Legislature(2007 - 2008)CAPITOL 106
03/11/2008 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB406 | |
| HB396 | |
| SB253 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 406 | TELECONFERENCED | |
| *+ | HB 396 | TELECONFERENCED | |
| + | SB 253 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 396-INCREASE 2008 PERM. FUND DIVIDEND 8:49:53 AM VICE CHAIR ROSES announced that the next order of business was HOUSE BILL NO. 396, "An Act relating to and increasing the amount of the 2008 permanent fund dividend; and providing for an effective date." 8:50:49 AM REPRESENTATIVE BILL THOMAS, Alaska State Legislature, presented HB 396 as prime sponsor. He paraphrased the first paragraph of the sponsor statement, which read as follows: The high cost of fuel is affecting everyone, and it is hitting Alaska particularly hard. Our state contributes a significant amount of natural resources to the nation, yet we still pay some of the highest prices for fuel. Soaring fuel costs translate into high prices for groceries, building materials, and all other goods. Families are being forced to chose between putting gas in their vehicles or food in their mouths. If these kinds of hardships continue without relief, it will force many families to leave the state for a lower cost of living. REPRESENTATIVE THOMAS noted as a point of reference that the cost of electricity in Haines ranges from 22 to 58 cents per kilowatt, while the cost is 8.5 cents in Juneau and 8 cents in Anchorage and Wrangell. He pointed out that there is a handout in the committee packet showing the cost of gas around the state. 8:52:58 AM REPRESENTATIVE THOMAS said the proposed bill would treat everyone, rich or poor, equally, [by increasing the amount of the 2008 permanent fund dividend (PFD) check by $500 per recipient]. He said the price of oil is currently $107 dollars a barrel, and at 700,000 barrels, massive amounts of money are going into the state's coffers, up to $3.6 billion in savings. Some of that savings should be shared with the people of Alaska, he opined. REPRESENTATIVE THOMAS said the Alaska's Clear and Equitable Share (ACES) bill read, "It is the intent of the legislature that the legislature will responsibly invest the amount received after December 31, 2007, as a result of this enactment of this Act that exceeds the amount that would have been received." He said the language in that bill lists intended appropriations, including "statewide energy needs of Alaskans to assist with grave, rising energy costs." He stated, "I have not seen a bill around that addresses that equally to everybody." 8:55:53 AM TIM JOYCE, Mayor, City of Cordova, testified in support of HB 396. He echoed the bill sponsor's statement that energy costs are becoming a major expense for families in Alaska today, far outstripping inflation in the state. He listed the following prices in Cordova: propane, $4.10 a gallon; fuel oil for home heating, as of 3/7/08, $4.38 a gallon; stove oil used in certain furnaces for home heating, $4.49 a gallon; gasoline, $4.43 a gallon; and Mr. Joyce's own electric bill for one month, $218 for 667 kilowatts of energy. He said it is difficult to make compensation for the price of energy when it rises so rapidly. 8:58:31 AM VICE CHAIR ROSES noted that the next person to testify, Paul D. Kendall, had sent numerous pages of information to the committee by facsimile, and he asked Mr. Kendall to focus on his position regarding the PFD and "what that $500 would look like." 8:59:06 AM PAUL D. KENDALL, stated that he is concerned that the legislature and the general public is not aware of what is happening behind the scenes with "some of these companies." He spoke of a full-page advertisement placed by BP to build the first hydrogen power station in Scotland, which would serve 250,000 homes, and he said there is no reason that that could not be built in Alaska. He emphasized the importance of ensuring that future generations will be aware of and involved in state of the art [energy sources]. MR. KENDALL said, as stated in his letter [dated 3/10/08], that he would favor the money [proposed through HB 396], but indicated that he would like to see it spent in "some smart way." He listed some examples, such as: the Susitna Dam Project, Tom Staudenmiers' all-Alaskan owned "Grid Network Consolidation proposal," weatherization and conservation outlays, and rural energy subsidies. He stated, "When you look at all of these things combined, energy is so large I just don't see how you cannot address this in some [Alaska Gasline Inducement Act] (AGIA)-type hearing, where everybody comes on board as quickly as possible. I think time is of the essence here." 9:01:10 AM MR. KENDALL said the projected number of PFD checks for 2007 is 604,149, and, multiplied by $500 each, the total cost would be approximately $300 million. Continued