Legislature(2009 - 2010)CAPITOL 106

04/07/2009 08:00 AM House STATE AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HJR 24 FED. SCHOOL LUNCH PROGRAM/MILITARY TELECONFERENCED
Moved Out of Committee
+ HB 24 PROCUREMENT PREFERENCE FOR VETERANS TELECONFERENCED
Heard & Held
*+ HCR 8 UNIFORM RULES: MEASURE SPONSORS/READINGS TELECONFERENCED
Scheduled But Not Heard
*+ HB 128 INTRODUCTION OF MEASURES/FISCAL NOTES TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HJR 8 CONST. AM: APPROP. LIMIT/MINERAL REVENUE TELECONFERENCED
Moved Out of Committee
HJR  8-CONST. AM: APPROP. LIMIT/MINERAL REVENUE                                                                               
                                                                                                                                
8:05:34 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN announced  that the first order of  business was HOUSE                                                               
JOINT RESOLUTION NO. 8, Proposing  amendments to the Constitution                                                               
of  the  State of  Alaska  limiting  appropriations from  certain                                                               
mineral  revenue, relating  to the  balanced budget  account, and                                                               
relating to an appropriation limit.                                                                                             
                                                                                                                                
8:06:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE KELLY,  Alaska State  Legislature, as  prime                                                               
sponsor of  HJR 8,  noted that  questions had  been asked  by the                                                               
committee at  the previous hearing of  HJR 8, and the  answers to                                                               
those questions  had been prepared  and would be provided  by his                                                               
staff, Derek Miller.                                                                                                            
                                                                                                                                
8:07:23 AM                                                                                                                    
                                                                                                                                
DEREK  MILLER, Staff,  Representative  Mike  Kelly, Alaska  State                                                               
Legislature, noted the first question  that had been asked was in                                                               
regard to the  source of the definition of "mineral  revenue" - a                                                               
term  used on  page 1,  lines  8-10, of  HJR  8.   The answer  is                                                               
Article  9, Section  15,  of  the Constitution  of  the State  of                                                               
Alaska, which read:                                                                                                             
                                                                                                                                
     At  least  twenty-five  percent of  all  mineral  lease                                                                    
     rentals,  royalties,  royalty  sale  proceeds,  federal                                                                    
     mineral revenue  sharing payments and  bonuses received                                                                    
     by the State  shall be placed in a  permanent fund, the                                                                    
     principal  of  which  shall  be  used  only  for  those                                                                    
     income-producing  investments  specifically  designated                                                                    
     by  law as  eligible  for  permanent fund  investments.                                                                    
     All income  from the permanent fund  shall be deposited                                                                    
     in the general fund unless otherwise provided by law.                                                                      
                                                                                                                                
MR.   MILLER  also   defined  mineral   production  and   mineral                                                               
transportation - two other terms  used in the proposed resolution                                                               
- as the state's production tax  on oil and the state's tariff on                                                               
transporting  oil via  the Trans-Alaska  Pipeline System  (TAPS),                                                               
respectively.                                                                                                                   
                                                                                                                                
MR.  MILLER  said question  two  had  to  do with  the  remaining                                                               
indebtedness to  the Constitutional  Budget Reserve  Fund (CBRF),                                                               
and the amount is $150 million  "and change."  He said [in fiscal                                                               
year 2008 (FY  08)] the legislature appropriated  $3 billion from                                                               
the  General  Fund (GF)  to  the  CBRF.   Additionally,  over  $2                                                               
billion  were transferred  from  a variety  of  GF sub-funds  and                                                               
accounts to the CBRF.                                                                                                           
                                                                                                                                
8:09:55 AM                                                                                                                    
                                                                                                                                
MR.  MILLER  addressed  question  three,  which  was  to  discern                                                               
whether or not the state  could include fish receipts and tourism                                                               
in the proposed 5-year appropriation  limit.  Mr. Miller said the                                                               
answer is yes;  however, the state receives  minimal revenue from                                                               
these  sources compared  to  mineral revenue.    For example,  he                                                               
noted, if  the $22  million total  unrestricted income  from fish                                                               
tax  in FY  07 and  FY 08  was added  to the  HJR 8  model, those                                                               
receipts would  represent a  little less than  half a  percent of                                                               
the total revenue for those years.   He noted also that there are                                                               
other fish receipts,  but since they are  restricted, they should                                                               
not be included in  the HJR 8 model.  In  response to Chair Lynn,                                                               
he indicated that restricted receipts are like designated funds.                                                                
                                                                                                                                
8:11:02 AM                                                                                                                    
                                                                                                                                
MR.  MILLER,  in  response  to  Representative  Gatto,  said  the                                                               
unrestricted income from tourism, which  could be included in the                                                               
HJR  8 model,  includes:   $9 million  from the  Car Rental  Tax,                                                               
[$12.3] from the  Cruise Corporate Income Tax,  $3.5 million from                                                               
the  Tourism Corporate  Income  Tax, and  $6.7  million from  the                                                               
Cruise Gaming Tax.                                                                                                              
                                                                                                                                
