Legislature(2019 - 2020)GRUENBERG 120

04/23/2019 03:00 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ An Act relating to voting by mail, voter access, TELECONFERENCED
and election modernization; and providing for an
effective date.
<Pending Introduction & Referral>
Moved CSHB 110(STA) Out of Committee
-- Public Testimony --
Moved HB 31 Out of Committee
-- Public Testimony --
Moved HB 82 Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
          HB 31-APPROP: EARNINGS RESERVE TO PERM FUND                                                                       
3:14:56 PM                                                                                                                    
CO-CHAIR  KREISS-TOMKINS   announced  that  the  next   order  of                                                               
business would  be HOUSE BILL  NO. 31,  "An Act making  a special                                                               
appropriation to the Alaska permanent  fund; and providing for an                                                               
effective date."                                                                                                                
3:15:23 PM                                                                                                                    
REPRESENTATIVE VANCE asked how much  currently is in the earnings                                                               
reserve account (ERA).                                                                                                          
3:15:38 PM                                                                                                                    
KEVIN  MCGOWAN,  Staff, Representative  Jonathan  Kreiss-Tomkins,                                                               
Alaska  State Legislature,  on behalf  of Representative  Kreiss-                                                               
Tomkins, prime  sponsor of HB 31,  answered $18.4 billion.   To a                                                               
follow-up  question,  he  said  there is  $46.1  billion  in  the                                                               
REPRESENTATIVE VANCE asked how HB  31 would affect the governor's                                                               
ability  to pay  back the  permanent fund  dividends (PFDs)  that                                                               
previously were not paid in full.                                                                                               
MR.  MCGOWAN  answered,  "The $5.5  billion  transfer  would  ...                                                               
[leave] about $12.9 in the earnings reserve account."                                                                           
CO-CHAIR KREISS-TOMKINS added  that that would be  "ample cash on                                                               
the  table to  backpay  PFDs," should  that be  the  will of  the                                                               
legislature and the governor.                                                                                                   
REPRESENTATIVE  VANCE asked  what  the motivation  is for  moving                                                               
$5.5  billion from  the  ERA  when the  legislature  has not  yet                                                               
finished discussing the budget, including crime reform.                                                                         
CO-CHAIR  KREISS-TOMKINS  answered  that he  cannot  foresee  any                                                               
scenario  in  which  the  legislature  needs  more  than  $12-$13                                                               
billion in  the ERA, and  historically, that amount is  "north of                                                               
norms."  He  said he is "trying  to get some of  that excess cash                                                               
protected in the corpus."                                                                                                       
REPRESENTATIVE VANCE  asked, "Why  put it  in the  permanent fund                                                               
...  versus the  [capital budget  reserve] (CBR)  that we  have a                                                               
mandate to repay?"                                                                                                              
CO-CHAIR  KREISS-TOMKINS  answered  because  the  corpus  of  the                                                               
permanent fund  "is constitutionally protected and  will be there                                                               
in  perpetuity for  future generations."   He  said historically,                                                               
the CBR "is not the same."                                                                                                      
3:18:55 PM                                                                                                                    
REPRESENTATIVE LEDOUX asked Co-Chair  Kreiss-Tomkins if he thinks                                                               
this would  "hamstringing the legislature"  into having  to "make                                                               
draconian cuts" or reduce the permanent fund dividend.                                                                          
CO-CHAIR  KREISS-TOMKINS  answered  no.     If  more  money  were                                                               
transferred  out,  thus leaving  less,  then  that might  happen;                                                               
however, leaving $12-$13 billion would not hamstring anybody.                                                                   
REPRESENTATIVE  LEDOUX  asked  if  that  means  Co-Chair  Kreiss-                                                               
Tomkins  thinks   the  state  is   "so  flush  right   now"  that                                                               
legislators do not  need to be concerned about cuts  or a reduced                                                               
CO-CHAIR KREISS-TOMKINS answered as follows:                                                                                    
     If the legislature wishes to  balance the budget with a                                                                    
     mixture of  permanent fund  earnings and  revenues that                                                                    
     it currently receives,  it can do so.   But that's sort                                                                    
     of a question  for the Finance Committee and  all of us                                                                    
     on the operating budget.                                                                                                   
     ... I  think the sort  of underlying principle  of this                                                                    
     bill is not spending more  out of the permanent fund in                                                                    
     a year than  is sustainable and putting  cash safely in                                                                    
     the  bank  to  ...   protect  from  the  temptation  of                                                                    
     overdrawing ....                                                                                                           
3:20:38 PM                                                                                                                    
REPRESENTATIVE  WOOL  noted   that  Co-Chair  Kreiss-Tomkins  had                                                               
