Legislature(2021 - 2022)DAVIS 106

05/15/2021 11:30 AM House WAYS & MEANS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved HB 202 Out of Committee
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
           HB 202-PERMANENT FUND DIVIDEND; ROYALTIES                                                                        
        HB 37-INCOME TAX; PERMANENT FUND; EARNINGS RES.                                                                     
[Contains discussion of SJR 6 and SJR 7.]                                                                                       
12:31:01 PM                                                                                                                   
CHAIR SPOHNHOLZ announced that the  final order of business would                                                               
be HOUSE BILL  NO. 202, "An Act relating to  the Alaska permanent                                                               
fund; relating to dividends for  state residents; relating to the                                                               
use  of certain  state  income; and  providing  for an  effective                                                               
date." and HOUSE  BILL NO. 37, "An Act relating  to deposits into                                                               
the dividend fund; relating to  income of and appropriations from                                                               
the earnings reserve account; relating  to the taxation of income                                                               
of  individuals,   partners,  shareholders  in   S  corporations,                                                               
trusts,  and   estates;  relating   to  a  payment   against  the                                                               
individual   income  tax   from  the   permanent  fund   dividend                                                               
disbursement; repealing  tax credits  applied against the  tax on                                                               
individuals under  the Alaska Net  Income Tax Act;  and providing                                                               
for an effective date."                                                                                                         
12:31:31 PM                                                                                                                   
CHAIR SPOHNHOLZ opened public testimony on HB 202 and HB 37.                                                                    
12:32:00 PM                                                                                                                   
BERT HOUGHTALING  stated his strong  opposition to HB 202  and HB
37.   Instead, he advocated  for the passage  of SJR 6,  which he                                                               
believed  would resolve  the issues  pertaining to  the dividend.                                                               
He  explained that  his opposition  to  the proposed  legislation                                                               
revolved around  the removal of  the statutory  dividend formula.                                                               
He opined  that the bills would  "take away from the  children of                                                               
Alaska by taxing every single one of them."                                                                                     
12:33:31 PM                                                                                                                   
CRIS EICHENLAUB  opined that Alaska is  "grossly" mismanaging its                                                               
resources as  the largest state  with the most resources  and the                                                               
smallest  population.    He   characterized  the  permanent  fund                                                               
dividend  (PFD) as  the  "best  bang for  our  buck," adding  his                                                               
belief that the people should have  the first call on all revenue                                                               
12:35:45 PM                                                                                                                   
SHERRY EICHENLAUB stated  her opposition to HB 202 and  HB 37 and                                                               
aligned  herself   with  the  comments  from   the  two  previous                                                               
12:36:16 PM                                                                                                                   
KATIE BOTZ  stated her opposition  to HB  202 and support  for HB
37.   She shared her belief  that an income tax  would help close                                                               
the fiscal gap.   Additionally, she advocated for  a "50/50 share                                                               
of the PFD."                                                                                                                    
12:37:06 PM                                                                                                                   
ADAM  HYKES,  recalled  an  earlier   statement  from  Mr.  Alper                                                               
regarding the  repeal of the  Amerada Hess  settlement provision,                                                               
which  he interpreted  as an  indication that  the bill  wouldn't                                                               
work without taking money that  would have otherwise gone towards                                                               
the  PFD.    He  said,  "In  the  case  that's  it's  not  always                                                               
guaranteed in  some years, then  why is  it reliable for  you and                                                               
not for  us?"   Further, he opposed  the idea that  the PFD  is a                                                               
negative  tax.   He  shared  his belief  that  Alaskans want  the                                                               
legislature to  spend less and  fix the  budget.  He  opined that                                                               
rushing  the implementation  of a  new tax  and depending  on the                                                               
permanent fund to  fill the gaps in the budget  are both fiscally                                                               
irresponsible.  He concluded that  as a stakeholder in Alaska, he                                                               
did not give [the legislature]  permission to take his children's                                                               
inheritance.  He stated his opposition to HB 202 and HB 37.                                                                     
12:39:33 PM                                                                                                                   
MIKE  COONS  emphasized  that whether  wealthy  or  poor,  people                                                               
should  be able  to spend  the  PFD on  whatever they  want.   He                                                               
stated  his full  opposition  to  both bills  and  added that  he                                                               
supports SJR 6 and SJR 7.   He suggested that the legislature has                                                               
no  intention of  working  with  Alaskans or  the  governor on  a                                                               
12:41:44 PM                                                                                                                   
CLIFF  GROH  expressed  that  the  state  needs  a  comprehensive                                                               
strategy  that  looks beyond  the  next  fiscal year  to  address                                                               
Alaska's deep  structural deficit.   He opined that  the strategy                                                               
needs  to include  a  revised PFD  formula  that is  sustainable;                                                               