8:12:01 AM                                                                                                                    
                                                                                                                                
MR. MILLER moved  on to the fourth question,  which asked whether                                                               
it would be feasible to  calculate a 3-year average, deleting the                                                               
high and  low extremes.  The  answer to that question  is yes, he                                                               
said, and  the numbers are  illustrated on a line  graph labeled,                                                               
"State of Alaska  General Fund Spending FY 00 -  FY 10," which is                                                               
attached  to the  aforementioned handout.   Mr.  Miller explained                                                               
that the blue  line depicts the actual GF spending,  the red line                                                               
shows the five-year average discussed  at the last hearing of HJR
8, and the green line depicts  the three-year average.  The green                                                               
and red  lines track  together until  FY 09 and  FY 10,  when the                                                               
green line is less by several hundred million dollars.                                                                          
                                                                                                                                
8:13:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  interpreted that no matter  which plan was                                                               
used - the five-year average proposed  by HJR 8, shown as the red                                                               
line, or  the three-year average  comparison, shown as  the green                                                               
line -  the amount of money  available from GF spending  would be                                                               
less than the  amount shown through FY 10 for  actual GF spending                                                               
- the black line.                                                                                                               
                                                                                                                                
MR. DEREK answered that's correct.                                                                                              
                                                                                                                                
8:14:26 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO pointed out a  second line graph attached to                                                               
the  handout,  [which is  entitled,  "5-year  and 3-year  Average                                                               
Comparison"].    He observed  that  because  the values  for  the                                                               
horizontal  and  vertical  scales  of each  line  graph  are  not                                                               
compatible, it is difficult to  make a comparison between the two                                                               
graphs.  For  example, one chart shows  FY 00 - FY  10, while the                                                               
other shows  FY 04  - FY 17.   The first  and second  graphs have                                                               
different coordinates,  which makes  it difficult to  compare the                                                               
two.                                                                                                                            
                                                                                                                                
MR. MILLER explained that those two  line graphs are not meant to                                                               
be compared,  since the  one shows GF  spending, while  the other                                                               
shows how much the state received in mineral revenue.                                                                           
                                                                                                                                
8:15:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY  commented, "That was in  response, I think,                                                               
to Representative Wilson's question  about projecting it out, and                                                               
of  course what  we  used was  the state  estimates  for ...  the                                                               
elements."                                                                                                                      
                                                                                                                                
8:16:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON said  she was comparing this  to [slide] 10                                                               
of  the presentation  the other  day [included  in the  committee                                                               
packet]; however, she  observed that the colors of  the lines are                                                               
not consistent.                                                                                                                 
                                                                                                                                
8:17:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  noted  that the  day  before,  committee                                                               
members  had received  information from  Representative Gruenberg                                                               
relating  that  the  amount  the  state owes  the  CBRF  is  $650                                                               
million, while  Mr. Miller today  told the committee  that amount                                                               
is  $150 million.    He said  he  wants to  know  what the  state                                                               
actually owes  and what the  source was for the  information from                                                               
both parties.                                                                                                                   
                                                                                                                                
MR. MILLER said  the information that the  amount of indebtedness                                                               
was $150 million  was obtained from Rob  Carpenter in Legislative                                                               
Finance.  He said the number is from FY 08.                                                                                     
                                                                                                                                
8:19:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON drew  attention  to [a  memorandum in  the                                                               
committee   packet  from   Pat  Davidson,   Legislative  Auditor,                                                               
Legislative Budget  and Audit Committee, Division  of Legislative                                                               
Audit], which shows that the balance owed  at the end of FY 08 is                                                               
[$150,093,111],  while the  estimated amount  currently owed  the                                                               
CBRF  in 2009  is [$620,578,218].   He  said, then,  that neither                                                               
this  source nor  Mr. Miller's  contradict  one another,  because                                                               
both  list  the  amount  owed  in FY  08  as  approximately  $150                                                               
million.                                                                                                                        
                                                                                                                                
8:19:57 AM                                                                                                                    
                                                                                                                                
CHAIR  LYNN asked  Representative  Kelly which  comparison -  the                                                               
five-year or  the three-year -  he thinks  would be best  for the                                                               
state.                                                                                                                          
                                                                                                                                
8:20:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY answered that  both comparisons are similar.                                                               
He indicated that  if there had not been a  spike in the revenue,                                                               
as  seen  on the  line  graph,  he  would  stay with  his  5-year                                                               
averaging plan.   However, because there was a  spike in revenue,                                                               
the  three-year average  comparison  "wipes that  effect out  and                                                               
smoothes it so  the net effect would be ...  less spending as the                                                               
price  plummeted."   The  effect would  be  "even more  budgetary                                                               
disciplines being imposed," he added.   Representative Kelly said                                                               
he would  leave the decision  to the committee.   He said  no one                                                               
anticipated the spike in revenue when HJR 8 was formulated.                                                                     
                                                                                                                                
CHAIR LYNN stated  that if [the spike in  revenue] doesn't happen                                                               
for  another 20  years, "that's  one  thing," but  if it  happens                                                               
every three or four years, "it's quite another."                                                                                
                                                                                                                                