previously stated that the $12  billion left after taking out the                                                               
$5.5 billion  would be  enough.   He asked,  "For what  would you                                                               
need a  reserve of  $12 billion  for, that  $18 [billion]  is too                                                               
much $7 [billion] is not enough?"                                                                                               
3:22:17 PM                                                                                                                    
ANGELA  RODELL, Chief  Executive Officer,  Alaska Permanent  Fund                                                               
Corporation  (APFC), mentioned  the ERA,  Senate Bill  26 [passed                                                               
during  the Thirtieth  Alaska State  Legislature and  signed into                                                               
law  on 6/27/18],  and percent  of market  value (POMV),  and she                                                               
said the draw for fiscal year  2020 (FY 20) will be $2.9 billion.                                                               
She explained that the corporation  knows the amount, because the                                                               
figures lag by a  year, so "it closed off with  the closure of FY                                                               
18."   She then related  that APFC forecasts  the draw for  FY 21                                                               
will  be  approximately $3.1  billion.    She said  that  barring                                                               
anything  happening, $12  billion equates  to approximately  four                                                               
years' worth of POMV draws,  "assuming that there is no statutory                                                               
net income  made to replenish the  draw amount" in the  ERA.  She                                                               
noted that there  had been a proposal in one  iteration of Senate                                                               
Bill 26  that would have  provided to  keep four years'  worth of                                                               
POMV draw  amounts in the  ERA at any  one time and  put anything                                                               
over that back into the corpus.   She concluded, "And so, I think                                                               
that  this is  a  reflection  of some  of  that  ... activity  in                                                               
REPRESENTATIVE  WOOL reiterated  that after  accruing $3  billion                                                               
per year  for four  years - or  $12 billion -  the rest  could be                                                               
transferred to the  corpus.  He asked whether the  ERA grows when                                                               
earnings  are realized  in the  permanent fund  through sales  of                                                               
stocks or through earnings from stocks.                                                                                         
MS. RODELL replied,  "Both."  She stated that the  ERA has assets                                                               
that grow, and  "it gets everything that the corpus  owns when we                                                               
realize it."   She clarified,  "So, the earnings  reserve account                                                               
gets  all of  the  unrealized gain  from  principle and  earnings                                                               
reserve account,  plus the cost  basis from the  earnings reserve                                                               
REPRESENTATIVE WOOL  asked for confirmation  that the only  way a                                                               
5.25 percent  POMV draw can be  made is with realized  earnings -                                                               
either those  realized from sales  within the corpus of  the fund                                                               
or those  realized from sales within  the ERA - "sort  of cash on                                                               
MS. RODELL  answered that is  correct.  The  corporation monitors                                                               
the  amounts  realized; it  tries  not  to  sell assets  to  make                                                               
payments to  the state if it  does not have  to do so.   She said                                                               
APFC works with the Department  of Revenue (DOR) "to optimize the                                                               
investment profile for the fund."                                                                                               
3:26:41 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  how a  four-year bear  market would                                                               
affect the liquidity of the ERA.                                                                                                
MS. RODELL  answered, "This isn't  going to impact  the liquidity                                                               
of the earnings reserve account."  She explained:                                                                               
     What's going to happen is  your POMV valuation is going                                                                    
     to change,  because that reduced market  value from the                                                                    
     market losses is going to  reduce how much you can draw                                                                    
     when those  years roll  into the  calculation.   So, if                                                                    
     you have four  years of market losses,  those are going                                                                    
     to  start coming  to  you in  two,  three, four  years;                                                                    
     you're going to know that  this is coming; you're going                                                                    
     to see  the reduction  in the  draw amount;  and you're                                                                    
     going to be able to plan accordingly around that.                                                                          
REPRESENTATIVE  LEDOUX  surmised  that  in  a  bear  market,  and                                                               
following the law  under Senate Bill 26, there  either would have                                                               
to be "fairly hefty cuts to state government" or a smaller PFD.                                                                 
MS.  RODELL responded  no.   She  explained, "This  is not  money                                                               
being  spent out  of the  entirety of  the fund.   So,  this $5.5                                                               
billion  goes into  the corpus.   It's  still part  of the  $64.5                                                               
billion that  you calculate the draw  amount off of, and  then we                                                               
work with [the Department of] Revenue  to make sure that the 5.25                                                               