protection for  the permanent fund against  overspending; and new                                                               
revenues to  help pay for public  services.  He believed  that HB
202 goes too far to balance  the budget (indisc.) of the dividend                                                               
to avoid  collecting taxes from  high earners in Alaska,  some of                                                               
whom are nonresidents.   He advocated for  a sustainable dividend                                                               
formula in  addition to broad-based  taxes, preferably  an income                                                               
12:43:55 PM                                                                                                                   
BARBARA  TYNDALL  stated  her  opposition to  HB  37,  which  she                                                               
characterized as  a plan  to rob  the people  of Alaska  and give                                                               
their  money to  special  interests because  the legislature  and                                                               
administration   had  failed   to   live   within  their   means.                                                               
Additionally,  she   believed  HB   202  would   "exacerbate  the                                                               
manipulation by  the legislature  for the fund's  original intent                                                               
and  make it  a political  football rather  than a  market-driven                                                               
process."   She argued that  HB 202 would  cut the people  out of                                                               
the process  almost entirely.   She urged a  "no" vote on  HB 202                                                               
and HB 37.                                                                                                                      
12:45:18 PM                                                                                                                   
ANDRA RICE shared  that she relies on a full  PFD for her heating                                                               
oil and doesn't  want it taken away from her  grandchildren.  She                                                               
said she  loves Alaska, adding  that the dividend belongs  to the                                                               
people, as does  their income.  She reiterated  her opposition to                                                               
both HB 202 and HB 37.                                                                                                          
12:46:44 PM                                                                                                                   
MELISSA  GUDOBBA  stated that  she  believed  the legislature  is                                                               
trying to "bamboozle"  and "hoodwink" Alaskans.   She argued that                                                               
if people  are willing to  give up their liberties  for temporary                                                               
securities, then  they don't deserve  either.  She  believed that                                                               
growing the government when revenues  are high and not being able                                                               
to pay for  those programs when revenue is  low is irresponsible.                                                               
She concluded by stating her opposition to HB 202 and HB 37.                                                                    
12:48:49 PM                                                                                                                   
JAMES  SQUYRES [Due  to technical  difficulties, the  majority of                                                               
Mr. Squyres' testimony is indiscernible throughout.]                                                                            
12:51:21 PM                                                                                                                   
GARY MCDONALD  urged the  legislators to  listen to  the previous                                                               
testifiers.  He  said, "Mr. Wool is trying to  pull the wool over                                                               
your eyes if he gets both bills."                                                                                               
12:52:07 PM                                                                                                                   
ROBERT COELTER  stated his opposition  to HB 202  and HB 37  as a                                                               
taxpayer and proponent of small  government.  He believed that HB
37 would enlarge government by  taking people's money to increase                                                               
government spending.   Further, he opined that HB  202 would make                                                               
government larger.                                                                                                              
12:53:36 PM                                                                                                                   
THOMAS BELLANICH stated  his opposition to HB 202 and  HB 37.  He                                                               
opined that  children should not  be taxed, because they  are the                                                               
future.   Further,  that  if a  tax were  to  be implemented,  it                                                               
should  be  a  wage  tax,  as  opposed to  an  income  tax.    He                                                               
emphasized that many rely on  the dividend for clothing, heating,                                                               
food, and  hunting, and that taking  it away would be  wrong.  He                                                               
reiterated his belief that a wage  tax is preferable, as it would                                                               
allow the state to tax nonresidents.                                                                                            
12:55:45 PM                                                                                                                   
JEAN  HOLT stated  her  opposition to  HB  202 and  HB  37.   She                                                               
believed both bills would eliminate  Alaskans' ability to receive                                                               
their share  of mineral  rights through the  PFD.   She advocated                                                               
for SJR 6 and SJR 7.                                                                                                            
12:56:58 PM                                                                                                                   
RENEE WELLINGTON  expressed her opposition  to HB 202 and  HB 37,                                                               
especially  after  the difficult  year  Alaska  has faced.    She                                                               
opposed  implementing  an income  tax  to  "grow" government  and                                                               
reducing  the  PFD.   She  urged  the  legislature to  listen  to                                                               
Alaskans and stop catering to special interest groups.                                                                          
12:58:32 PM                                                                                                                   
LAURA  BONNER said  she's pleased  to see  a proposal  that would                                                               
change  the outdated  PFD formula,  which no  longer works.   She                                                               
opined that  HB 37  is more  sustainable for  future generations,                                                               
while still  providing a dividend.   She pointed out that  in the                                                               