REPRESENTATIVE KELLY concurred.                                                                                                 
                                                                                                                                
8:23:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON said  she can  understand why  the sponsor                                                               
chose to show  the first graph with vertical  scale increments of                                                               
a billion dollars, because she  opined doing so illustrates "more                                                               
of a difference ... just at a glance."                                                                                          
                                                                                                                                
REPRESENTATIVE SEATON  observed that  the difference  between the                                                               
first and second  graphs is apparent in the years  FY 08, 09, and                                                               
10.   He  interpreted  that with  the  three-year average,  there                                                               
would never have  been "a penny out of this  fund since 2000 that                                                               
would  ever  have  come  back for  supporting  the  General  Fund                                                               
budget."    He  pointed  out  that  the  difference  between  the                                                               
averages and actual  GF spending in FY 05, as  shown on the first                                                               
line  graph,  is  approximately  $600  million.    He  said  that                                                               
represents 26 percent of the total  GF in the operating budget in                                                               
2005,  and   represents  100  percent  of   the  capital  budget.                                                               
Representative Seaton surmised that the  intent is that in future                                                               
years the  state would create  a [Balanced Budget  Account (BBA)]                                                               
fund with  its mineral revenue  that exceeds the three-  or five-                                                               
year average.  However, that  revenue would be unavailable in the                                                               
BBA,  and would  only be  available  if the  legislature were  to                                                               
"violate the statute" or access  the CBRF via the required three-                                                               
quarter vote.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON, referring  to the  first graph,  surmised                                                               
that if  the proposed constitutional  amendment had been  in play                                                               
over the  last decade, then "the  only thing that we  could do is                                                               
take a CBR vote to fund every one  of these years and make up the                                                               
difference  between  the  green  or  the red  line  and  what  we                                                               
actually would have spent."                                                                                                     
                                                                                                                                
8:29:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO  said  he   believes  what  the  resolution                                                               
intends  is  forced savings  to  prepare  for a  bleak  [revenue]                                                               
future.   He  said Representative  Seaton is  right that  [if the                                                               
averaging had  been done  over the past  decade] the  state would                                                               
have had  less to spend; however,  the state would have  had more                                                               
money  saved.   He  said the  question is,  "Which  one of  those                                                               
scenarios is the preferable scenario."                                                                                          
                                                                                                                                
8:30:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY said  the  short  answer to  Representative                                                               
Seaton is yes.  In response  to Representative Gatto, he said the                                                               
purpose of HJR 8 is to  place constraints on the legislature.  He                                                               
said he has  never met an Alaskan who would  say the state should                                                               
not  have a  fiscal plan.   The  debate is  what the  fiscal plan                                                               
should look like, and many agree  that the plan will be comprised                                                               
of many  elements.  One of  the elements put in  place last year,                                                               
he  related, was  a bill  that passed  [requiring departments  to                                                               
develop a  10-year forecast].   He indicated  that the  people of                                                               
the state  have attempted in the  past to place limits  on [state                                                               
spending]; however, "the efforts to  this point have caused quite                                                               
a few problems."   He opined that HJR 8  is "an averaging method"                                                               
that "avoids the  problems," is flexible, and  takes into account                                                               
both the past and the future.                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY  drew attention  to a  page attached  to the                                                               
aforementioned handout,  on which is a  model of HJR 8.   He said                                                               
the [BBA  ending balance]  shown for  the years [FY  04 -  FY 17]                                                               
illustrates "that  it would show  off in some  years considerable                                                               
dollars."   He said Representative  Seaton's point is  that those                                                               
are  dollars  that the  legislature  would  have some  difficulty                                                               
"getting  their  hands  on."    Representative  Kelly  confirmed,                                                               
"That's exactly  what this  does."   He spoke  of the  benefit of                                                               
having  a  discipline  wherein the  state  saves  revenue  earned                                                               
during "good times."  He said he  would like to ask the people of                                                               
Alaska  if they  support  that idea.   He  pointed  out that  the                                                               
constraints proposed  by the resolution would  be predictable and                                                               
would help  the administration and  the legislature to  know more                                                               
easily what funds will be available.                                                                                            
                                                                                                                                
8:35:04 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN  offered his  understanding that  the managers  of the                                                               
Alaska Permanent Fund recently switched  to a five-year averaging                                                               
plan to avoid giving out too much in any single year.                                                                           
                                                                                                                                
REPRESENTATIVE KELLY stated, "We  didn't begin this exercise when                                                               
prices  were plummeting,  we began  it when  prices seemed  to be                                                               
rising."  He added, "It performs as we would expect."                                                                           
                                                                                                                                
8:35:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  remarked that  in many regions  across the                                                               
state, the capital budget is  the engine that drives the economy,                                                               
and she  questioned [how HJR  8 would affect]  those communities.                                                               
She  said she  agrees  with Representative  Kelly's premise,  but                                                               
warned  that  the  State  of  Alaska must  be  careful  to  avoid                                                               
devastating parts of  the state which may not be  able to "handle                                                               
it" as well as other parts of the state.                                                                                        
                                                                                                                                
