Legislature(2005 - 2006)

02/18/2005 08:29 AM W&M


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB  52-LONG-RANGE FISCAL PLAN                                                                                                 
                                                                                                                                
CHAIR WEYHRAUCH announced that the  first order of business would                                                               
be HOUSE  BILL NO. 52 "An  Act relating to adoption  and revision                                                               
of  a  comprehensive long-range  fiscal  plan  for the  State  of                                                               
Alaska."                                                                                                                        
                                                                                                                                
8:31:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  relayed  that  he  and  Representative                                                               
Harris,  originally  introduced  HB 52  during  the  Twenty-Third                                                               
legislature and  in its  previous incarnation  it was  House Bill                                                               
493.  The  first section of HB 52,  contains legislative findings                                                               
that   indicate  the   areas   for  which   the  legislature   is                                                               
responsible,  such   as:  public   health  and   welfare,  public                                                               
education,  development  of  natural  resources,  public  safety,                                                               
public  facilities, and  environmental protection.   In  order to                                                               
carry out  these responsibilities  the legislature must  budget a                                                               
reasonable  level of  expenditures to  finance the  operations of                                                               
state  government.    There  is  often  a  significant  disparity                                                               
between the  revenue sources used and  the expenditures necessary                                                               
to maintain a  reasonable level of state services, he  noted.  He                                                               
related  that   revenue  sources   fluctuate  and   Alaska  needs                                                               
stability.  For several years,  the legislature has addressed the                                                               
disparity by  drawing against the  balance in  the constitutional                                                               
budget reserve  fund (CBR), which  has been declining to  a level                                                               
that requires the development of a  sound fiscal plan.  The long-                                                               
range  comprehensive fiscal  plan will  encourage the  discipline                                                               
necessary  to ensure  the budget  remains  balanced and  properly                                                               
planned, which will stabilize the state's economy.                                                                              
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  that he  was "surprised"  that no                                                               
statute  existed requiring  the  state to  adopt  and maintain  a                                                               
stable  long-term fiscal  plan.   This legislation  would require                                                               
the  legislature to  adopt and  annually  revise a  comprehensive                                                               
long-range fiscal plan to balance  state revenue and expenditures                                                               
for  the  current  and  succeeding  four years.    The  plan,  he                                                               
explained,  must   set  out   projected  revenue   available  and                                                               
anticipated expenditures  for the  operation of  state government                                                               
for  each  fiscal  year.    For each  fiscal  year  of  projected                                                               
expenditures  that  exceed  projected   revenue,  the  plan  must                                                               
include proposals  to achieve the following:  balance the budget,                                                               
encourage real  economic growth and  stability, improve  the high                                                               
quality of  life, develop  natural resources,  provide education,                                                               
maintain  public  health  and  safety,   and  ensure  that  state                                                               
government provides services as  efficiently as practical, while,                                                               
reducing  state expenditures  where possible.   Furthermore,  the                                                               
legislature must: protect the principal  of the permanent fund in                                                               
accordance with  the constitutional mandate, use  the earnings of                                                               
the  fund to  provide for  inflation-proofing, maintain  a strong                                                               
dividend program,  and repay the legislature's  legal flexibility                                                               
to determine  the appropriate  use of  the remaining  earnings of                                                               
the fund.   The  legislature must  examine and  plan for  ways to                                                               
raise  the   necessary  revenue   for  the  operation   of  state                                                               
government while maintaining a stable  tax environment.  The plan                                                               
must contain  provisions to  maintain the  integrity of  the CBR,                                                               
which was  established under  the constitution  to ensure  that a                                                               
prudent minimal balance in the  fund remains available to provide                                                               
funding for emergencies.                                                                                                        
                                                                                                                                
8:37:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG,  in response to  Representative Seaton,                                                               
related that the  expenditures of the state  have never surpassed                                                               
the revenue sources of the state.                                                                                               
                                                                                                                                
8:37:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG,  in response to  Representative Wilson,                                                               
said  that HB  52 directs  the  legislature to  consider all  the                                                               
revenue sources  of the state,  such as: the permanent  fund, the                                                               
permanent  fund  dividend, the  CBR,  the  ERA [Earnings  Reserve                                                               
Account],  and  the enactment  of  taxes.   How  the  legislature                                                               
appropriates   those  funds   is  under   its  jurisdiction,   he                                                               
highlighted.                                                                                                                    
                                                                                                                                
8:39:06 AM                                                                                                                    
                                                                                                                                
KEVIN  RITICHE,  Executive   Director,  Alaska  Municipal  League                                                               
(AML), relayed that the AML  and its members support the proposal                                                               
for   a  long-range   fiscal  plan.     He   related  that   many                                                               
municipalities have a  five-year plan to balance the  budget.  He                                                               
said,  "The  only thing  more  dangerous  than planning,  is  not                                                               
planning."                                                                                                                      
                                                                                                                                