future, oil  royalties may decrease;  therefore, she  opined that                                                               
HB 202 would not be the best  solution.  She believed HB 37 would                                                               
offer a  new source  of revenue, which  is desperately  needed to                                                               
provide services.   She concluded that an income  tax wouldn't be                                                               
popular, but it's necessary.                                                                                                    
1:00:00 PM                                                                                                                    
DAVE  JOHNSON disclosed  that he  has worked  in Prudhoe  Bay for                                                               
over 20  years, adding  that over 50  percent of  his nonresident                                                               
coworkers do not pay  taxes.   He stated his  support for both HB
37 and HB 202.   He pointed out that it's  easy to "throw stones"                                                               
at solutions.  He emphasized the  need to pick a solution, as the                                                               
state is in a tough spot from drawing down its savings.                                                                         
1:00:51 PM                                                                                                                    
JOHN SONIN  expressed his support for  HB 37.  Regarding  HB 202,                                                               
he said he was  not as clear on how it  would be implemented, but                                                               
he is supportive.   He shared his belief  that future generations                                                               
should be able to share in the "gifts" of the permanent fund.                                                                   
1:03:08 PM                                                                                                                    
JANET MCCABE  stated her support for  HB 202.  She  said adopting                                                               
this  bill would  be  a  major step  towards  giving Alaska  much                                                               
needed fiscal  stability.  For  years, she said,  the legislature                                                               
has  disagreed about  the percentage  of  POMV funds  to use  for                                                               
dividends and the  percentage to use for state services.   HB 202                                                               
would solve  that issue by  drawing funds  for the dividend  by a                                                               
totally separate source.  Instead,  the dividend would be a fixed                                                               
percent of annual  mineral revenues.  She  believed the resulting                                                               
stability   would  benefit   and  strengthen   Alaska's  economy.                                                               
Further,  she emphasized  the  importance of  passing  HB 202  to                                                               
protect the  permanent fund  and POMV revenue,  which is  now the                                                               
state's primary source of income.   She concluded that passing HB
202   this  session   would  be   an  important   and  beneficial                                                               
1:04:50 PM                                                                                                                    
ELEANOR  ANDREWS stated  her support  for HB  202.   She believed                                                               
that without a fiscal plan  that provides sustainable income from                                                               
every source,  Alaska would be worse  off than it was  before the                                                               
discovery of  oil.  She  indicated that  HB 202 would  provide an                                                               
additional source of  revenue.  She pointed  out that government-                                                               
provided services that  everyone enjoys would not  be possible if                                                               
the permanent fund ceased to exist.                                                                                             
1:06:19 PM                                                                                                                    
PETER  MICHALSKI said  he agreed  with  the previous  testifier's                                                               
comments regarding  HB 202.   Additionally, he opined that  HB 37                                                               
would maintain the dividend program  while implementing a minimal                                                               
tax.  He believed  HB 202 and HB 37 would  put the legislature on                                                               
the   right   track   towards   fulfilling   the   constitutional                                                               
requirement  of providing  education, public  safety, roads,  and                                                               
other services.                                                                                                                 
1:08:08 PM                                                                                                                    
CHAIR SPOHNHOLZ closed public testimony on HB 37 and HB 202.                                                                    
[HB 37 was held over.]                                                                                                          
1:08:33 PM                                                                                                                    
The committee took an at-ease from 1:08 p.m. to 1:12 p.m.                                                                       
1:12:39 PM                                                                                                                    
CHAIR SPOHNHOLZ  moved to  adopt Amendment 1  to HB  202, labeled                                                               
32-LS0884\I.1, Nauman, 5/13/21, which read:                                                                                     
     Page 5, line 16:                                                                                                           
          Delete "30"                                                                                                           
          Insert "50"                                                                                                           
1:12:49 PM                                                                                                                    
REPRESENTATIVE STORY objected for the purpose of discussion.                                                                    
1:12:53 PM                                                                                                                    
CHAIR  SPOHNHOLZ explained  that Amendment  1 would  increase the                                                               
percentage of  royalties the legislature  may appropriate  to the                                                               
dividend fund  from 30 percent  to 50 percent, which  would allow                                                               
the  dividend  to  remain  tied   to  resource  production  while                                                               
allowing  more of  the  revenue to  go  towards Alaskans  through                                                               
dividends.    She  opined  that   the  concept  of  the  bill  is                                                               
intriguing; however,  she said she  had "heartburn" in  regard to                                                               
the proposed PFD formula and  the corresponding amount in HB 202.                                                               
