Legislature(2005 - 2006)
04/11/2005 08:42 AM House W&M
| Audio | Topic |
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| Start | |
| HB235 | |
| HJR12 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 12-CONST. AM: BUDGET RESERVE FUND REPEAL 9:16:11 AM CHAIR WEYHRAUCH announced that the final order of business would be HOUSE JOINT RESOLUTION NO. 12 Proposing amendments to the Constitution of the State of Alaska relating to the repeal of the budget reserve fund. [Before the committee, adopted as a work draft was Version G, 24-LS0485\G, Cook, 4/4/05]. 9:18:41 AM CHAIR WEYHRAUCH clarified that Version G of HJR 12 is dated 4/4/05, and Version F is dated 3/8/05. TOM WRIGHT, Staff to Representative John Harris, Alaska State Legislature, replied Version F was Representative Croft's proposal that the sponsor was taking into consideration. In response to Chair Weyhrauch, Mr. Wright related that Representative Seaton's amendments to the resolution are congruent with the sponsor's intent, such as including the 5 percent of market value (POMV) methodology and establishing a portion of the currency going into a statutory constitutional budget reserve. He added that the aforementioned amendments may need to be drafted in statutory language through a bill. CHAIR WEYHRAUCH noted the committee's intent to take action on the resolution today and move it to the next committee of referral for further refinement. 9:18:59 AM MR. WRIGHT reiterated his preference for the earlier mentioned amendments to be addressed in accompanying legislation. CHAIR WEYHRAUCH, in response to Representative Wilson, explained that Version F was an idea of "how to sculpt HJR 12" that was provided by Representative Croft. He acknowledged that as the committee reviews Version G, it may want to incorporate aspects of Version F into Version G. The committee took an at-ease from 9:20:37 AM to 9:24:41 AM. 9:25:09 AM REPRESENTATIVE WILSON moved to adopt Representative Seaton's conceptual amendments labeled CSHJR12\G, Cook 4/4/05. The conceptual amendments are as follows [original punctuation provided]: Proposed amendment # 1 Page 1 line 2 Insert after construction "permanent" Proposed amendment # 2 Page 1 line 11 Insert before appropriated "only" insert after appropriated "as authorized under (b) of this section" Proposed amendment # 3 Page 1 line 11 after fund for insert construction and Proposed amendment # 4 Page 1 line 12 through 15 delete Entire sentence beginning with "MONEY MAY ... CORPORATION. Proposed amendment # 5 Page 1 line 16 add new section 2 and new section 3 and renumber accordingly *Sec. 2. Article IX, sec. 17(b), Constitution of the State of Alaska, is repealed and readopted to read: (b) Appropriations from the capital project endowment fund during a fiscal year may not exceed five percent of the average of the fiscal year-end market values of the fund for the first five of the preceding six fiscal years. Appropriations from the fund may only be made for capital projects. *Sec. 3. Article IX, secs. 17(c) and 17(d), Constitution of the State of Alaska, are repealed. 9:25:48 AM CHAIR WEYHRAUCH related his understanding that the [five separate] conceptual amendments establish a capital construction permanent fund, for which the CBR would be "morphed" from a budget reserve fund for state spending in the constitution to a fund for capital construction and maintenance projects within the state. Therefore, it would essentially eliminate the CBR and establish the aforementioned account. He highlighted that the Senate has adopted to use permanent fund earnings for education projects, in addition Governor Murkowski has introduced legislation to use funds from the Amerada Hess Settlement which is within the corpus of the permanent fund. He opined that the proposed fund could theoretically be used for any of the aforementioned purposes. However, a gas pipeline may not qualify as a capital construction fund because it would be, theoretically, by private industry. 9:27:24 AM REPRESENTATIVE WILSON asked if the [capital construction project] could potentially be utilized in the event that the state decides to take part ownership of the pipeline. CHAIR WEYHRAUCH replied, "I guess it's arguable." 9:27:43 AM CHAIR WEYHRAUCH objected to the conceptual amendments for discussion purposes. 9:28:01 AM REPRESENTATIVE SEATON explained that the portion [of Conceptual Amendment 1] labeled as proposed amendment 1 inserts the word "permanent fund" starting on page 1, line 2, throughout the resolution in order to clarify for voters that the fund's purpose is as a "permanent capital generation source." CHAIR WEYHRAUCH related his belief that the [capital project fund] presents a "philosophical shift" in the resolution. 