Legislature(2023 - 2024)DAVIS 106
03/06/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB90 | |
| HJR7 | |
| HJR8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 90 | TELECONFERENCED | |
| *+ | HJR 7 | TELECONFERENCED | |
| *+ | HJR 8 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HJR 8-CONST AM: GUARANTEE PERM FUND DIVIDEND
6:55:22 PM
CHAIR CARPENTER announced that the final order of business would
be HOUSE JOINT RESOLUTION NO. 8, "Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund and appropriations from the Alaska permanent
fund."
6:55:35 PM
MS. BROUSSARD, Staff, Representative Ben Carpenter, Alaska State
Legislature, presented HJR 8 on behalf of the House Special
Committee on Ways and Means, sponsor, on which Representative
Carpenter serves as chair. She read the sponsor statement,
[included in the committee packet], which read as follows
[original punctuation provided]:
For almost thirty years, Alaskans could count on their
annual dividend checks as the state legislature
followed the law that directed the dividend to be paid
by a statutory formula. The trust between the
government and the people of Alaska was broken in 2016
when Governor Walker vetoed a portion of the annual
dividend and the Alaska Supreme Court ultimately
determined that dividends were subject to the annual
appropriations process. While the legislature could
choose to follow the law and appropriate the dividend
according to statute and separate it from the budget,
they have not done so. Instead, the permanent fund
dividend has been subjected to the budget process,
where the dividend competes with government spending
and often becomes the deficit reduction solution.
House Joint Resolution 8 aims to enshrine the PFD
program in the Alaska Constitution to create stability
for Alaskans who rely on their annual dividend, and to
create stability for the long-term fiscal plan of the
state. Without stability, those who receive state
funding, through the dividend or from government
programs, cannot plan for their businesses or their
lives for a duration of more than a year.
HJR8 adds protection against overspending of the Fund
by moving the balance of the Earnings Reserve Account,
which currently holds the Permanent Fund's investment
earnings, into the Fund corpus, where all future
earnings will be retained and thereby safeguarded from
access.
HJR8 then limits the permissible draw from the Fund to
five percent (5%) of a five-year averaged market value
of the Fund. The people would then be apportioned
either fifty percent (50%) of the draw value or the
amount of the historic calculation formulawhichever
is greater. In this way, the people will always
receive first call on the earnings of the Fund, ahead
of government. Failing to constitutionalize the PFD
would enable a disproportionate distribution of
Alaska's oil wealth to growing government at the
expense of Alaskan citizens.
Neglecting to constitutionalize the PFD would permit
lawmakers to continue avoiding their obligation to
address the shortcomings of Alaska's fiscal and
economic planning, placing the Permanent Fund at risk.
Constitutionally enshrining the Permanent Fund
Dividend will provide for the maximum benefit of all
Alaskans and ensure the prosperity of the Permanent
Fund for generations of Alaskans to come.
6:58:11 PM
MS. BROUSSARD moved on to the sectional analysis [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1.
Eliminates the earnings reserve account of the
Permanent fund. All income of the Permanent Fund that
is not directed to the dividend payment or to the
general fund shall be retained in the corpus of the
Permanent Fund.
Section 2.
Article IX, Section 15 of the Constitution is amended
to provide for a draw from the Permanent Fund of five
percent of the market value (POMV) of the Fund.
Section 2 then requires the state to pay a permanent
fund dividend that is the greater of two calculations:
the traditional PFD calculation or fifty percent of
the five percent POMV.
The remainder of a five percent POMV may be
appropriated by the legislature for state government.
Section 3.
Article XV of the Constitution is amended to provide
for transition timing of effective actions once voters
approve this amendment to the Constitution.
At the end of fiscal year 2023, the balance of the
earnings reserve account would be transferred into the
corpus of the Fund.
The substantive provisions would be effective
beginning fiscal year 2026.
Section 4.
Provides that this amendments to the Constitution be
placed before voters at the next general election.