She  noted that  as currently  drafted,  HB 202  would produce  a                                                               
dividend  of $442  in FY  21, which  she characterized  as "low."                                                               
Per ITEP, she  reminded the committee that a  PFD reduction would                                                               
be the  hardest on lower-income  individuals and that  95 percent                                                               
of Alaskans  would be  worse off  with a PFD  cut, as  opposed to                                                               
other forms of  revenue.  She added that the  only people who are                                                               
better off  with a PFD reduction  are those in the  top 5 percent                                                               
who  make $228,000  a  year or  more.   She  reiterated that  the                                                               
proposed  amendment would  increase the  percentage of  royalties                                                               
that  would go  to dividends  and,  if adopted,  would produce  a                                                               
dividend of $763 in FY 21, which would provide more certainty.                                                                  
1:14:43 PM                                                                                                                    
REPRESENTATIVE STORY removed her objection.                                                                                     
1:14:46 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  objected.    He said  given  that  the                                                               
current  statutory dividend  formula provides  for a  dividend of                                                               
$3,400, Amendment 1 would be  a marked decrease.  Nonetheless, he                                                               
reported  that as  it's currently  written, the  bill would  have                                                               
resulted in a dividend of $1,600  in the "productive" years of FY                                                               
08  through FY  12; therefore,  he presumed  that if  Amendment 1                                                               
were to pass, the dividend  would have increased to approximately                                                               
$2,000 in those years.  He asked why that is affordable.                                                                        
1:15:54 PM                                                                                                                    
CHAIR SPOHNHOLZ noted  that she only possessed  modeling from the                                                               
Legislative Finance Division that dated  back to FY 16.  Further,                                                               
she  reported  that in  FY  18,  50  percent of  royalties  would                                                               
produce  a dividend  of $1,008,  which  is significantly  smaller                                                               
than the figure referenced by Representative Josephson.                                                                         
REPRESENTATIVE JOSEPHSON  clarified that  he had  referenced data                                                               
from 2008, as opposed to 2018.                                                                                                  
CHAIR SPOHNHOLZ  responded that she  didn't have  the information                                                               
for that  year.   Further, she  recalled that  2008 was  a fairly                                                               
high oil  price environment, indicating  that the state  had more                                                               
money  at that  point in  time.   She reiterated  that in  FY 21,                                                               
Amendment  1 would  yield  a  dividend of  $763,  which is  still                                                               
modest and much  lower than the historic average  of the dividend                                                               
at approximately $1,100.                                                                                                        
REPRESENTATIVE JOSEPHSON  indicated that  he liked the  spirit of                                                               
generosity  in which  the amendment  was proposed.   However,  he                                                               
pointed out  that in a world  without COVID and AARPA  funds, the                                                               
proposal would  cross into deficit spending  without new revenue,                                                               
which is concerning.                                                                                                            
CHAIR SPOHNHOLZ opined  that Representative Josephson's statement                                                               
would  be true  if the  dividend were  the only  solution to  the                                                               
fiscal  problem;  however,  she  expressed her  opposition  to  a                                                               
"permanent  fund only  solution," adding  that it  would be  "the                                                               
most regressive thing that you  could do."  Further, she believed                                                               
that for 95  percent of Alaskans, a "PFD only  solution" would be                                                               
worse than  an income  tax, as  proposed by  Representative Wool.                                                               
She stated  her belief that HB  37 is a practical  measure, which                                                               
would leverage  the funding sustainability of  the permanent fund                                                               
and require  Alaskans to chip  in through an updated  PFD formula                                                               
while  balancing  the  regressivity  with an  income  tax.    She                                                               
reiterated her objection to the  premise that the dividend is the                                                               
only considerable solution to  address Alaska's fiscal situation.                                                               
She  pointed out  that if  Amendment 1  to HB  202 were  to pass,                                                               
there  are  other  bills  that   would  complement  the  proposed                                                               
legislation, such as income and  oil tax revenue bills that could                                                               
help  while  still keeping  Alaska  competitive  and balance  the                                                               
budget while providing  for a more reasonable  dividend than what                                                               
is currently proposed in the original draft of HB 202.                                                                          
1:19:10 PM                                                                                                                    
REPRESENTATIVE SCHRAGE  requested that the bill  sponsor speak to                                                               
Amendment 1.                                                                                                                    
1:19:35 PM                                                                                                                    
REPRESENTATIVE  KELLY MERRICK,  Alaska  State Legislature,  prime                                                               
sponsor  of  HB 202,  stated  that  the  original intent  of  the                                                               
legislation was to  avoid overdrawing the POMV.   She deferred to                                                               
her staff, Ms. Teal, to explain the implications of Amendment 1.                                                                
