Legislature(1999 - 2000)
05/22/1999 04:05 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 1001
"An Act authorizing an advisory vote on a long term
financial plan for the state; and providing for an
effective date."
This was the first hearing for this bill in the Senate
Finance Committee.
Co-Chair John Torgerson referred to a handout titled
"Balanced Budget Plan". (Copy on file.) He discussed the
components of the balanced budget plan, saying that the
first step is to transfer the Constitutional Budget Reserve
(CBR), earnings reserve and unrealized gains into the
Earning Reserve Account. Secondly, he explained the plan
stipulates using the market value of total assets approach
for inflation proofing the fund, for the calculation of
dividends and for payment of government services. He added
that this is similar to the approach proposed in the
earlier plan described in CS SB 76 (FIN), although the
current plan uses different calculations. He explained the
updated calculations multiply the market value of total
assets by 2.25 percent for inflation proofing the principal
of the Alaska permanent fund. The new calculations also
multiply the market value by 5.88 percent and distribute
that amount with 50 percent going to dividend payments and
50 percent going to payment of government services in lieu
of taxes.
Co-Chair John Torgerson continued describing the balanced
budget plan noting that it calls for mandatory deposits of
excess earnings into the constitutionally protected
principal of the permanent fund. He explained that anytime
the amount contained in the earnings reserve plus the CBR
is greater than one-third of the total assets of the
combined account of the permanent fund plus CBR plus
earnings reserve, the difference is automatically deposited
into the permanent fund account. He pointed out that these
adjustments would be made annually. Although the
particular language is not before the Committee as part of
the advisory vote legislation, he qualified that it is his
intent that the provision will be part of the statutory
element of the balanced budget plan. He expressed that
these deposits will be placed into the permanent fund and
therefore be constitutionally protected. In addition, he
remarked that this practice leaves adequate funds to
sustain volatility in the financial market and also survive
oil production declines or other difficulties.
Co-Chair John Torgerson then detailed the assumptions used
in the balanced budget plan as similar to the earlier
balanced budget plan. With the passage of HB 156, he told
the Committee the allocations to the Permanent Fund
Corporation are increased, which allows the fund managers
to realize a bigger return on the total assets. The new
rate of return is estimated at 8.13 percent, he shared, and
noted that assumption is implemented into the plan.
Co-Chair John Torgerson said the plan assumes no new
revenues for fiscal year 2000, $50 million in new revenues
for FY01, an additional $25 million for FY02, another $25
million for FY03 and $25 million for FY10. He also noted
that the plan calls for reductions in government spending
of $30 million each for fiscal years 2000 and 2001, and no
overall spending reduction in FY02. He continued describing
the funding allocations, saying the plan requires flat
funding for all government services except for a 1.45-
percent compounded increase each year for K-12 education in
FY01, FY02 and FY03. He stated that statistics show
historic population growth at the 1.45 percent allocated
under this plan for education services. He commented that
the legislature has always increased K-12 education funding
to provide for population increases.
Co-Chair John Torgerson outlined the projected dividend
amounts under this plan from 1999 through 2010 using the
calculation provisions explained earlier. He noted that
the permanent fund managers provided the figures using the
assumptions of the plan. He noted that the dividend could
actually be $1835 or higher for FY00, but that the
spreadsheet shows a conservative figure of $1712.
Co-Chair John Torgerson concluded his presentation of this
balanced budget plan pointing out that the total assets in
20 years is projected to be $51 billion.
PHIL OKESON, Fiscal Analyst, Division of Legislative
Finance addressed the spreadsheet provided by the Division
of Legislative Finance; one page of graphs dated 5/22/99,
3:51 PM, six pages of figures dated 5/22/99, 2:34 PM and
the remaining two pages of figures dated 5/22/99 2:37 PM.
(Copy on file.) He began with the graphs, showing that in
the first two years of the plan, the dividend will payout
at approximately $1700. In FY01, he explained, the
dividend will be reduced to about $1399 then grow each year
throughout the remainder of the plan. He pointed out that
the dividend amounts grow with the market value of the
fund. He qualified that there is a possibility that the
fund would go down, but that over the long-term, the
dividend would average $1500 annually.
Senator Dave Donley asked how this compares to the House's
version of a balanced budget plan. Phil Okeson answered HB
231 proposes reducing the dividend to $1000 in FY01 and
growing from that amount. Co-Chair John Torgerson disclosed
that the other body is considering SB 1001. He believed the
House Finance Committee would be holding a meeting later in
the day to take up a similar proposal.