6:59:36 PM
CHAIR CARPENTER said that HJR 8 differs in effect from HJR 7.
6:59:46 PM
REPRESENTATIVE GROH thanked Chair Carpenter for introducing the
two resolutions. He pointed out that HJR 8 would
constitutionalize the POMV rules and create a single account
structure - a change he supports. He noted that the
constitutional amendment proposed in HJR 8 would set out
alternative formulas as a way of figuring out what the PFD would
be in future years. He said that HJR 8 does not address
revenues; it is said that if there's a 50/50 POMV split per
allocation between PFDs and general government, that creates a
hole that the Senate Finance Committee estimated to be $800
million a year. He asked if the sponsor could address the
policy question of why HJR 8 does not address revenues.
CHAIR CARPENTER answered that the intent of HJR 8, as it is
drafted, was not to address revenue options; the intent of the
committee is to address revenues, if necessary, with other
accompanying legislation, and model all of the propositions
before the committee to see how they interact. He said it is
premature to have a conversation based on what was presented to
other committees, but HJR 8 was not meant to deal with new
revenues, which he said was a recommendation of the Fiscal
Policy Working Group.
REPRESENTATIVE GROH commended members of the working group,
whose recommendations included a variety of proposals. He
advised members that if the 50/50 POMV formula is put in the
constitution, there must be revenues for public services, ergo,
why the working group recommended revenues of between $500
million to $775 million a year.
CHAIR CARPENTER offered that another perspective would be that
it adds economic growth in the state that would provide new
revenue to the state.
7:04:06 PM
REPRESENTATIVE MCCABE relayed that HJR 8 essentially limits the
earnings reserve account (ERA). Speaking on revenues, he said
there is no way - except perhaps a large income tax - that the
revenue from the citizens of Alaska could make up the budget
shortfall. He shared that the working group investigated an
income tax structure for Alaska extensively, but "it just
doesn't work with our tax base."
7:05:11 PM
REPRESENTATIVE GROH recounted that the State House of
Representatives had passed a bill to raise an income tax, which
the Department of Revenue estimated to generate $700 million in
revenues in 2017. He said he is supportive of development
projects that raise revenues, but if PFDs and distribution
formulas are inserted into the state constitution, there must be
a way to ensure that there are revenues for public services.
7:06:34 PM
REPRESENTATIVE GRAY asked why the sponsor chose to pair the
elimination of the ERA with a fixed PFD formula.
CHAIR CARPENTER relayed two recommendations from the working
group: consolidate to a single fund source for the permanent
fund and constitutionalize the permanent fund program. He
stated that putting both of those items into one resolution is
the way to carry them out.
7:07:43 PM
REPRESENTATIVE ALLARD asked Representative Groh if he is
suggesting that the state underspends on public services and
takes money out of the PFD before it cuts the budget.
REPRESENTATIVE GROH answered no, but said he is looking out for
the views of those that make $20-$25 an hour, despite people
advising him to look out for people making $2,000 an hour. He
said that the people within his district are more likely to have
a second job than a second home. He shared that he would like
to see a balanced approach, like what the working group
recommended in 2021.
7:09:29 PM
CHAIR CARPENTER stated that the goal of today's meeting was to
hear three separate and unique bills and said that the committee
will get to Representative Allard's question when it sees the
other proposals that come from components of the working group's
work.
7:10:28 PM
REPRESENTATIVE GRAY said that as a new legislator, he is trying
to reconcile all the bills the committee has heard in the
unlikely event that they all pass. In considering a 75/25 POMV
split, a $1,000 PFD, and the two proposed constitutional
amendments, the amendments would trump statutory related policy.
He said all the bills cannot be reconciled together. He asked
Chair Carpenter how he can see the whole legislature working
together.