1:20:09 PM                                                                                                                    
TALLY  TEAL, Staff,  Representative Kelly  Merrick, Alaska  State                                                               
Legislature, on  behalf of Representative Merrick,  prime sponsor                                                               
of HB  202, said based  on cursory modeling from  the Legislative                                                               
Finance  Division,  the  budget reserves  would  increase  before                                                               
leveling  off and  the dividend  amount would  be slightly  under                                                               
$800.   Most concerning,  she said, is  the $39  million overdraw                                                               
from the  earnings reserve  account (ERA)  in FY  23.   She noted                                                               
that modeling  showed FY  23 as  the only year  in which  the ERA                                                               
would be overdrawn.                                                                                                             
1:20:56 PM                                                                                                                    
CHAIR  SPOHNHOLZ   stated  that  she  wouldn't   support  an  ERA                                                               
overdraw,  adding that  other revenue  measures could  complement                                                               
this legislation.                                                                                                               
1:21:05 PM                                                                                                                    
REPRESENTATIVE EASTMAN  observed that Amendment 1  appeared to be                                                               
talking about a cap.  He  asked whether the dividend was intended                                                               
to  be  capped at  "whatever  amount  that  50 percent  of  those                                                               
categories of money is" and the  legislature would not be able to                                                               
appropriate   more   money   to   a  dividend   in   a   separate                                                               
CHAIR  SPOHNHOLZ shared  her belief  that Representative  Eastman                                                               
may be  speaking to  the underlying bill,  as Amendment  1 simply                                                               
instructs the deletion of "30" and  the insertion of "50" on page                                                               
5, line 16.                                                                                                                     
REPRESENTATIVE EASTMAN  asked whether  "50" represents a  cap and                                                               
whether the intent was to increase the cap to 50 percent.                                                                       
CHAIR  SPOHNHOLZ remarked.  "I  believe, Representative  Eastman,                                                               
that you  understand that all  bills and legislation  are subject                                                               
to appropriation by the legislature."                                                                                           
REPRESENTATIVE EASTMAN  said he is confused  about what Amendment                                                               
1  is  attempting to  accomplish.    He  asked again  whether  it                                                               
pertains to a cap or not.                                                                                                       
CHAIR SPOHNHOLZ  responded, "We are talking  about increasing the                                                               
amount of funds  that are available to the  dividend, as proposed                                                               
by HB 202."                                                                                                                     
1:22:29 PM                                                                                                                    
REPRESENTATIVE WOOL conveyed that he  shares some of the concerns                                                               
that Representative  Josephson expressed.   He explained  that he                                                               
appreciated  that  the bill,  in  its  original form,  would  not                                                               
produce any overdraws.   Further, he characterized  30 percent of                                                               
royalties as  sustainable and highlighted the  surplus, which was                                                               
forecasted in the fiscal modeling.   He opined that increasing 30                                                               
to 50  would push up against  the wall of that  surplus and asked                                                               
whether the  price of oil  and the budget  would have to  stay in                                                               
narrow  parameters to  maintain  sustainability.   He  emphasized                                                               
that  he was  not  opposed to  a dividend  of  $700; however,  he                                                               
wanted to make sure that it would be affordable.                                                                                
CHAIR SPOHNHOLZ deferred the question to Conor Bell.                                                                            
1:24:22 PM                                                                                                                    
CONOR  BELL,   Fiscal  Analyst,  Legislative   Finance  Division,                                                               
explained that the division's modeling  assumes that any deficits                                                               
are  filled with  the constitutional  budget reserve  (CBR) until                                                               
the CBR reaches  a minimal balance of $500 million,  which is the                                                               
recommended minimum  balance for  short-term cash  flow purposes.                                                               
He confirmed that  based on the division's  modeling, there would                                                               
be an  unplanned ERA draw of  $9 million [if Amendment  1 were to                                                               
pass].  He continued to  note that there are alternative options,                                                               
such  as drawing  the  CBR below  $500  million.   Alternatively,                                                               
different  oil  prices  and  revenue  assumptions  could  produce                                                               
different outcomes.                                                                                                             
1:25:23 PM                                                                                                                    
REPRESENTATIVE WOOL  sought to confirm  that above 30  percent, a                                                               
CBR draw may be  assumed, as opposed to a draw from  the ERA.  He                                                               
concluded that to pay out a 50  percent royalty in FY 22, the CBR                                                               
would have  to be drawn down  to $500 million.   He asked whether                                                               
that is correct.                                                                                                                
MR.  BELL  clarified  that  based   on  the  Legislative  Finance                                                               
Division's  modeling,  there would  be  a  $355 million  deficit,                                                               