percent -  in this  case $2.9  billion for  FY 20  - is  free and                                                               
available to  be spent as  cash."   She explained the  reason for                                                               
the one-year lag is to ensure the amount is known.                                                                              
3:29:29 PM                                                                                                                    
REPRESENTATIVE STORY asked whether APFC has an opinion on HB 31.                                                                
MS. RODELL  answered that the board  has not taken a  position on                                                               
the bill.                                                                                                                       
REPRESENTATIVE STORY asked  if putting money into  the corpus was                                                               
a way of inflation-proofing the fund.                                                                                           
MS. RODELL  agreed that "in  some ways  this ... acts  similar to                                                               
inflation   proofing."      She   said   the   inflation-proofing                                                               
calculation happens  every year based  on actual inflation.   She                                                               
said  there were  three  years when  inflation  proofing was  not                                                               
appropriated into  the corpus of  the fund.   She said  the board                                                               
feels  strongly  that  inflation   proofing  needs  to  continue,                                                               
because that is  how the purchasing power  for future generations                                                               
of Alaskans is protected.                                                                                                       
3:30:45 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked, if  the concern is  "money tempting                                                               
the  legislature," what  the advantage  is  with "this  scenario"                                                               
over  establishing a  spending cap  in statute  or constitutional                                                               
CO-CHAIR  KREISS-TOMKINS  replied,  "I think  we'll  probably  be                                                               
seeing that  discussion on those measures  potentially later this                                                               
REPRESENTATIVE  LEDOUX  questioned  why the  bill  sponsor  would                                                               
choose  to address  the  issue  with HB  31  rather  than with  a                                                               
spending cap.                                                                                                                   
CO-CHAIR KREISS-TOMKINS answered that  the only spending cap that                                                               
would  be unbreakable  would be  that done  via a  constitutional                                                               
amendment, and "there's no way  that that would be enacted before                                                               
the voters have an opportunity  to ratify any such constitutional                                                               
amendment,  which would  be in  the 2020  election."   That would                                                               
leave a year and  a half without a hard spending  cap.  He called                                                               
HB 31  "an interim  measure" that  would keep  the ERA  flush and                                                               
roll  over  excess cash  from  the  ERA  into  the corpus  to  be                                                               
protected for  future generations "and  use it at the  four times                                                               
or so of draw."                                                                                                                 
3:32:43 PM                                                                                                                    
CO-CHAIR KREISS-TOMKINS opened public testimony  on HB 31.  After                                                               
ascertaining no one wished to testify, closed public testimony.                                                                 
3:34:13 PM                                                                                                                    
REPRESENTATIVE  VANCE expressed  concern  that HB  31 would  take                                                               
away the flexibility  of the legislature to be able  to fund "the                                                               
many  areas  of our  government  that  we  haven't had  the  full                                                               
discussion  of."   She offered  her understanding  that currently                                                               
the CBR  has only enough  money for "one good  natural disaster."                                                               
She advocated for having the ability  to utilize funds in the ERA                                                               
for unforeseen circumstances and  to address crime reform issues.                                                               
She clarified that  she is not a proponent of  "spending down the                                                               
ERA," but  indicated that HB  31 would take away  the flexibility                                                               
for options  before a full  discussion has  been held.   She said                                                               
she  does not  want to  "reduce  the ERA  down to  a number  that                                                               
provides just  enough of a cushion  for our PFDs in  the future."                                                               
She stated that  she would not be  able to support HB  31 at this                                                               
3:35:49 PM                                                                                                                    
REPRESENTATIVE LEDOUX  expressed that she has  "the same concerns                                                               
with  this   bill."    She  said   while  she  has  not   seen  a                                                               
constitutional  amendment   relating  to  a  spending   cap,  she                                                               
presumes that  "those bills, resolutions might  have something in                                                               
them  allowing  for truly  emergency  situations."   She  gave  a                                                               
recent  earthquake  as  an  example.     She  said  the  proposed                                                               
legislation does not provide for  emergency situations.  She said                                                               
she cannot support HB 31.                                                                                                       
3:37:09 PM                                                                                                                    
REPRESENTATIVE WOOL  asked how money  gets back into the  CBR and                                                               