Senator Randy Phillips wanted to know what happens if no
action is taken on a balanced budget plan. Phil Okeson
repeated testimony he gave in earlier presentations saying
that the dividends would be higher for the first years.
However, he warned that as the savings account is depleted,
the dividend would begin to spike up around 2007 and peak
in 2011 but then crash shortly thereafter. At that point,
the dividend would only amount to about $100.
Senator Randy Phillips asked the witness to explain how the
savings account would be depleted.
Phil Okeson relayed that under the "do nothing plan", in
the early years the CBR would be emptied paying for
government services. He explained that this assumption is
based on historical use of state assets. The next step
under the same assumption is to utilize the earnings
reserve, he stated.
Phil Okeson continued saying that once the earnings reserve
is used up and higher dividends have been paid out for
several years, the next assumption is to tap the unrealized
gains. He explained that the current method of calculating
the dividend uses the proceeds of unrealized gains once
they are realized i.e. once assets are sold, a portion of
the profits must be paid out as part of the dividends. He
warned that although this causes the dividends to increase,
the principal of the fund decreases, and by about 2011, the
fund is exhausted. At that time, he admonished, the State
Of Alaska has no savings account and the only choices are
to make drastic cuts to government services, to impose
taxes or institute a combination of the two. Before that
stage is reached, he predicted the "do nothing plan" would
eliminate the dividend program and use the proceeds of the
permanent fund to pay for government services. Either way,
he asserted, there would be a substantial drop in the
dividend.
Phil Okeson observed another disadvantage to the "do
nothing" approach to the budget situation. He pointed out
that if there were four or five consecutive "flat years" in
the market, the dividend amount would be very low
regardless. He stressed that this is a technical problem
and is caused by the calculation of the dividend based on
earnings instead of on the market value of the fund. He
stated that the current plan before the Committee changes
the dividend calculation to a percentage of market value
and therefore makes the dividend program stable for all
Alaskans. He related the Division of the Permanent Fund
agrees that this dividend calculation change is preferable
to the status quo.
Senator Robin Taylor asked if calculations had been done
incorporating a possible constitutional amendment requiring
a stipulated allotment of earnings. Phil Okeson said the
Division of Legislative Finance had looked at various
scenarios of a "40-30-30 split" of earnings and concluded
there would be little to gain from this method. The
problems associated with using the realized gains to
calculate the dividend would still exist, he stressed. He
cited advice given by Callan and Associates and the
managers of the permanent fund to support this assertion.
He granted that if a "40-30-30 split" of a percent of
market value of assets were used, the problems related to
the unrealized gain usage would be solved. He noted that
the current proposed plan is similar to that split with
some variances in the ratios. He quoted the calculated
split under the balanced budget plan at approximately 28-
36-36.
Senator Robin Taylor clarified that under the "do nothing"
approach the assumption is that government would deplete
all of the income from the permanent fund in about twelve
years. He asked if that assumption precludes any income
taxes or other form of new revenue sources. Phil Okeson
admitted it did not, but noted that in order for new
revenue to avert the depletion of the earnings reserve it
would have to be very large - over $500 million.
Senator Robin Taylor asked if that new revenue would need
to be similar to revenues generated from oil production on
the Arctic National Wildlife Refuge (ANWR). Phil Okeson
replied he had not seen revenue projections on ANWR, but
assumed that if the amount was similar to revenues
generated on the North Slope, the income would help the
stem the use of the earnings reserve under the "do nothing"
plan.
Senator Loren Leman challenged the "28-36-36 split"
numbers, noting that inflation proofing was not taken into
account. He indicated a desire to review the data at a
later time.
Phil Okeson continued his presentation referring to the
graph, Projected Savings Account Balance vs. Inflation
Adjusted Balance, showing the intergenerational equity
line. This line relates the financial situation of the
current generation to that of future generations. If the
line is higher, future generations will be better off than
the current generation; if the line is lower, future
generations will have less than the current generation;
equal lines mean both generations will be in the same
position. He stated that the proposed balanced budget plan
works fairly well at keeping the generations in balance. He
compared this plan to previous proposals, which held the
intergenerational line above this plan's. He shared advice
given to him by a finance professor that "there is no such
thing as a free lunch." Therefore, Phil Okeson cautioned
that in order to achieve a higher dividend, the
intergenerational equity line must come down and remove
some of the cushion for future generations. He qualified
that the median of this plan keeps the purchasing power of
the assets maintained at an acceptable level.