9:29:43 AM REPRESENTATIVE SEATON reiterated that proposed amendment 1 proposed a title change for identification purposes. He turned to proposed amendment 2 [as labeled on Conceptual Amendment 1] on page 1, line 11, which proposes to insert the word "only" before appropriated, which reads "the money can only be appropriated." CHAIR WEYHRAUCH suggested that grammatical the language "money may only be appropriated" would be better. 9:30:18 AM REPRESENTATIVE SEATON related that the aforementioned language was taken from Version F. MR. WRIGHT, in response to Chair Weyhrauch, offered Version F page 2, line 9, reads "Appropriations from the fund may only be made for capital projects." 9:31:16 AM REPRESENTATIVE SEATON said he would take Chair Weyhrauch's suggestion as a friendly amendment. CHAIR WEYHRAUCH clarified then that the word "only" be inserted before "be appropriated". 9:31:48 AM REPRESENTATIVE WILSON suggested that the change on page 1, line 2, that inserts "permanent" after the word "construction" should be done throughout the body of the resolution. REPRESENTATIVE SEATON agreed with that suggestion, and noted that was his intention. 9:32:22 AM CHAIR WEYHRAUCH clarified that Amendment 2 [as labeled on Conceptual Amendment 1] for page 1, line 11, inserts the word "only" before "be appropriated". MR. WRIGHT said he is uncertain if it's necessary on page 1, line 11, to insert after appropriated "as authorized under (b) of this section," because the text is referring to its own subsection. REPRESENTATIVE SEATON agreed that it's confusing, and suggested that perhaps the language "Article IX, sec 17(b)" could be added for clarity. MR. WRIGHT noted the aforementioned text is found in Version F, subsection (a). 9:34:31 AM CHAIR WEYHRAUCH opined the sentence in Version G, on page 1, lines 9-10: "Money may be appropriated only as provided under (b) of this section." should be deleted. 9:35:11 AM REPRESENTATIVE SEATON reiterated the need to include the language "under Article IX, sec 17(b)" so that the resolution would refer to the way in which the appropriation is authorized. 9:35:57 AM CHAIR WEYHRAUCH questioned whether Representative Seaton's suggested language is necessary. MR. WRIGHT opined that the language "as authorized under (b) of this section." is not necessary because it's already found in subsection (b). REPRESENTATIVE WILSON asked whether the language: "as authorized under Article IX, section 17(b) of this section" is necessary. MR. WRIGHT related his belief that it's unnecessary. 9:37:25 AM CHAIR WEYHRAUCH pointed out that a new section 18 [in the constitution] is being created. REPRESENTATIVE WILSON inquired as to whether section 18 needs to refer back to section 17. MR. WRIGHT clarified that section 17 is being repealed because a constitutional amendment cannot be amended. Therefore, the section would remain numbered accordingly. CHAIR WEYHRAUCH asked whether the capital construction permanent fund should be section 17 or 18. MR. WRIGHT related his belief that it should be section 18. 9:38:35 AM CHAIR WEYHRAUCH, upon conferring with Representative Seaton, announced that the portion of the amendment on [page 1, line 11] after appropriated, that would insert "as authorized under (b) of this section." is to be deleted from the Conceptual Amendment 1. He then turned the committee's attention to proposed amendment 3 [as labeled on Conceptual Amendment 1] to page 1, line 11, which would after the word "fund", insert, "construction and maintenance." REPRESENTATIVE SEATON explained that the change was proposed so that it's clear that the fund can be used for "construction and maintenance." 9:39:36 AM MR. WRIGHT, in response to Chair Weyhrauch, said there is no problem with inserting "construction and maintenance." 9:39:55 AM CHAIR WEYHRAUCH, in response to Representative Wilson, said page 1, line 11, will read, "Money may only be appropriated from the capital construction fund for construction and maintenance of facilities." 9:41:07 AM CHAIR WEYHRAUCH turned to amendment 4 [as labeled on Conceptual Amendment 1], page 1, line 12-15, deletes the entire sentence "Money may be appropriated from the fund for payment of the principal and interest on general and obligation or revenue bonds issues for the construction of capital projects by the State or a subdivision of the State, including a public corporation." 