CHAIR CARPENTER responded that one criticism of the working
group's report was that it was just theoretical recommendation,
not a bill or resolution to be taken up by the legislature. He
said the group could have developed a recommendation towards a
piece of legislation and submit it for consideration. He said
that this committee is seeking to bring options so the
conversations are no longer theoretical. He stated that he does
not envision all the bills passing because some compete with
each other through varying actions; what he hopes the House
Special Committee on Ways and Means will do is pick something
one which members agree. Further, the intent in weeks to come
is to use a legislative finance tool to "plug" in the different
proposals to see how each of them intersect.
7:13:24 PM
CHAIR CARPENTER asked Senator Shelley Hughes to speak as a
member of the working group, as well as a member of the previous
PFD group. She was asked to share her thoughts now that the
committee has the measures before them.
7:14:11 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau,
Alaska, shared that she was a member of a bicameral PFD working
group, as well as the recent Fiscal Policy Working Group. She
explained, in considering the varied legislation before the
committee, that all the different pieces must come together, and
that once one bill passes, another bill must pass in order to
function. She advised that resolutions that propose
constitutional amendments are more difficult to pass, but
determine what is left over for the budget, which is what leads
to the revenue and reduction questions being raised. She said
that passing measures that settle the PFD and provide a spending
cap provide a framework for which the other pieces of
legislation can be carried out. She said that whatever is put
forward has to appear fair to the people and receive their
approval. She said this is the reason she likes the resolutions
that offer what the PFD would be; however, if the sponsor can
get the votes only within the state capitol, she feels more
comfortable with that now than when fund drawing began in 2016.
Further, for about eight years now there has been no bill passed
aimed at changing the PFD formula, she said. She acknowledged
the talks around workforce recruitment and retention of public
employees, as well as school funding concerns. She stressed
that fiscal certainty in the state should be addressed first.
She shared that Milton Friedman was consulted as to what to do
with the permanent fund and recommended that some of the funds
should go out to the private sector. She said, "Anything that
goes into the budget, whether operating or capital, ultimately
is serving some special interest group." She further quoted
Milton Friedman as stating that offering a permanent fund is
moving away [from special interests] because everyone is treated
equally by receiving the money, and "a dollar in the private
sector economy has a higher multiplier than in the government
sector."
SENATOR HUGHES referred to a document authored in 2021 by
herself and former Representative Johnathan Kriess-Thompkins,
which addressed a larger PFD, and that in looking at HJR 8, the
legislation calls for a larger PFD, so the document is
applicable. She said that the data within the report suggests
that a $3,000 PFD results in $2-$3 billion income to Alaska
residents, positive impacts on employment, 10,000 to 17,000
jobs, and 36,000 to 45,000 residents out of poverty. She said
that the Institute of Social and Economic Research (ISER)
studies suggest that about $750 out of a $3,000 PFD would go to
nondurable goods, like food, entertainment, and travel. She
quoted segments of the ISER report that emphasize the
relationship between policy uncertainty, the recession, and
"significant negative effects on aggregate investment and on
employment". She said economic policy uncertainty can explain
up to 32 percent of the drop in corporate investment. She
continued, "The decline in spending due to policy uncertainty
would indicate that waiting is not a costless option, in fact,
the losses due to uncertainty are important, and similar in
magnitude to the ones the economy would experience due to
attacks or due to further government cuts." She shared that the
state's lack of having its fiscal house in order has cost the
state half a billion dollars.
SENATOR HUGHES said a sizeable PFD impacts the business sector.
According to the University of Alaska Anchorage's Business
Enterprise Institute, 64 percent of start-ups will go to
families first for capital; therefore, if there is a sizable
PFD, the state will see more start-ups, as well as other
businesses, expand. She said that 23 percent of start-ups begin
with $10,000 or less, and that for a family of four receiving
PFDs, the total they accumulate would be $12,000. She stressed
that if the legislature settles the PFD issue, it will increase
Alaskans' income, reduce poverty, improve health, expand
businesses, increase employment, increase jobs, and increase
private investment.
