Legislature(1995 - 1996)

02/28/1995 08:06 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HSTA - 02/28/95                                                               
 HB 89 - APPROP:  TO PERMANENT FUND PRINCIPAL                                
                                                                               
 Number 672                                                                    
                                                                               
 REPRESENTATIVE TERRY MARTIN, Sponsor of HB 89, presented his                  
 sponsor statement to the committee, as follows:                               
                                                                               
 TAPE 95-22, SIDE B                                                            
                                                                               
 HB 89 is straightforward and very important.  The permanent fund              
 earnings reserve account was created by statute.  It is unto this             
 account that the balance of the Permanent Fund Corporation's net              
 income is deposited upon payment of dividends and inflation                   
 proofing.  The intent of the bill is to deposit the approximately             
 $1,146,000,000, as of June 30, 1995, into the corpus of the                   
 permanent fund, escalating the total to approximately                         
 $14,146,000,000.  He felt they should save this revenue in the most           
 secure account possible.  The permanent fund is untouchable by the            
 legislature, hence no special interests can infiltrate the fund and           
 Alaskans will prosper in the future with a solid savings account              
 yielding a return of almost nine percent this year.  If the                   
 earnings reserve is not appropriated to the permanent fund corpus             
 by July 1, 1995, there is a strong possibility the court may rule             
 that it to be used as partial payback to the constitutional budget            
 reserve (CBR).  From this account, it can easily be spent with a              
 simple majority of the House and Senate.                                      
                                                                               
 REPRESENTATIVE MARTIN said HB 89 is intended to send a message to             
 Alaska's public, that the legislature is willing and able to save             
 money for future generations.  While there are currently annual               
 projected budget deficits, this legislation makes the statement               
 that we are willing to deal with the situation through budgetary              
 reductions or other means, but certainly not by spending these                
 earnings - simply because they are there.                                     
                                                                               
 REPRESENTATIVE MARTIN told the committee that their support of this           
 legislation will send a signal to the voters that we, as a body,              
 recognize the fiscal crisis as well as the need to save for future            
 shortfalls.                                                                   
                                                                               
 Number 063                                                                    
                                                                               
 REPRESENTATIVE MARTIN said this bill has to do with putting a large           
 amount of money into a permanent savings account.  The earnings of            
 the permanent fund must be spent before they can get into the                 
 Constitutional Budget Reserve account.  He voted to approve the CBR           
 when it came up in the legislature years ago, and was recently                
 asked if he would have approved the CBR had he known they would               
 have to redo the inflation proof every year, or, by court decree,             
 that money would have to go back, first, to pay the CBR off, which            
 we will never be able to do.                                                  
                                                                               
 REPRESENTATIVE MARTIN said in 1999, it is computed that all the               
 money that comes in the general revenue goes right to the CBR,                
 because it will be automatic by then.  If we were to pay the CBR              
 today, of $1.4 billion that owed, it means $2.8 billion is a new              
 account.  Representative Martin says the CBR is inoperative, it is            
 going to "be an albatross on the legislators, no matter who is in             
 charge of the neck."  Right now, his question was whether we should           
 save or put the money into CBR.   Some people say to take the                 
 "simple twenty-one" to spend it right now, then legislators can put           
 it in the permanent fund corpus, or we can use it for this year's             
 operation.  We are about $5.6 million short of new revenues coming            
 in.  Representative Martin said he thinks we should save the money.           
 This is not to be hard nosed about cutting the budget, but the idea           
 that this is the future generation's money as well as ours.  Once             
 the state gets to a $20 billion permanent fund corpus, the state              
 legislators will have more leeway of giving a generous amount in              
 dividends to the citizens, to inflation proof, and still have                 
 enough money for the new flow to the revenues.  Representative                
 Martin said he was glad that Chair James became co-sponsor of the             
 bill and urged the committee to get the bill off the table and save           
 for future generations.  The best solution is to put this money               
 away before we lose it all.  After July 1, of this year, we could             
 lose it all, if the court rules that it must go in as payback to              
 CBR.                                                                          
                                                                               
 CHAIR JAMES asked if there were any questions.  There being no                
 further questions, she said the problem she had with the CBR is the           
 three-quarter vote.  Representative Martin spoke once before about            
 the minority being in control, and Chair James said that a three-             
 quarter vote is a minority vote. It puts the minority in charge.              
 Of course, it is always presumed that the majority ought to be in             
 charge.  Chair James said she supports this legislation because she           
 is unwilling to take the earnings reserve of the Permanent Fund,              
 which is the excess earnings over and above the Permanent Fund                
 Dividend Program and the inflation proofing, and then require only            
 a minority vote for it to be spent.  Also, because the earning                
 reserve of the permanent fund is located in the permanent fund, as            
 opposed to in the general fund, and managed much the same as the              
 rest of the permanent fund dividend is, the people consider it part           
 of the permanent fund.  It is her feeling, therefore, that the                
 legislature should make sure it is part of the permanent fund.  The           
 way to make it a certainty is to appropriate it to the permanent              
 fund.  The other option would be to allow this money to be spent              
 with the three-quarter vote, or put it somewhere where it cannot be           
 spent with any vote, except by the vote of the people.  She said              
 she supports that concept.                                                    
                                                                               
 REPRESENTATIVE PORTER agreed with Representative James, and wanted            
 to add that another reason it should get off the table is that the            
 appointed or soon to be appointed long range budget commission and            
 the legislature, has to make some tough decisions while looking               
 forward to our financial situation.  Those decisions can be made              
 sooner with this money off the table.                                         
                                                                               
 Number 109                                                                    
                                                                               
 REPRESENTATIVE PORTER moved to pass HB 89 out of committee, and               
 there being no objections, the bill was so moved.                             

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