REPRESENTATIVE KELLY responded that HJR  8 is formulated to avoid                                                               
severe plummeting [of the state's  revenue income], thus it would                                                               
sustain a predictable capital budget.                                                                                           
                                                                                                                                
REPRESENTATIVE WILSON said  it can take six years to  pull out of                                                               
a sharp drop  in revenue, but she doubts the  state would ever be                                                               
without a  capital budget for  six years, because of  the balance                                                               
in  the CBRF.   She  said the  legislature is  not going  to take                                                               
anything out  [of the CBRF]  unless it  absolutely has to  do so.                                                               
She related that in some years  the capital budget has been high,                                                               
in others  it has  been low,  and in still  others it  could have                                                               
been kept lower  than it was..  She predicted  that under the HJR
8 scenario,  part of  the state  may fare  well, while  the other                                                               
part  may find  its economy  torn apart,  and she  encouraged the                                                               
legislature to look  for solutions that would  benefit the entire                                                               
state.                                                                                                                          
                                                                                                                                
8:41:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY  reiterated  that  HJR  8  is  designed  to                                                               
provide  a capital  budget in  years when  it would  otherwise be                                                               
empty.                                                                                                                          
                                                                                                                                
REPRESENTATIVE WILSON  countered that  the resolution  would take                                                               
away the capital budget "during the other years."                                                                               
                                                                                                                                
REPRESENTATIVE KELLY responded that HJR  8 would not make or lose                                                               
money for the  state, but would signal the need  to stop spending                                                               
as much.                                                                                                                        
                                                                                                                                
8:43:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG directed  attention to  a pie  chart in                                                               
the committee  packet, labeled, "State of  Alaska Expenditures by                                                               
Category FY 05  Operating & Capital Budgets  ($ millions)," which                                                               
shows varying types  of expenditures.  He said he  would focus on                                                               
those types  of expenditure  "as measured  against the  matrix of                                                               
time," as well as in terms of  whether or not they are legally or                                                               
practically required  expenditures.   One category, he  said, are                                                               
expenditures that  must occur because they  are legally required.                                                               
They  include  expenditures   such  as  federal  "pass-throughs,"                                                               
entitlement  programs,  education,   keeping  streets  safe,  and                                                               
economic stimulus  funds.  The  second category,  he highlighted,                                                               
relates  to those  expenditures that  must be  spent practically,                                                               
but do  not have to  be spent  immediately, such as  for deferred                                                               
maintenance.     The   third   category,  he   said,  are   those                                                               
expenditures that  are discretionary  funds, such  as celebrating                                                               
Alaska Day.                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG said that  Alaska cannot dedicate funds,                                                               
but its  legislature has much  more discretion  than legislatures                                                               
in other states.   He pointed to the pie  chart, which shows that                                                               
30.6 percent of it  is money from the General Fund.   He said HJR
8 affects  the matrix of  time by delaying expenditures  which do                                                               
not fall under the legally required  category.  He said those who                                                               
want an  Alaska Day  celebration "will  still have  the political                                                               
pressure  to do  it."    Conversely, he  stated,  issues such  as                                                               
children being  crowded into  schools and  bridges that  will not                                                               
get repaired until  they collapse, which do not have  the kind of                                                               
lobby to  push them through, will  just get delayed.   He stated,                                                               
"I think  you have to  measure your concept against  the concepts                                                               
of  time and  requirements."   He asked  Representative Kelly  to                                                               
specifically address that issue.                                                                                                
                                                                                                                                
8:47:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY said  he has a different view.   He said the                                                               
state cannot print  money and must discipline itself.   He stated                                                               
that a  fiscal plan prevents  over spending and sets  aside money                                                               
in case  of decreased income.   He reiterated that he  would like                                                               
to offer this plan to the public.                                                                                               
                                                                                                                                
CHAIR  LYNN  commented that  this  [fiscal  plan] could  be  done                                                               
without amending  the constitution, but the  legislature probably                                                               
would not adhere to it.                                                                                                         
                                                                                                                                
REPRESENTATIVE KELLY concurred.                                                                                                 
                                                                                                                                
8:50:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN talked  about the  difficulty the  state                                                               
has had in  projecting revenue.  He said  last year's projections                                                               
were  well over  $1 million  off the  mark, and  that discrepancy                                                               
will have to be corrected with  a supplemental budget.  He stated                                                               
that he thinks it is difficult  to lock the state into a spending                                                               
plan when it does not know what its revenue will be.                                                                            
                                                                                                                                
CHAIR LYNN said  projecting revenue will be  difficult whether or                                                               
not [HJR 8 is adopted].                                                                                                         
                                                                                                                                
8:52:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY  stated that  he agrees  with Representative                                                               
Petersen, and he  said he believes that is a  strong argument for                                                               
this model, because this model projects only one year.                                                                          
                                                                                                                                