which  would be  filled  from  the CBR,  resulting  in an  ending                                                               
balance of  $544 million in the  CBR.  Additionally, in  FY 23, a                                                               
small  ERA draw  would be  required, as  the $97  million deficit                                                               
would bring  the CBR down  to its minimum recommended  balance of                                                               
$500 million.                                                                                                                   
1:26:27 PM                                                                                                                    
CHAIR SPOHNHOLZ acknowledged that  [Amendment 1] would reduce the                                                               
available revenue  to pay for government  and dividends; however,                                                               
she strongly believed that  a PFD of $442 would be  too low.  She                                                               
characterized  a  dividend  of  that size  as  "bad  policy"  and                                                               
"politically  untenable," as  the  public would  be  angry.   She                                                               
opined that  [HB 202]  could be  one piece  of an  overall fiscal                                                               
plan.    She  added  that  she  would  be  uncomfortable  with  a                                                               
"permanent fund-only solution."   She explained that she proposed                                                               
Amendment  1   in  an  attempt  to   stay  within  constitutional                                                               
limitations  while  creating a  modest  change  to the  dividend,                                                               
which would be part of a broader discussion.                                                                                    
1:27:43 PM                                                                                                                    
REPRESENTATIVE STORY sought  to confirm that that  there would be                                                               
a $39 million overdraw of the  ERA [if Amendment 1 were to pass].                                                               
She asked  whether there would  be [additional overdraws]  in the                                                               
following years.                                                                                                                
MS. TEAL responded that based on  the modeling, that was the only                                                               
year in  which a  deficit would  need to  be filled  through some                                                               
measure.  She added that  the proposal appeared to be sustainable                                                               
in the outyears.                                                                                                                
REPRESENTATIVE STORY asked, "How many years did you roll out?"                                                                  
MS. TEAL  shared her understanding  that the  Legislative Finance                                                               
Division's fiscal model forecasts through FY 30 or FY 31.                                                                       
1:28:47 PM                                                                                                                    
REPRESENTATIVE SCHRAGE pointed  out that there would  still be 15                                                               
to  20  percent of  the  natural  resource  income going  to  the                                                               
general  fund.    Provided Amendment  1  requires  an  additional                                                               
revenue measure,  he questioned  why not  have all  the remaining                                                               
natural  resource  income go  to  the  PFD  and backfill  with  a                                                               
revenue  measure?   Further, he  noted that  [Amendment 1]  would                                                               
leave no  funds available  for a  capital budget.   He  asked the                                                               
sponsor of the proposed amendment to respond.                                                                                   
CHAIR SPOHNHOLZ  reiterated that  the proposed  legislation would                                                               
seek  to  balance  the  budget  using only  the  dividend.    She                                                               
acknowledged that  a method  for funding  the capital  budget had                                                               
not  been considered  unless  additional  measures were  enacted.                                                               
She  understood that  this proposal  is  one piece  of a  broader                                                               
conversation, such  as geobonding  or federal funding,  and could                                                               
not stand  alone if  the budget  were to  function.   She relayed                                                               
that she  and Representative Merrick  are in strong  alignment on                                                               
the notion  of a  robust capital budget,  and she  explained that                                                               
she thought increasing [the cap] from  30 to 50 was a compromise.                                                               
Nonetheless, she  said she continues  to be uncomfortable  with a                                                               
dividend that is less than $1,000.                                                                                              
1:30:53 PM                                                                                                                    
REPRESENTATIVE MERRICK,  in response to  Representative Schrage's                                                               
comments   about  constitutional   requirements   going  to   the                                                               
permanent fund  and the rest  going to dividends, noted  that the                                                               
scenario  in  question was  modeled  by  the Legislative  Finance                                                               
Division.  She deferred to Ms. Teal.                                                                                            
MS. TEAL deferred to Mr. Bell.                                                                                                  
1:31:21 PM                                                                                                                    
MR. BELL responded  that if only 25 percent of  royalties were to                                                               
go the permanent fund's principal  account, there would no longer                                                               
be an  ERA overdraw.  However,  there would still be  deficits in                                                               
FY 22  and FY 23,  followed by a  surplus in  FY 24 based  on the                                                               
division's modeling.                                                                                                            
1:32:06 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked  Mr.   Bell  whether  the  small                                                               
deficits in FY 22  and FY 23 are associated with  the bill in its                                                               
current form or Amendment 1.                                                                                                    
MR. BELL answered Amendment 1.                                                                                                  