Senator Sean Parnell clarified that the graph shows that
under this plan, future generations would have the same
earnings power in the permanent fund as this generation
currently has. Phil Okeson affirmed and added this
equality applies to all state assets including the
permanent fund.
Phil Okeson next addressed the graph titled, Alaska's
Savings Accounts. He pointed out that the CBR remains in
existence even after the year 2000 under the balanced
budget plan, because the transfer is not made until 2001.
He showed where the CBR, the earnings reserve account and
the unrealized gain are located on the graph. He admitted
he had not had time to incorporate the shifting of excess
earnings provision of the plan into this graph, noting that
the figures were currently out of balance. He explained how
the unrealized gains and the earnings reserve reach an
amount greater than one-third of the total assets in the
later years of the plan and that this current plan
stipulates transferring a portion of the unrealized gains
and earnings reserve into the corpus of the permanent fund.
He stated that these transfers would help keep the accounts
in balance.
Phil Okeson shared that he had spoken with the Division of
the Permanent Fund about how to balance the need to
constitutionally protect the fund with the need to provide
a cushion in case of a major market downturn. The
recommendation the division gave was that a one-third to
two-thirds split is adequate. He noted that the division
would be looking at the matter in greater detail. The goal
is to find the amount most reasonable to keep in each
account, according to Phil Okeson.
Phil Okeson turned to the graph titled, Total Spending and
pointing out the difference between this plan and previous
plans is a greater increase of the dividend line. He
explained this reflects the larger dividends paid under
this plan.
Senator Loren Leman clarified that the plan inflation
proofs the fund first and then applies a portion of the
remaining amount to the 5.88 percent that is split between
the dividend and government expenditures. However, he noted
that he calculated the split to be 34-31-35. Co-Chair John
Torgerson said he thought the payout rate is higher under
the current plan. There was discussion to clarify the 2.94
percent allotted to the dividend using the same base
amount. Co-Chair John Torgerson stated that the multipliers
are somewhat different under this plan and that the
predictions of 36-36-28 are correct.
Senator Loren Leman then addressed the provision in the
plan to take the excess earnings and redeposit them into
the corpus of the fund. He pointed out that only two-thirds
of the excess earnings would actually be transferred and
that one-third would remain in the unrealized gains
account. Phil Okeson affirmed and stated that the goal is
to maintain a one-third to two-thirds balance in the
distribution of the fund.
Senator Loren Leman asked if the adjustments would be made
annually. Co-Chair John Torgerson stated that the matter of
detailing the balancing of the fund wasn't officially
before the Committee. Therefore, he believed there would be
time to work out the details with the Division of Permanent
Fund so long as the intent of the one-third to two-thirds
balance was approved. He reminded the Committee that the
division has reserved the right to make a different
recommendation after further reviewing the matter.
Senator Gary Wilken requested the witness detail the 2.25
percent market value calculations and then show the fifty-
fifty split (dividend and governmental services) on a
spreadsheet. He was having difficulty calculating the
split. Phil Okeson noted that the information was not
prepared at this time. Senator Gary Wilken asked for a
spreadsheet to reflect the Balanced Budget Plan.
Senator Al Adams commented that the figures shown for this
plan use 2.25 percent of full market value to inflation
proof the permanent fund while previous plans used a three-
percent calculation. He asked if either amount follows the
calculations required in statute.
Phil Okeson replied that the 2.25 percent method is an
attempt to reach the same result as the current statutory
inflation rate. He explained that in order to provide a
higher dividend, the method of inflation proofing the fund
needs to be closer to the current method. Therefore, he
said, it was determined to use a 2.25 percent rather than
the three-percent earlier proposed.
Senator Al Adams then asked what would be the actual
percentage needed to inflation-proof the fund and still
stay within the directives of statute, disregarding the
amount of dividends.
Co-Chair John Torgerson responded that the 2.25 percent is
the correct figure to use for inflation-proofing the fund.
He explained that this figure assumes a three-percent
inflation on the corpus of the fund less the CBR, the
unrealized gains and the earnings reserve, which had never
been inflation-proofed in the past. When that amount is
subtracted from the expected earnings of 8.13 percent of
the permanent fund, the result is 2.25 percent, according
to Co-Chair John Torgerson.