9:41:42 AM REPRESENTATIVE SEATON characterized amendment 4 [as labeled on Conceptual Amendment 1] as a "policy call." REPRESENTATIVE WILSON noted her agreement, and said that she didn't want a prior legislature to have the ability to tie-up all the funds for future legislatures. MR. WRIGHT relayed that the sponsor has no objection to the removal of that language. CHAIR WEYHRAUCH, upon determining there was no objection, announced that amendments 1, 2, 3, and 4 [as labeled on Conceptual Amendment 1] were incorporated into the resolution. He then turned the committee's attention to proposed amendment 5 [as labeled on Conceptual Amendment 1], which proposes adding new Sections 2 and 3. 9:45:30 AM MR. WRIGHT questioned whether the "budget reserve fund transition language" is necessary in the resolution. REPRESENTATIVE SEATON said the transition language is necessary and it can be renumbered accordingly as opposed to being repealed. 9:45:52 AM MR. WRIGHT suggested that it might be more appropriate to be a new subsection (c) under section 18, rather than repealing section 17(c) and 17(d). REPRESENTATIVE SEATON related that he wanted to include Sections 2 and 3 of Version F into Version G because that is where the POMV is defined. He reiterated that these amendments are conceptual. 9:47:07 AM CHAIR WEYHRAUCH surmised then that "the guts" of these amendments is establishing the POMV. 9:47:22 AM REPRESENTATIVE WILSON opined that POMV methodology is important in order to have an "steady stream" of revenue for each legislature while protecting the principal of the fund. 9:48:48 AM CHAIR WEYHRAUCH offered that proposed amendment 5 [as labeled on Conceptual Amendment 1] should read, "appropriations from the capital construction permanent fund." MR. WRIGHT added that the sentence "Appropriations from the fund may only be made for capital projects." isn't necessary because it's stated throughout the amendment that appropriations are for construction and maintenance of facilities of the state or a subdivision of the state. CHAIR WEYHRAUCH noted it's important to keep the constitution as simple a document as possible so it doesn't read like a regulation. MR. WRIGHT pointed out that Section 3 is unnecessary because section 17 [of Article IX] is being repealed. CHAIR WEYHRAUCH offered a friendly amendment to proposed amendment 5 [as labeled on Conceptual Amendment 1], which would delete the aforementioned sentence from Section 2 of Article IX, section 17(b). In response to Representative Wilson, Chair Weyhrauch confirmed that section 17(b) will now read, "Appropriations from the capital construction permanent fund during a fiscal year may not exceed five percent of the average of the fiscal year-end market values of the fund for the first five of the preceding six fiscal years." In further response to Representative Wilson, Chair Weyhrauch clarified that the aforementioned methodology is similar to the calculations used for the permanent fund dividend checks. 9:52:30 AM REPRESENTATIVE SEATON, in response to Representative Wilson, clarified this is the wording for POMV. REPRESENTATIVE WILSON added she wants to have the POMV methodology in the resolution. 9:53:03 AM CHAIR WEYHRAUCH explained that the POMV assumes an 8 percent growth with 3 percent inflation, of which 5 percent is endowed for use by the legislature. In response to Representative Wilson, Chair Weyhrauch answered, "the first five of the proceeding six fiscal years," is an assumption that tries to even the fluctuations of the market and determines the rate of return and inflation. CHAIR WEYHRAUCH, in response to Representative Wilson, said the aforementioned assumption is only used for the POMV methodology. 9:54:13 AM MR. WRIGHT clarified that the aforementioned is standard language used in other legislation for the POMV methodology. 9:54:46 AM REPRESENTATIVE SEATON noted his agreement with earlier statements that if section 17 is repealed entirely, the subsection should actually be "(c)" and the language on the first two lines of Sec. 2. could be deleted. CHAIR WEYHRAUCH, in response to Representative Wilson, said the reorder of the sections is a drafting issue. 9:56:53 AM REPRESENTATIVE SEATON added that the new Section 3 should be deleted because of the repeal of section 17 [of Article IX] in Version G. In response to Representative Wilson, Representative Seaton clarified that the proposed Section 3 will not be inserted, and therefore the proposed amendment 5 [as labeled on Conceptual Amendment 1] will read: Article IX, sec. 17(b), Constitution of the State of Alaska, is repealed and readopted to read: (b) Appropriations from the capital construction permanent fund during a fiscal year may not exceed five percent of the average of the fiscal year-end market values of the fund for the first five of the preceding six fiscal years. REPRESENTATIVE SEATON said instead of the conceptual amendment of adding section 2, all that is needed is the addition of subsection (c) under Section [2]. 