7:26:16 PM
SENATOR HUGHES asked whether HJR 8 is like legislation drafted
by Senator Wielechowski.
CHAIR CARPENTER indicated that HJR 8 mirrors SJR 1.
SENATOR HUGHES stated that if the PFD issue were settled through
the state constitution, then that would provide more certainty
than if it were settled in statute.
CHAIR CARPENTER asked if Senator Hughes could provide the
documentation referred to in her presentation.
SENATOR HUGHES agreed to share the information.
7:27:29 PM
SENATOR HUGHES, in response to Representative Gray, indicated
that ISER had conducted a study showing that a larger PFD
resulted in the birth of larger babies.
REPRESENTATIVE GRAY commented that he would like to see the
study.
7:28:09 PM
REPRESENTATIVE GROH said that, as someone who assisted in
creating the PFD, he is happy to hear all the substantial
benefits. He relayed that business leaders have impressed upon
him the need of fiscal stability to help grow the economy.
Further, such leaders stressed the need for amenities and basic
services; such factors are important to them in deciding where
to locate businesses and attract employees. He asked whether
Senator Hughes had done the research on this.
SENATOR HUGHES answered that she has, and that business leaders
like HJR 8 because it is a comprehensive approach, since they
too want to ensure there are good schools and roads so that the
state doesn't apply heavy taxes on the businesses.
7:29:36 PM
CHAIR CARPENTER asked whether it would take investment earnings
or economic growth in the future to pay for good roads and
services. He said the committee is figuring out what is the
most stable system to create.
7:30:17 PM
REPRESENTATIVE MCCABE pointed out that money in the private
sector returns nine times the amount invested; conversely,
government investment returns are at 1:2. He said the idea is
that the jobs need to be created first, then the roads. He
illustrated an example from Phoenix, Arizona, in which people
came, moved in, built houses, and then everyone complained
because there were no roads, despite having the tax base to
build one. He said the "chicken or the egg" question will be a
big part of the upcoming conversation.
SENATOR HUGHES recounted a "crash" in Alaska in the 1980s which
emptied homes. She said there must be an economy to support the
services.
7:32:13 PM
REPRESENTATIVE GRAY said he supports growing the economy, but
that if the economy is not sending money to government to pay
for services, then no matter how big it gets, it would not pay
for services.
CHAIR CARPENTER explained that the structure the state has now
pays for services from its "one-trick pony" [oil], and that it
may be years from now when the state finds a revenue
alternative. He said the point is that if the state is known
only for oil revenue, then the state is in a "pickle." He
pointed out that the legislature has not been having the
conversation on how to incentivize economic growth. He opined
that if the state wishes to incentivize such growth, it
shouldn't have high corporate taxes, and rather there should be
a positive environment in which businesses are able to take
risks.
[HJR 8 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0090A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Sponsor Statement.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - Sectional Analysis.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| Historical average dividend since 1982.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HB 90 - WM Bill Hearing Presentation 3.6.23.pdf |
HW&M 3/6/2023 6:00:00 PM |
HB 90 |
| HJR007A.PDF |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sponsor Statement HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| Sectional Analysis HJR7.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR 7 Fiscal Note.pdf |
HFSH 1/19/2024 1:00:00 PM HW&M 3/6/2023 6:00:00 PM |
HJR 7 |
| HJR008A.PDF |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| Sponsor Statement HJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| SectionalAnalysisHJR8.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| HJR 8 Fiscal Note.pdf |
HW&M 3/6/2023 6:00:00 PM |
HJR 8 |
| ISER Presentation Economic Impacts of Fiscal Options and Uncertainty - Dr Guettabi.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| UAA Business Enterprise Institute Presentation - Christi Bell.pdf |
HW&M 3/6/2023 6:00:00 PM |
|
| Bicameral Permanent Fund Working Group Report With Title Page, 20 January 2020.pdf |
HW&M 3/6/2023 6:00:00 PM |