REPRESENTATIVE JOSEPHSON  sought to confirm that  the $37 million                                                               
in FY 23 was still being discussed.                                                                                             
MR. BELL clarified that if  the legislature were to forego paying                                                               
the additional  statutory royalties to the  principal and instead                                                               
pay  only  the  constitutionally  required   25  percent  to  the                                                               
principal  and 50  percent of  total royalties  to the  PFD, then                                                               
there would no longer be an ERA overdraw.                                                                                       
1:33:16 PM                                                                                                                    
REPRESENTATIVE    MERRICK    shared    her    understanding    of                                                               
Representative Schrage's questions as  "if [the legislature] paid                                                               
the constitutional requirements to  the permanent fund, then paid                                                               
100  percent of  the other  royalties."   She asked  Mr. Bell  to                                                               
1:33:42 PM                                                                                                                    
MR. BELL responded that there  would be larger deficits under the                                                               
proposed  scenario.   He explained  that if  the constitutionally                                                               
required 25  percent were  paid to the  principal and  the entire                                                               
remainder of royalties  was allocated to the dividend,  the FY 22                                                               
PFD would amount  to $1,700 and there would be  a deficit of $900                                                               
1:34:18 PM                                                                                                                    
REPRESENTATIVE WOOL asked Mr. Bell  what budget numbers were used                                                               
for his calculations.                                                                                                           
MR.  BELL  said  [the  division]  had been  working  off  of  the                                                               
governor's amended budget  and the capital budget  as outlined in                                                               
the Office  of Management  & Budget's (OMB's)  10-year plan.   He                                                               
highlighted  another  assumption  pertaining  to  permanent  fund                                                               
investment returns below the current fiscal year to date.                                                                       
1:35:13 PM                                                                                                                    
CHAIR SPOHNHOLZ [received  confirmation that Representative Story                                                               
had removed her objection to Amendment 1.]                                                                                      
REPRESENTATIVE  STORY recalled  someone else  had also  objected.                                                               
[It had been Representative Josephson.]                                                                                         
CHAIR SPOHNHOLZ asked if there was any further objection.                                                                       
1:35:19 PM                                                                                                                    
REPRESENTATIVE EASTMAN  objected.   He said  he believed  that if                                                               
Amendment 1  were to pass and  legislators were to exceed  the 50                                                               
percent  threshold  through  multiple appropriation  vehicles,  a                                                               
lawsuit would likely be engendered.                                                                                             
CHAIR  SPOHNHOLZ remarked,  "I  presume you  mean the  underlying                                                               
bill could potentially create that same situation."                                                                             
REPRESENTATIVE EASTMAN  replied, "Yeah, I'm trying  to figure out                                                               
how it doesn't, but I'm not seeing that."                                                                                       
CHAIR  SPOHNHOLZ  clarified for  the  public  that the  amendment                                                               
would only change "30" to "50."                                                                                                 
1:36:30 PM                                                                                                                    
A roll  call vote was  taken.  Representatives  Josephson, Story,                                                               
and  Spohnholz voted  in favor  of the  adoption of  Amendment 1.                                                               
Representatives  Wool, Schrage,  and  Eastman  voted against  it.                                                               
Therefore, Amendment 1 failed by a vote of 3-3.                                                                                 
1:37:32 PM                                                                                                                    
CHAIR  SPOHNHOLZ invited  further  discussion  on the  underlying                                                               
bill, HB 202.                                                                                                                   
1:37:41 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON shared  one reason that he  likes HB 202                                                               
is that it  wouldn't suffocate government.  He  recalled that oil                                                               
prices crashed  around fall 2014; therefore,  the legislature had                                                               
been  aware  of this  problem  for  seven years  while  generally                                                               
lacking  the courage  to do  something  about it  aside from  the                                                               
POMV.    He opined  that  the  proposed legislation  is  fiscally                                                               
responsible   because  it   wouldn't   interfere  with   publicly                                                               
requested services.   He stated  his intention to  support moving                                                               
the bill from committee if an objection were made.                                                                              
1:39:03 PM                                                                                                                    
REPRESENTATIVE SCHRAGE expressed his  general agreement with most                                                               
of the  statements from the  previous speaker.  He  believed that                                                               
HB  202 would  provide for  services that  the state  depends on,                                                               
such as roads and education,  regardless of one's income bracket.                                                               
Further, he  appreciated that the proposed  legislation would tie                                                               
dividends to natural resource production.   However, he expressed                                                               
his  concern that  out-of-state workers  come to  work in  Alaska                                                               