9:58:38 AM MR. WRIGHT noted that the conceptual amendments have added significant changes to which the sponsor won't have any problems. 9:59:10 AM CHAIR WEYHRAUCH added that there may need to be a committee letter of intent. Chair Weyhrauch removed his objection to Conceptual Amendment 1 [proposed amendments 1-5, as amended]. There being no further objection, Conceptual Amendment 1, as amended, [proposed amendments 1-5, as amended] were adopted. [The committee later returned to HJR 12.] HJR 12-CONST. AM: BUDGET RESERVE FUND REPEAL CHAIR WEYHRAUCH returned the committee's attention to HOUSE JOINT RESOLUTION NO. 12, Proposing amendments to the Constitution of the State of Alaska relating to the repeal of the budget reserve fund. REPRESENTATIVE SEATON moved to adopt the proposed committee substitute (CS) for HJR 12, Version 24-LS0485\F, Cook, 4/11/05. 4:13:49 PM CHAIR WEYHRAUCH objected. 4:14:07 PM TOM WRIGHT, Staff to Representative John Harris, Alaska State Legislature, in response to Chair Weyhrauch, related that Version F has adopted the language and intent of the conceptual amendments brought forth earlier by the House Special Committee on Ways and Means. 4:14:28 PM CHAIR WEYHRAUCH, in response to Representative Wilson, explained that on page 2, [Section 30. Budget Reserve Fund. subsection (b)], was a request by the committee to not place any "fund transitional provision" into the constitution, if it could be done by a statutory amendment. Furthermore, the aforementioned would conform and maintain the simplicity of the constitution. However, in order to establish the committee's aforementioned request the drafter added (b) "Notwithstanding Section 18(b)," on establishing the percent of market value (POMV) to include the transitory section on the appropriations during the fiscal years of [2007]-2012, which is a 5-year period to make the POMV process work through the appropriation process. He explained that the section "dovetails" the intent of establishing five out of six years of the POMV, with the amount of money available. In further response to Representative Wilson, Chair Weyhrauch relayed that this would be voted on during the November 2006 general election and, if approved, would take effect in 2007. 4:16:31 PM MR. WRIGHT added, "I did talk to the drafter and she said one of the reasons this is being voted on in November, which is ... halfway through the fiscal year. And it's kind of hard to have that full-year ... of this fund setup and trying to figure out what 5 percent of that is until it actually had a full year in use." 4:17:14 PM CHAIR WEYHRAUCH commented that by establishing a POMV for the capital construction fund, which doesn't involve any payment of the permanent fund dividend, allows the public to understand how it works. He opined that it might "dispel some fear" over how POMV could work in the context of the permanent fund. 4:17:18 PM REPRESENTATIVE SEATON related his concern with the legislature only being allowed to use the preceding year's interest from now until 2012 because if there was a potential downturn in interest, the legislature could basically invade the principal. He highlighted that the legislature could use the constitutional budget reserve (CBR) during the transition in order not to invade the principal. 4:18:58 PM REPRESENTATIVE WILSON recalled that when the economy went through a downturn event, Sitka never saw a reduction of its 6 percent principal. Therefore, she said, "I feel comfortable" with the 5 percent. 4:19:33 PM MR. WRIGHT noted that the POMV concept offers no principal, it's all one lump sum. 4:20:11 PM REPRESENTATIVE SEATON specified that he is not suggesting an amendment at this time, but he would like to revisit the concepts at a later date. 4:20:33 PM CHAIR WEYHRAUCH highlighted that the resolution has three committees through which it must move and through which there can be refinements. Chair Weyhrauch removed his objection to Version F. 4:21:05 PM REPRESENTATIVE SEATON moved to report CSHJR 12, Version 24- LS0485\F, Cook, 4/11/05, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHJR 12(W&M) was reported from the House Special Committee on Ways and Means.
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