how a  slush fund for  a major catastrophe would  be set up.   In                                                               
other words, he asked, "How does the CBR get funded?"                                                                           
CO-CHAIR KREISS-TOMKINS  answered that there are  funds available                                                               
for the  legislature to move around  as it sees fit.   When there                                                               
is unexpected money due to  increase in oil revenue, for example,                                                               
that money can be  put into the CBR as savings.   He said that is                                                               
what the legislature did from 2006-2011.                                                                                        
REPRESENTATIVE  WOOL  explained  he  wanted to  know  the  actual                                                               
mechanics of  handling the money.   He asked whether  money comes                                                               
in through the ERA  and then gets put into the  CBR or whether it                                                               
goes into  the general fund (GF)  and then any surplus  then gets                                                               
put into the  CBR.  He explained, "I'm sort  of interested in how                                                               
we get money back in the CBR to  build it up again if that's sort                                                               
of our checking account."                                                                                                       
CO-CHAIR KREISS-TOMKINS responded,  "The latter.  It  all goes in                                                               
general fund, and then the  legislature can replenish funds as it                                                               
sees fit."                                                                                                                      
3:39:24 PM                                                                                                                    
REPRESENTATIVE STORY  expressed her hope  never to "go  into" the                                                               
ERA.   She said, "We  cannot go into the  corpus."  She  said she                                                               
knows the  interest is based on  the ERA and corpus  of the fund.                                                               
She said she would support moving  HB 31 to the next committee of                                                               
referral, because she  wants to protect the permanent  fund.  She                                                               
expressed concern  that "if  we use up  the earnings  reserve, we                                                               
will not have  a dividend in future years," and  she asked if she                                                               
is correct in  thinking that if [the ERA]  diminishes, there will                                                               
not  be a  dividend.   She  said she  understands  there will  be                                                               
fluctuations in the amount of the dividend based on the market.                                                                 
CO-CHAIR  KREISS-TOMKINS   confirmed  that  if   the  legislature                                                               
overspends  and the  ERA "bottoms  out," Representative  Story is                                                               
correct that there would be no money available for the PFD.                                                                     
CO-CHAIR  KREISS-TOMKINS  told  Representative  LeDoux  that  her                                                               
point was well-taken regarding emergencies.   He said his working                                                               
assumption  is that  $12 billion  in the  ERA provides  plenty of                                                               
liquidity with  which to  handle emergencies.   He  said it  is a                                                               
scenario to keep in mind.                                                                                                       
3:42:50 PM                                                                                                                    
REPRESENTATIVE WOOL moved  to report HB 31 out  of committee with                                                               
individual recommendations [and the accompanying fiscal notes].                                                                 
REPRESENTATIVE VANCE objected.                                                                                                  
A roll call  vote was taken.  Representatives  Shaw, Story, Wool,                                                               
and   Kreiss-Tomkins    voted   in    favor   of    the   motion.                                                               
Representatives LeDoux  and Vance  voted against it.   Therefore,                                                               
HB  31 was  reported  out  of the  House  State Affairs  Standing                                                               
Committee by a vote of 4-2.                                                                                                     

Document Name Date/Time Subjects
HB082 Fiscal Note GOV-ASCHR 3.22.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HR 3
HB082 Letter of Support - IHRSA 4.22.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Letter of Support - NEA 4.15.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Letter of Support - FNSB Resolution 4.11.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ADN Article #2 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ADN Article 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ADN Article #3 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ADN Article #4 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ADN Article #5 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - ASD Administrative Guidelines 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Letter of Support - Alaskans Together For Equality 03.26.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Amendment A.1 (Vance) 4.22.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Letter of Support - Identity 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Email Explanation 4.9.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - Womens Groups in Support of Trans Sports Participation 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - National Consensus Statement 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Letter of Support - Planned Parenthood 4.23.29.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB110 Amendment M.1 (JKT) 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 110
HB082 Opposing Document - Letters of Opposition 4.23.19 - 4.24.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - Email from Dr. Maureen Longworth 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - Letters of Support 4.16.19 - 4.14.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - Letter of Support ACLU 4.23.19.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB082 Supporting Document - Letters of Support 4.21.19 - 4.25.19 Redacted.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB 82 Letter of Support - Testimony #3 3.9.20.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB 82 Letter of Support - Testimony 2.4.20.pdf HSTA 4/23/2019 3:00:00 PM
HB 82
HB 82 Letter of Support - Testimony #2 3.4.20.pdf HSTA 4/23/2019 3:00:00 PM
HB 82