while contributing  nothing to the state,  which he characterized                                                               
as a "huge issue" that the  legislature will have to reconcile at                                                               
some point.  Nonetheless, he conveyed his support for the bill.                                                                 
1:40:21 PM                                                                                                                    
REPRESENTATIVE WOOL stated  his support for HB  202 and commended                                                               
its sustainability.   He indicated  that he was  comfortable with                                                               
30  percent going  towards the  dividend, which  could always  be                                                               
added to in the future.                                                                                                         
1:41:19 PM                                                                                                                    
REPRESENTATIVE STORY  said she would  have preferred the  bill if                                                               
Amendment 1 had passed; nonetheless,  she expressed her intent to                                                               
support  it.   She  reiterated  that  the legislation  would  not                                                               
eliminate the potential of increasing  the dividend through other                                                               
1:41:56 PM                                                                                                                    
REPRESENTATIVE  EASTMAN stated  that normally,  he doesn't  favor                                                               
holding bills  longer than necessary,  adding that he  would like                                                               
to vote  the bill  out of committee  so that he  could be  a "no"                                                               
vote and recommend that others do  the same.  However, he posited                                                               
that  because the  proposed  legislation is  not  trivial, as  it                                                               
recalculates the  dividend and would reduce  the current dividend                                                               
by 87  percent, the committee  should acquire more  feedback from                                                               
the  public  before  advancing  it   to  the  next  committee  of                                                               
referral.   He  said  he  would be  a  "no"  vote because  public                                                               
testimony had been limited, characterizing it as "bad process."                                                                 
1:42:51 PM                                                                                                                    
CHAIR  SPOHNHOLZ said  she  would  allow the  bill  to move  from                                                               
committee; however,  she emphasized that  she does not  support a                                                               
dividend of $450.   She shared a personal anecdote.   She advised                                                               
that  a dividend  of that  size would  be bad  for 95  percent of                                                               
Alaskans  and  only sufficient  for  those  who earn  upwards  of                                                               
$228,000 per year, which is only 5 percent of Alaskans.                                                                         
1:45:23 PM                                                                                                                    
REPRESENTATIVE WOOL moved to report  HB 202 out of committee with                                                               
individual recommendations.                                                                                                     
1:45:35 PM                                                                                                                    
REPRESENTATIVE EASTMAN objected.                                                                                                
1:45:37 PM                                                                                                                    
A roll call vote was  taken.  Representatives Josephson, Schrage,                                                               
Wool,  and  Story  voted  in  favor  of  reporting  HB  202  from                                                               
committee.   Representatives Eastman and Spohnholz  voted against                                                               
it.   Therefore, HB  202 was  reported out  of the  House Special                                                               
Committee on Ways and Means by a vote of 4-2.                                                                                   
[Although not stated on the record,  the vote was voided due to a                                                               
failure to mention the fiscal note.]                                                                                            
1:46:29 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
1:46:43 PM                                                                                                                    
REPRESENTATIVE WOOL moved to report  HB 202 out of committee with                                                               
individual recommendations and the accompanying fiscal notes.                                                                   
1:46:56 PM                                                                                                                    
REPRESENTATIVE EASTMAN maintained his objection.                                                                                
1:46:58 PM                                                                                                                    
A roll call vote was  taken.  Representatives Josephson, Schrage,                                                               
Wool,  and  Story  voted  in  favor  of  reporting  HB  202  from                                                               
committee.   Representatives Eastman and Spohnholz  voted against                                                               
it.   Therefore, HB  202 was  reported out  of the  House Special                                                               
Committee on Ways and Means by a vote of 4-2.                                                                                   

Document Name Date/Time Subjects
HB 202 Testimony - Support as of 5.15.21.pdf HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Testimony - Opposition as of 5.15.21.pdf HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Amendment #1.pdf HW&M 5/15/2021 11:30:00 AM
HB 202
HB 37 Testimony - AML Resolution 2019-06.pdf HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 202 Sponsor Statement 5.5.2021.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Sectional Analysis 5.5.2021.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Flowchart.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Fiscal Note OMB-PFD 5.9.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Fiscal Model Output REVISED.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 202 Testimony - Opposition as of 5.11.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HB 202
HB 37 Testimony - Opposition as of 5.15.21.pdf HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Sponsor Statement.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Sectional Analysis.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 ITEP Flat Tax Report 12.2020.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Note DOR-TAX - Updated 5.11.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Note DOA-OAH 5.7.21.pdf HW&M 5/11/2021 11:30:00 AM
HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Presentation 5.13.21.pdf HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37
HB 37 Fiscal Model.pdf HW&M 5/13/2021 11:30:00 AM
HW&M 5/15/2021 11:30:00 AM
HW&M 5/18/2021 11:30:00 AM
HB 37