8:39:59 AM                                                                                                                    
                                                                                                                                
MR. RITCHIE,  in response to  Chair Weyhrauch, related  that many                                                               
municipalities, like Juneau, try to "look ahead five years."                                                                    
                                                                                                                                
8:40:08 AM                                                                                                                    
                                                                                                                                
MR. RITCHIE,  in response to  Chair Weyhrauch, said he  could not                                                               
answer  whether any  ordinance or  statute used  the term  "long-                                                               
range fiscal  plan."  He explained  that the City and  Borough of                                                               
Juneau  had a  five-year fiscal  plan, but  it was  not called  a                                                               
"long-range fiscal plan" in the ordinance.                                                                                      
                                                                                                                                
8:40:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG noted that,  although he could not recall                                                               
the exact  statute, in his  research for balancing the  budget he                                                               
found   a  statuary   requirement   existed   for  a   long-range                                                               
projection.                                                                                                                     
                                                                                                                                
8:40:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  commented that  she has  received numerous                                                               
emails   and   letters    from   statewide   municipalities   and                                                               
organizations "begging"  the legislature  to propose a  long term                                                               
fiscal plan, similar to the proposal of HB 52.                                                                                  
                                                                                                                                
8:41:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said that  the legislature needs to adopt                                                               
a long-range  fiscal plan and  not just  a bill that  talks about                                                               
it.   He expressed concern that  the bill would deflect  from the                                                               
urgency to adopt such a plan.                                                                                                   
                                                                                                                                
8:41:41 AM                                                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH  related that a  bill is merely  "fluff" compared                                                               
to the substance.                                                                                                               
                                                                                                                                
8:41:53 AM                                                                                                                    
                                                                                                                                
TADD OWENS, Executive Director,  Resource Development Council for                                                               
Alaska,  Inc., said  the  council has  been  concerned about  the                                                               
state structural fiscal  imbalance for over a  decade.  Although,                                                               
the council's board  has yet to take a formal  position on HB 52,                                                               
the council is  "anxious to work with the legislature  on any and                                                               
all ideas to move the state  closer to a long range fiscal plan,"                                                               
he said.   This year's budget surplus offers  the legislature the                                                               
opportunity   to   make   "tough  decisions"   regarding   fiscal                                                               
responsibility over the long term, he noted.                                                                                    
                                                                                                                                
8:43:33 AM                                                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH  noted that Mr.  Owens' position mirrors  that of                                                               
the "Chamber, AARP, and many other [institutions]."                                                                             
                                                                                                                                
8:43:40 AM                                                                                                                    
                                                                                                                                
MR.  OWENS, in  response to  Representative Seaton,  relayed that                                                               
the  council's [opinion  that] the  state is  not in  a situation                                                               
where  there  is no  revenue  or  revenue  options to  cover  the                                                               
expenditures,  rather  it's an  allocation  issue.   The  council                                                               
believes that  particular steps  should be  taken to  address the                                                               
long-term fiscal imbalance, such  as: budget discipline, uses for                                                               
the permanent  fund earnings for  something other  than dividends                                                               
alone,  a constitutional  amendment for  percent of  market value                                                               
(POMV), and, if necessary, the institution of a statewide tax.                                                                  
                                                                                                                                
8:46:28 AM                                                                                                                    
                                                                                                                                
MR. OWEN, in  response to Representative Rokeberg,  said that the                                                               
council is wrestling with a  long-range comprehensive fiscal plan                                                               
versus  making incremental  improvements to  the status  quo when                                                               
possible.   However the council  is willing  to work on  any idea                                                               
that would "drive the state forward," he related.                                                                               
                                                                                                                                
8:48:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG   clarified  that  HB  52   is  not  an                                                               
alternative to an  actual fiscal plan because  both are necessary                                                               
in order for the state to plan ahead.                                                                                           
                                                                                                                                
8:48:48 AM                                                                                                                    
                                                                                                                                
MR. OWENS  related that the  council wants  what is best  for the                                                               
state, and  if the combined  efforts of both  HB 52 and  a [long-                                                               
range]  fiscal plan  perpetuate  that process,  then the  council                                                               
supports both actions.                                                                                                          
                                                                                                                                
8:49:15 AM                                                                                                                    
                                                                                                                                
CHAIR  WEYHRAUCH  stated  that   the  aforementioned  issues  are                                                               
important to consider when attempting to resolve the fiscal gap.                                                                
                                                                                                                                

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