for a three-year period, the amount would be about a billion dollars. He said most people don't realize that out of an entire energy bill, only 11- 15 percent is applied to distribution costs, while 65-80 percent of it goes to the feed stock provider, which Mr. Kendall posited "provides no incentive for them to be taken into account or for the political leaders to plan for the energy which I think has to have a new direction." MR. KENDALL said [the proposed legislation] is well-intended, but indicated that he has another suggestion. He stated that a properly functioning free enterprise system is supposed to adjust itself by natural market means in the commercial, institutional, industrial, and military application. He explained his concern is that there is no way for a single family home to absorb those costs. He talked about the factors that negatively affect society. MR. KENDALL suggested that the state could use the aforementioned $300 million to "put in enough megawatts" to serve somewhere in the area of 150,000 homes with electricity for 25 years. He asked that the committee carefully weigh how it chooses to spend its funds. Mr. Kendall said he would like to see a discussion take place comparable to that which occurred during consideration of AGIA, where "everybody is sworn in and testifies." He emphasized the importance of dealing with the issue of energy. Mr. KENDALL said if the legislature does decide to pass HB 369 and "disperse the $500," he would like to see check-off boxes at the bottom [of the PFD application] asking everyone if he/she would like to give that money to another cause, and, if so, how much? He indicated that he would give his $500 toward the purchase of one of many energy products. If 1,000 PFD applicants did the same, he said, that would be a half million dollars. He outlined other details of his vision to create a people's co-op of some type, allow remote villagers to apply for a [wind] turban, and apply the energy only to the single family home, which Mr. Kendall characterized as "the foundation of all of our society." He continued: It's the home and the rental. Everything that you have, ladies and gentleman - everything - comes from those two structures; they are the foundations of all society. And before you can get to that, you have to have the air, ... water, and energy. So, the energy is, in essence, a fundamental erosion of that which begets you everything else. Those oil companies cannot sell the oil, without having a society which represents thousands of communities like ours. It is on that on which they bring these huge increases, so you have to stop that assault right now. MR. KENDALL offered to send more information to the committee pertaining to alternative energy sources. He concluded, "If you address this issue, you, ladies and gentlemen, will portend the next structure of the next society which is going to come one way or another." 9:06:41 AM REPRESENTATIVE THOMAS related that there is an energy bill currently before the Senate Finance Committee, which proposes the renewable energy that Mr. Kendall is promoting. 9:07:36 AM VICE CHAIR ROSES closed public testimony. 9:07:51 AM REPRESENTATIVE THOMAS reminded the committee that HB 396 is a one-year, one-time bill. He said, "Hopefully we'll find a permanent solution that will treat everybody equitably." In response to a question from Representative Coghill, he confirmed that it is not his intention to create an additional dividend every year. REPRESENTATIVE COGHILL warned there is always a danger in offering something like this once, then finding it difficult not to do it again. 9:09:10 AM REPRESENTATIVE GRUENBERG pointed out a typographical error - an incomplete sentence - in the analysis portion of the fiscal note prepared by the Permanent Fund Dividend Division, dated 3/3/08. 9:09:59 AM JERRY BURNETT, Director, Administrative Services Division, Department of Revenue, in response to Representative Coghill, said the department believes that the appropriation required for HB 396 would be $305 million. REPRESENTATIVE COGHILL asked Mr. Burnett how much the permanent fund earned and what is now available for appropriation from those earnings. MR. BURNETT responded: I don't have the exact numbers with me. [The] last financial statement I looked at ... was ... somewhere around the $4 billion range there. The realized earnings, which [are] what the dividend is calculated on, were - from ... July 1, 2007, through January 31, 2008 - about $2.2 billion. REPRESENTATIVE COGHILL explained that he is trying to figure out the annual earnings compared to the amount available for appropriation - "what that $300 million-plus is going to leave as a whole there." He mentioned inflation-proofing and the PFD, and he asked Mr. Burnett to help him understand "in big chunks, what that looks like." MR. BURNETT replied that "in big chunks," regular dividends are approximately $1 billion this year, based on likely calculations; realized earnings are, year-to-date, in excess of $2 billion; and the earnings reserve is in the neighborhood of $4 billion. He added, "So, I don't think this has any effect; it should not create a concern at this point." He explained, "Even though market earnings are down, realized earnings are not down, necessarily, ... and that's where you get your earnings reserve and your ability to pay dividends." REPRESENTATIVE COGHILL said, "Normally, we are depositing money into the fund on a consistent basis for inflation proofing." He offered his understanding that "normally that's short of a billion dollars." MR. BURNETT said he does not know what the amount will be this year, but it will be based upon inflation and will probably be in excess of $1 billion. 9:12:43 AM REPRESENTATIVE JOHNSON said he knows there is a calculation by which the PFD is figured out, and he asked how the $305 million appropriation would affect future dividends. MR. BURNETT responded that what the future earnings will be is unknown, but paying a larger dividend this year would have an effect on all future dividends. The effect to each dividend would be in the $10-$20 range, he estimated. 9:14:10 AM VICE CHAIR ROSES asked Mr. Burnett to confirm that a one-time increase in the amount of the PFD, if sourced from surplus money deposited once to the permanent fund in the amount of $305 million, would have no effect on future dividends. MR. BURNETT confirmed that's correct. 9:15:25 AM REPRESENTATIVE COGHILL referred to [the analysis section of the fiscal note prepared by Ellie Fitzjarrald, Director, Public Assistance, dated 3/3/08], which read as follows: This legislation increases the 2008 Permanent Fund Dividend by $500 in recognition of the recent increase in energy costs. The additional $500 payment will be funded by transfers from the earnings reserve account to the dividend fund. The Food Stamp, Social Security Supplemental Income (SSI), and Adult Public Assistance (APA) programs count the Permanent Fund Dividend (PFD) as income in determining whether a person or household qualifies for benefits. PFD money that is not spent and is kept after the month of receipt is also considered an available asset (cash on hand or money in the bank) for program applicants. REPRESENTATIVE COGHILL asked, "Are all of those in the hold harmless, or only part of them?" ELLIE FITZJARRALD, Director, Division of Public Assistance, Department of Health and Social Services, responded as follows: People who receive Adult Public Assistance and [Social Security Supplemental Income] (SSI) are also held harmless, but the permanent fund dividends have been high enough in the last few years that all of their benefits are hold harmless. So, this additional $500 payment, the one time for this fiscal year, would not add additional hold harmless expenditures to them, because ... the PFDs are high enough that they're already put on the hold harmless program. REPRESENTATIVE COGHILL said the cost is picked up by the state "for the hold harmless." He asked, "So, what would be the anticipated level under this condition?" MS. FITZ explained as follows: What happens is that their benefits that are currently general fund are replaced with the hold harmless benefit that is paid for with the ... earnings of the permanent fund; so, it's that special appropriation in statute. ... So, there is no additional general fund cost or savings, if that's what you're asking. REPRESENTATIVE COGHILL responded: But there is a cost to the permanent fund earnings, and so, help me understand what that is. Because we're going to give them $500, and what is the underside of that? Because we're going to make up the social service benefits with permanent fund earnings money. And so, what I'm trying to see is $500, plus what? MS. FITZJARRALD stated: Our annual permanent fund hold harmless expenditures are about $12 million for all programs. The reason this fiscal note only ... adds costs for the Food Stamp program is because the ... majority of expenditures are on the Adult Public Assistance and people who are receiving Social Security Supplemental [Income] Benefits .... That hold harmless benefit that they get is already in that $12 million that we have budgeted for hold harmless. This one-time payment isn't going to add a new hold harmless expenditure for them; we're already replacing their benefit. ... The maximum income a person on SSI can have is $640, and then when you add the Adult Public Assistance of about $300 - some receive a little more, some a little less - it's about $962 a month, the maximum amount of income somebody on APA can have. So, since the PFDs have been lots higher than $962 a month, we're replacing their benefit already. So, this bill does not affect those expenditures at all, because we're already giving them a hold harmless benefit, because their PFDs are high enough that we have to replace it entirely now. REPRESENTATIVE COGHILL offered his understanding that the aforementioned $12 million is what it takes to pay the federal government back. He estimated that would equal approximately $3-$4 off of each Alaskan's PFD check. MS. FITZJARRALD suggested that Mr. Burnett could answer questions regarding the amount of each PFD that goes towards the payment of the hold harmless expenditures. She related that those expenditures have significantly reduced the caseload for the "temporary assistance families." 