8:54:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON stated  that HJR 8 has  brought about more                                                               
discussion  about  allocating  dollars  in  a  finite  world  and                                                               
actually  making financial  decisions than  he has  heard in  any                                                               
other committee.   He opined that this is where  the focus of the                                                               
discussion should be.   He stated that "the  800-pound gorilla in                                                               
the room"  is the state's  operating budget.  He  emphasized that                                                               
that is  the issue that really  needs to be addressed,  and HJR 8                                                               
brings about that discussion.  He  said perhaps HJR 8 needs to be                                                               
"tweaked," but  he is encouraged  by the discussion  the proposed                                                               
legislation has  generated.  He  told Representative  Wilson that                                                               
he  knows there  are  varying  needs in  different  parts of  the                                                               
state, but  he said he would  like the committee to  focus on the                                                               
control HJR  8 will exercise rather  than what the state  will or                                                               
will not have.                                                                                                                  
                                                                                                                                
8:56:47 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON expressed  that the loss of  the House Ways                                                               
& Means Committee was sad,  because that committee held this type                                                               
of discussion all the time.                                                                                                     
                                                                                                                                
REPRESENTATIVE  JOHNSON said  he never  sat on  the House  Ways &                                                               
Means  Committee, but  he has  never heard  substantive decisions                                                               
made regarding where the state will spend each dollar.                                                                          
                                                                                                                                
8:57:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   said  Alaska's  capital   and  operating                                                               
budgets are separate  for a reason, and  the legislature violates                                                               
the constitution  every year  because it is  unable -  because of                                                               
the needs of  the state - to meet the  statutory requirement that                                                               
one-third of the  state's budget must be "capital."   He directed                                                               
attention   to  the   pie  chart   previously   referred  to   by                                                               
Representative Gruenberg, and another  pie chart, labeled, "FY 06                                                               
Operating  &  Capital   Budgets  Unduplicated  Appropriations  by                                                               
Category."  Each chart shows a  section of the pie as the General                                                               
Fund, which [handwritten  to the side] has been  broken down into                                                               
the  operating and  the capital  budgets.   Representative Seaton                                                               
said if  the plan proposed in  HJR 8 had  been in play in  FY 05,                                                               
when  the  legislature was  already  initiating  a tire  tax  and                                                               
increasing  business taxes,  $600 million  would have  had to  be                                                               
taken  out of  the GF.    That means  the state  would have  been                                                               
required to  raise $600  million either  by initiating  a [state]                                                               
sales tax  or income tax.   In FY  06, he noted,  the legislature                                                               
came  up  with $338  million  in  capital  and  funded a  lot  of                                                               
projects; however,  if the  plan proposed  in HJR  8 had  been in                                                               
existence  then,  it would  have  required  100 percent  of  that                                                               
capital  budget and  26-30 percent  of the  GF operating  budget.                                                               
Representative Seaton  remarked that between $900  million - $1.2                                                               
billion  would have  had to  be put  aside, out  of reach  of the                                                               
legislature, until the five-year  average raised the balance, and                                                               
there  would have  been a  zero capital  budget and  at least  25                                                               
percent less in the GF.                                                                                                         
                                                                                                                                
REPRESENTATIVE  KELLY  responded that  he  wishes  the state  had                                                               
taken that  money off the  table.  He  said there are  many times                                                               
this plan would  "dampen down" spending, but he  believes that is                                                               
the kind of discipline the people of Alaska are requesting.                                                                     
                                                                                                                                
9:04:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  noted that in  the past, when oil  was down                                                               
to $10 a  barrel, at least there were 1.4  million barrels a day.                                                               
Today,  he indicated,  there are  only 650,000-700,000  barrels a                                                               
day being produced.  He stated  that in times when the state does                                                               
not have money to spend, there  are alternatives.  For example, a                                                               
roof can be repaired instead  of being replaced or an alternative                                                               
building can  be used for  a classroom when  one burns down.   He                                                               
suggested, "If  you want to go  to Disneyland for two  years in a                                                               
row, then  maybe you  can't go  to college."   He  explained that                                                               
this issue boils  down to making choices and giving  up one thing                                                               
to fund another.                                                                                                                
                                                                                                                                
9:06:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON  acknowledged  there are  many  points  of                                                               
view, and  she stated that she  does not have a  problem with the                                                               
idea of  the state  having a  fiscal plan.   However,  she warned                                                               
that there  is no guarantee  there will  ever be a  gas pipeline,                                                               
thus the state should be "planning  on other ways that revenue is                                                               
coming into this state besides oil."                                                                                            
                                                                                                                                
CHAIR LYNN remarked  that [some committee members]  had [during a                                                               
prior meeting  when HJR 8  was heard] suggested that  other forms                                                               
of revenue might be considered.                                                                                                 
                                                                                                                                
9:07:26 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON stated, "I  think Representative Seaton is                                                               
absolutely right, and ... where  he thinks it's a negative thing,                                                               
I think it's  a good thing."  Money could  still be accessed from                                                               
the  CBRF via  a  three-quarters  vote.   He  talked about  being                                                               
accountable to  the public, and  he stated  that he thinks  it is                                                               
"high  time that  we  start  looking to  the  future through  the                                                               
past."   He said that  he has not  heard any argument  that would                                                               
keep him from  "wanting to take this first step  towards a fiscal                                                               
plan."                                                                                                                          
                                                                                                                                
