Legislature(1995 - 1996)
02/28/1995 08:06 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.