9:20:22 AM REPRESENTATIVE DOLL said she does not favor a discretionary fund. She stated that she would rather see the money go to those who really need it rather than across the board. 9:21:22 AM REPRESENTATIVE COGHILL said the need is there; people on fixed incomes are enduring huge pressure these days. Some people may misuse the proposed $500 boost to their PFD check, but those in duress would not, he predicted. He commented that handing out money to everyone could increase the money coming back into communities; however, he stated that it is true that a shot in the arm makes people think things are better than they actually are. He stated, "At this point, with all the bills in play in this legislature, I think this is one solution that needs to move forward." 9:23:59 AM REPRESENTATIVE GRUENBERG said both previous speakers have expressed some of his concerns. He noted that during a community council meeting in his district, several people asked about the bill, and he thinks the idea of getting an extra $500 is a popular one. However, he stated, "Cracking open the egg is hard once the egg is cracked." 9:25:20 AM REPRESENTATIVE JOHANSEN echoed the sentiment of Representatives Coghill and Gruenberg that "once this gets out" there is the possibility that the legislature could lose control over the appropriation. He said he thinks there are other programs through which the legislature can appropriate money to help those in need. Furthermore, the money could be used to support "facilities that will take care of the cost of energy permanently." He said he would not hold up the bill, but he expressed concern about writing checks to people 50 years down the road for those who cannot afford energy, when the problem could have been addressed now. 9:27:20 AM REPRESENTATIVE JOHNSON concurred with Representative Coghill that the bill should pass out of committee to "be part of the discussion" and "part of the mix"; however, he expressed concern that voting raises for citizens is "just the first step to the downfall of democracy." 9:28:14 AM REPRESENTATIVE COGHILL said there are several things he thinks the committee needs to keep in mind: First, a big chunk of the state's money comes from the oil industry, and the permanent fund has been a success story of how to turn a nonrenewable source into a renewable one. Next, he said the amount of money going to the needy of Alaska through Welfare and health care has "crested $2 billion" since he has served in the legislature. The number of the recipients of that money "fall[s] short of 200,000." He said there could be an argument that by giving the people of Alaska an extra $500 each, the legislature could be "subsidizing the things that we want to stop." Also, he said paying out $500 could open a discussion of whether or not the earnings of the permanent fund should "ever only be used for personal income uses." He warned that there could be federal problems on taxation. Last, he said the legislature is significantly "matching" a low-income heating assistance program from the federal government, which is a huge benefit. REPRESENTATIVE COGHILL clarified that he had said the bill should go forward to put pressure on the legislature to determine if it will take care of those with the greatest need first. He said this issue needs to propel the discussion of "hydro issues," because if hydro power can be delivered to greater portions of Alaska, everybody in the state will benefit. He said the legislature has tried to "equalize out some of those things through several state programs," but must invest in lower-cost energy in the state. He reiterated that although giving $500 would be like giving a man a fish instead of teaching him to fish, it would be a shame for the legislature to sit on $4 million and make no investment. He said he would like to see discussion of HB 396 push forward the discussion of the previously mentioned alternative energy bill currently in the Senate Finance Committee. 9:32:34 AM REPRESENTATIVE COGHILL moved to report HB 396 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 396 was reported out of the House State Affairs Standing Committee.
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