9:09:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG,  in response to  Representative Gatto's                                                               
previous remarks, said, "It's not  just a question of whether you                                                               
go to  Disneyland or whether you  go to college; it's  a question                                                               
of whether you  put the money in  savings or go to  college."  He                                                               
said he recently attended a  health caucus, during which an issue                                                               
was  addressed regarding  the high  number of  children in  rural                                                               
Alaska  who have  health problems  because they  cannot get  good                                                               
drinking water.  He stated, "The  question really - to really put                                                               
this in  terms of  rural Alaska  - is whether  we get  those kids                                                               
some good  drinking water  and get  them out  of the  hospital or                                                               
whether we save the money."                                                                                                     
                                                                                                                                
CHAIR  LYNN suggested  that a  good fiscal  plan could  - over  a                                                               
period of  time -  help the  state address  some of  its critical                                                               
problems.                                                                                                                       
                                                                                                                                
9:10:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  responded that  he agrees  that decisions                                                               
have  to be  made; however,  he  said he  does not  think it's  a                                                               
decision between savings and health,  but rather it's a choice to                                                               
spend money in a responsible manner.                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG  said he  did not intend  to "trivialize                                                               
it."                                                                                                                            
                                                                                                                                
REPRESENTATIVE  JOHNSON emphasized  that  he takes  the issue  of                                                               
children's health seriously.                                                                                                    
                                                                                                                                
9:11:36 AM                                                                                                                    
                                                                                                                                
JOHN BOUCHER,  Senior Economist,  Office of the  Director, Office                                                               
of Management  & Budget (OMB),  Office of the Governor,  told the                                                               
committee that  since its  members had,  during the  previous and                                                               
current  hearings on  HJR 8,  mentioned the  10-year fiscal  plan                                                               
required by House  Bill 125, he wanted to report  on the progress                                                               
related  to it.   He  said  he got  the feeling  during the  last                                                               
hearing  that committee  members  thought nothing  had been  done                                                               
regarding this fiscal plan, and he  stated that that is "far from                                                               
the  truth."   He revealed  that  he is  the lead  person at  OMB                                                               
regarding the fiscal plan.                                                                                                      
                                                                                                                                
MR. BOUCHER,  regarding HJR  8, said he  thinks having  a certain                                                               
amount of money out of reach  may result in "a tremendous tension                                                               
to try to  get at those resources."  He  indicated that he thinks                                                               
[the proposed Balanced Budget Account)  would be a replication of                                                               
the CBRF.   He stated, "The bottom line to  me is you're removing                                                               
the   three-quarter  vote   calculation."      He  credited   the                                                               
legislature for  restraining itself  from spending  all available                                                               
monies over the years, noting  that a significant amount of money                                                               
went into  the CBRF.  He  said he thinks the  administration has,                                                               
in  partnership with  the legislature,  tried  to encourage  that                                                               
behavior.   He said "we  all" are aware  of the increases  in the                                                               
operating budget.                                                                                                               
                                                                                                                                
9:15:12 AM                                                                                                                    
                                                                                                                                
MR. BOUCHER  stated that with  big revenue comes  the possibility                                                               
to create new  opportunities or fix big problems.   He questioned                                                               
how  the  state  might  have  dealt  with  AGIA  or  the  state's                                                               
retirement system if state revenue had  been "off the table."  He                                                               
explained, "Because  a significant  amount of  the growth  in the                                                               
operating  budget during  the past  several years  has been  that                                                               
stepped up obligation that we have  taken on ... to deal with the                                                               
unfunded  liability."     Mr.  Boucher  said  "if   it  had  been                                                               
constructed  that  way" the  state  would  have had  to  consider                                                               
alternate  revenue sources,  and  he said  one alternative  would                                                               
have been the  earnings reserve.  He indicated that  [HJR 8] does                                                               
not address  "the whole revenue  picture," and he said  "we" need                                                               
to think about unintended consequences.                                                                                         
                                                                                                                                
9:17:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  said she was  the person who  had remarked                                                               
at  a previous  meeting that  legislators had  not been  issued a                                                               
report regarding the  10-year fiscal plan.  She  said having that                                                               
report would be assuring for many legislators.                                                                                  
                                                                                                                                
MR.  BOUCHER  explained that  the  report  was submitted  by  OMB                                                               
during "one of  the first several meetings" of  the House Finance                                                               
Committee.  It  was an overview of the entire  state plan, and it                                                               
exists  on line  at OMB's  web  site.   He said  no hardcopy  was                                                               
produced,  because OMB  did  not see  the need  for  one, but  he                                                               
offered to rectify  that.  Each agency provided  its own 10-year,                                                               
forward forecast, he explained.                                                                                                 
                                                                                                                                
MR. BOUCHER stated that the  shortcomings of [House Bill 125] are                                                               
similar  to those  of HJR  8:   neither takes  into account  "the                                                               
whole picture."   He noted that  much of the debate  he has heard                                                               
has been focused on unrestricted  GF revenues and has ignored the                                                               
categories  of "other"  revenue  or federal  revenue.   He  said,                                                               
"Because that  - if we  look in the rear  view mirror -  has been                                                               
the most  unpredictable piece  between one year  to the  next and                                                               
has caused the most angst in forums like this."                                                                                 
                                                                                                                                
