'll be asking in [the House Finance Committee]. ... They are definitely earnings that are vested from the permanent fund, but they're not commingled with what is normally considered earnings of the permanent fund. And so that is a pretty clear distinction at this point, I think. ... REPRESENTATIVE GRUENBERG indicated that he is doing some research on the term "the fund" as it is used in [the legislation], and noted that it doesn't clarify whether the money is being taken out of the corpus or out of the earnings. He said he thinks that that is an aspect of poor drafting, and so may have some concerns to raise on the House floor after further review. He went on to say: I also have some problems with them doing "that" quickly without really vetting that with the people of this state. I have suggested that they visit community councils and [things] ... like that, because people may very well think that that is an attempt to get into the permanent fund without a vote of the people. And this is something that we have never done, never used the money in the permanent fund to collateralize - they don't like that term, but that's what it is, well, it's not technically - to put up in some manner, to finance in some manner, the issuance of a large amount of bonds, and it's a significant precedent. So at this point, until I ... complete those [research] steps and am satisfied, politically and legally and economically ..., I don't plan to support ... it on the [House] floor. CHAIR McGUIRE characterized the points made by members as good points, and offered her belief that at some point, the legislature will need to decide whether or not the Amerada Hess money will be used for something, because, currently, it is clear that that money is separate from the [PFD] and has been kept separate and just continues to earn money "on top of itself." She noted, though, that if the legislature does decide to make use of the Amerada Hess money, it won't be necessary to spend all the money. If and when the money is used, she surmised that the questions surrounding that issue will include: "How much do we want in the way of a capital budget?" "Is $340 million the appropriate figure?" "Is that the figure simply because that's the amount in the Amerada Hess fund, or is it the figure because it's the right figure?" On the issue of bonding and the question of why the state should issue debt, she noted that it does serve the purpose of being able to get more out of the state's money at a time when interest rates are "really good, like they are right now." With regard to the comment about bringing the issue before the voters, she predicted that the public will get an opportunity to express their thoughts on the matter via their elected officials, adding that she questions the practice of asking the public to do the legislature's job with regard to budget issues. REPRESENTATIVE GRUENBERG remarked: It's not just the question of getting into the permanent fund. ... This is a way of getting, floating, a lot of bonds that would normally be [general obligation (GO)] bonds, and under a different provision of the [Alaska State Constitution], because [if] they put up the full faith and credit, they'd have to go ... to the people. So this is a way of "end running" votes to the people under two different theories. CHAIR McGUIRE said that is a good point. REPRESENTATIVE GARA offered his recollection that it has been presented that somehow the Amerada Hess money is different than permanent fund money and therefore it's okay "to bond" with this money. He offered his belief, however, that it isn't different and therefore he opposes it use. He offered his understanding that the Amerada Hess money, which came to the state as a result an oil tax settlement, was always intended to be part of the permanent fund but was instead kept separate in order to avoid a potential legal argument. That is a separate question, he opined, than whether the money is part of the fund; it was always intended, back then, to be part of the fund, it is part of the fund, and the only reason it's segregated now is because of the legal argument that existed many years ago about whether or not the money should go into the dividend and therefore possibly influence the judge and the jurors in the Amerada Hess litigation. So the question, he opined, is really whether it is time to spend permanent fund earnings, regardless of whether it is Amerada Hess money. CHAIR McGUIRE remarked that if the Amerada Hess money is part of the permanent fund earnings and it can't go towards PFDs, then that raises the question of what should be done with it, and whether it should simply be sitting there earning interest for no logical purpose. REPRESENTATIVE GRUENBERG mentioned that he was a member of the House Judiciary Standing Committee when the original legislation came before that committee, and characterized the passage of that bill onto the House Finance Committee as a mistake. That bill was considered a finance issue, and so it was allowed to move on to that committee without the House Judiciary Standing Committee considering the issue of whether to have the rule of necessity incorporated into it. "We should have dealt with it like that, rather than this tortured, non-fish-nor-foul thing that we did with this large pot of money, and the only reason I'm saying that to the members of this committee is because if we move very quickly on things that aren't normally in our purview, without really knowing what we're doing, then it could have a lot of consequences 20 years later," he concluded. [HB 187 and HB 188 were reported from the House Judiciary Standing Committee earlier in this same meeting.]
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