MR.   BOUCHER,  regarding   federal   revenue,   said  the   only                                                               
possibility is to consider current  programs and predict what the                                                               
"match  rate"  may be  in  the  future.    For programs  such  as                                                               
Medicaid,  the  state  has  "some  pretty  good  ideas."    Other                                                               
programs are more difficult to  predict, and the state almost has                                                               
to  "assume status  quo"  or  a potentially  inflated  rate.   He                                                               
expressed his  willingness to discuss  "the pieces of  the fiscal                                                               
plan" - those pieces that have  been successful, as well as those                                                               
that have caused a struggle.                                                                                                    
                                                                                                                                
CHAIR  LYNN said  he hopes  Mr. Boucher  would come  to the  next                                                               
committee of referral and "expand upon" what he just said.                                                                      
                                                                                                                                
9:20:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON said  she  knows how  important the  House                                                               
Finance  Committee is,  but not  everyone hears  what is  said in                                                               
that committee when they are busy with their own committees.                                                                    
                                                                                                                                
9:20:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG cited  part of  AS 37.07.060(b),  which                                                               
read as follows:                                                                                                                
                                                                                                                                
          (b) The governor shall present the proposed                                                                           
     comprehensive   operating   and  capital   improvements                                                                    
     programs, and  fiscal plan if  it is required  under AS                                                                    
     37.07.020(b), in  a message to  a joint session  of the                                                                    
     legislature   before   the   fourth   legislative   day                                                                    
     following the  convening of the legislature  in regular                                                                    
     session.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  stated   that  that  language  clearly                                                               
requires a  message from the  governor that  must be sent  to the                                                               
legislature as  a hard  copy, not just  sent electronically.   He                                                               
expressed his  hope that the  governor would follow  this statute                                                               
in the future.                                                                                                                  
                                                                                                                                
9:21:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO   said  Alaska  is  trying   to  avoid  the                                                               
difficulties  other states  are  experiencing.   California,  for                                                               
example, is a state with  "enormous resources," but it acquired a                                                               
huge deficit by spending more  money than available.  In response                                                               
to  Mr. Boucher's  comment regarding  AGIA, Representative  Gatto                                                               
indicated that the state would  have done without other things in                                                               
order to  fund AGIA.  He  spoke about looking to  the future, and                                                               
he said it  should be younger people in  the legislature deciding                                                               
what needs  to be addressed.   He added, "And that's  what scares                                                               
me is  we're doing the thinking  for them without them  doing the                                                               
thinking for us."                                                                                                               
                                                                                                                                
9:24:08 AM                                                                                                                    
                                                                                                                                
MR. BOUCHER said  he is not against  the resolution conceptually.                                                               
He emphasized that the administration  is "on record as trying to                                                               
promote saving."                                                                                                                
                                                                                                                                
9:25:38 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON said  if the mechanism [of HJR  8] had been                                                               
in  place in  2007, the  state would  have had  to reduce  the GF                                                               
contribution to the  budget by $1.4 billion - by  $1.7 billion if                                                               
the mechanism had been  in place in 2008.  He  asked if OMB could                                                               
have  done  that  "in any  mechanism  that  wouldn't,  basically,                                                               
almost destroy  the fabric of the  state as we know  it know, and                                                               
the procedures that are in place."                                                                                              
                                                                                                                                
MR. BOUCHER  responded that  when talking  about numbers  of that                                                               
magnitude,  there  would  have   been  some  extremely  difficult                                                               
decisions to  be made, and  the administration would "have  to do                                                               
that in  partnership with all  the citizens of the  state through                                                               
the legislature."                                                                                                               
                                                                                                                                
REPRESENTATIVE SEATON recalled the  fiscal restraints of 2003 and                                                               
2004, and  indicated [how difficult  it would have been  for] the                                                               
legislature to  remove $.5 billion  from its revenue  stream, "in                                                               
addition to everything  else."  He said he has  not ever seen the                                                               
administration come  forward with  an austere,  draconian budget;                                                               
therefore,  he questioned  Mr. Boucher's  support of  a mechanism                                                               
that would directly result in such a budget.                                                                                    
                                                                                                                                
9:28:15 AM                                                                                                                    
                                                                                                                                
MR. BOUCHER  responded, "Representative Seaton,  we're interested                                                               
in mechanisms  to save.   I think I've  tried to outline  some of                                                               
the tensions that I see in this."                                                                                               
                                                                                                                                
9:29:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY  summarized  that the  proposed  resolution                                                               
would not take  away the prerogative of  the legislature relative                                                               
to the capital  budget, would smooth out the spikes  and drops in                                                               
the state's savings, and would  force budgeting discipline on the                                                               
legislature.  He expressed his  hope that the resolution could be                                                               
passed so  that the  public could have  the issue  brought before                                                               
it.                                                                                                                             
                                                                                                                                
9:33:13 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN closed public testimony.                                                                                             
                                                                                                                                
9:33:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON stated  that although  she does  not think                                                               
HJR 8  is the answer to  a fiscal plan, she  thinks the committee                                                               
might use  it as "an  idea of what direction  we could go."   She                                                               
suggested that  five-year averaging could  be used.   That number                                                               
could be  divided by three, with  one-third of that going  to the                                                               
capital budget, one-third to  deferred maintenance, and one-third                                                               
to the  balanced budget account.   She explained that HJR  8 is a                                                               
good  idea, but  she warned  against "putting  so much  down that                                                               
we're  destroying what  we ...  have already."   She  agreed that                                                               
"we've  gone  up maybe  further  than  we should";  however,  she                                                               
stated that given the present  economy, the state must be careful                                                               
not to  take away from its  people anything it has  already given                                                               
them.  She  suggested that the sponsor  of HJR 8 is  on the right                                                               
track,  but that  the  idea needs  to be  "tweaked  a little  bit                                                               
more."                                                                                                                          
                                                                                                                                
CHAIR  LYNN   asked  Representative   Wilson  if  she   would  be                                                               
comfortable allowing the next committees  of referral - the House                                                               
Judiciary Standing  Committee and  the House Finance  Committee -                                                               
to consider those  issues.  He pointed out that  three members of                                                               
the  House State  Affairs Standing  Committee also  serve on  the                                                               
House Judiciary Standing Committee.                                                                                             
                                                                                                                                
REPRESENTATIVE WILSON replied, "I think  it would be good to look                                                               
at a few things like that."                                                                                                     
                                                                                                                                
9:35:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  opined  that  [HJR  8]  is  "poor  public                                                               
policy," because  it is saying  that since 2000,  the legislature                                                               
has been irresponsible in its budgeting.   He stated that he does                                                               
not think  that is  the case.   He  said the  proposed resolution                                                               
would  force the  legislature to  pass further  tax increases  on                                                               
individual citizens,  because it would  be taking money  into "an                                                               
untouchable  tank" via  a constitutional  amendment.   He  talked                                                               
about all the  edifices and services that would  not get funding.                                                               
Representative Seaton  told Chair Lynn  that if his intent  is to                                                               
move HJR  8 out  of committee,  he would move  it out,  but would                                                               
vote "do not pass."                                                                                                             
                                                                                                                                
CHAIR LYNN said  he also does not think the  legislature has been                                                               
irresponsible.                                                                                                                  
                                                                                                                                
9:37:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  moved to  report HJR  8 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.  There  being no objection, HJR 8 was  reported out of the                                                               
House State Affairs Standing Committee.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
01 HB0128A.pdf HSTA 4/7/2009 8:00:00 AM
HSTA 3/23/2010 8:00:00 AM
HB 128
01 HB0024B.pdf HSTA 4/7/2009 8:00:00 AM
HB 24
01 HJR024A.pdf HSTA 4/7/2009 8:00:00 AM
02 HJR24SponsorStatement.doc HSTA 4/7/2009 8:00:00 AM
03 HJR_24_Article.pdf HSTA 4/7/2009 8:00:00 AM
01 HCR008A.pdf HSTA 4/7/2009 8:00:00 AM
02 CS HCR 8.pdf HSTA 4/7/2009 8:00:00 AM
03 Sponsor Statement STA.doc HSTA 4/7/2009 8:00:00 AM
02 Sponsor Statement STA.doc HSTA 4/7/2009 8:00:00 AM
03 Sectional HB 128.pdf HSTA 4/7/2009 8:00:00 AM
HSTA 3/23/2010 8:00:00 AM
HB 128
02 HB24 Sponsor Statement - Electronic.pdf HSTA 4/7/2009 8:00:00 AM
HB 24
03 HB24 Explanation of Changes - Electronic.pdf HSTA 4/7/2009 8:00:00 AM
HB 24
04 Explanation of Changes to CS HCR 8.doc HSTA 4/7/2009 8:00:00 AM
04 HB 128 Amendment.pdf HSTA 4/7/2009 8:00:00 AM
HSTA 3/23/2010 8:00:00 AM
HB 128
04 HB 24 Sectional Analysis - Electronic.pdf HSTA 4/7/2009 8:00:00 AM
HB 24
04 HJR_24_letter_of_support.pdf HSTA 4/7/2009 8:00:00 AM
05 CS(HMLV)HB024-DOA-DGS-04-02-09.pdf HSTA 4/7/2009 8:00:00 AM
HB 24
05 HCR 8-LEG-SES-04-6-09.pdf HSTA 4/7/2009 8:00:00 AM
05 HB 128 Updated Sectional.pdf HSTA 4/7/2009 8:00:00 AM
HSTA 3/23/2010 8:00:00 AM
HB 128
06 HB128-LEG-SES-04-6-09.pdf HSTA 4/7/2009 8:00:00 AM
HSTA 3/23/2010 8:00:00 AM
HB 128
06 HCR 8 amendment.pdf HSTA 4/7/2009 8:00:00 AM