Senator Al Adams surmised that it is a policy call to only
inflation-proof the permanent fund corpus and not
inflation-proof the earnings or the unrealized gains. Co-
Chair John Torgerson replied that the practice is not a
policy call, but in existing law.
Phil Okeson expounded showing on a spreadsheet how the
inflation proofing is done. He detailed the intent to allow
for a three-percent inflation rate in the next year,
although models were not yet available to predict the
actual inflation rate. A higher percentage than the normal
inflation rate is used with the extra earmarked to
inflation-proof the permanent fund, he explained. He
summarized saying that the goal of the plan is to inflation
proof the permanent fund much the same way as the current
practice.
Senator Al Adams asked what would happen if the market
value fell below the 5.88 percent and the earnings
projections cannot be met. Phil Okeson remarked this is
the main advantage of using a market value of assets
approach rather than an earnings approach to calculate the
dividend. He explained that the market value approach gives
a cushion so money is always available for the dividends.
He cautioned that the cushion must be adequate and that
causes a concern with having a one-third to two-thirds
balance between the CBR, earnings reserve and unrealized
gains and the corpus of the entire fund. He continued
speaking on the possibility of a three or four year "flat
market" and how an adequate cushion allowed under the
market value approach protects the assets of the permanent
fund.
Senator Al Adams wanted to know if anyone from the Division
of the Permanent Fund was present to attest to this
information. Co-Chair John Torgerson related that prior
conversations he had with the fund managers indicated that
they are neutral on the use of the fund in this manner. He
stressed that the fund manager's main concern is that the
chosen market value approach method balances, which he
assured this plan does balance.
Senator Pete Kelly referred to comments the witness made on
the possibility of infusion into the fund of large amounts
of new revenue and how the dividend would be affected. He
also referred to scenarios presented showing the state's
fiscal situation if no changes were made except budget
cuts. He asked what years the permanent fund would be
depleted in these situations.
Phil Okeson responded that the amount of budget reductions
would need to be determined. He cautioned that permanent
fund earnings would still be needed because of the billion-
dollar deficit, but that if five to six hundred million
dollars in sustainable budget reductions were made, the
fund could last up to twenty years longer.
Senator Robin Taylor remarked that the balanced budget plan
allows for no growth in the Alaskan economy. Co-Chair John
Torgerson challenged that statement, saying that future oil
and gas revenue is factored in the plan. He qualified that
ANWAR revenues were not included in the plan, but noted
that is because there is no authorization to develop the
refuge.
Amendment #1: This amendment inserts language on page 2
line 9 of the committee substitute following "years." The
added language reads, "Submit a proposed constitutional
amendment to the voters that would reduce the base amount
of annual appropriations in art. IX, sec. 16, Constitution
of the State Of Alaska, from $2,500,000,000 to
$2,000,000,000 and make other changes to establish a
meaningful appropriation limit." Senator Dave Donley
indicated that he would not offer this amendment and the
amendment was HELD.
Amendment #2: This amendment replaces the advisory vote
ballot language relating to Plan A to read as follows:
Balanced Budget Plan: This will preserve the
permanent fund dividend, inflation-proof the
permanent fund, support public services, and
establish a citizen Revenue Task Force. The
plan will
(1) Protect the Permanent Fund: The principal
of the Alaska permanent fund will remain
untouched and inflation-proofed to protect
the value of the fund for current and
future generations.
(2) Preserve the Dividend: Dividend payments to
qualified Alaskans are continued, and the
dividend will grow over time. Dividends
will be paid based on the market value of
the Alaska Permanent fund. The dividends
payable are projected to be as follows:
1999 = $1,740, 2000 = $1,700 and thereafter
at approximately $1,394 and higher.
(3) Reduce Spending: Reduce state general fund
spending for fiscal years 2000 and 2001.
(4) Public Accountability: All permanent fund
expenditures will be disclosed to each
Alaskan who receives a permanent fund
dividend check.
(5) Explore Revenue Options: Establish a
citizen's Revenue Task Force to present
options to identify revenue sources.
(6) No Income Tax: No personal income tax will
be enacted as part of this plan.
Senator Sean Parnell moved for adoption. He explained that
the House of Representatives adopted this language in HB
231. He assured the Committee that this amendment
preserves the two choices on the ballot, although he
inserted the projected dividend amounts.
Senator Randy Phillips asked if the amount of anticipated
spending reductions would be specified in the ballot
language. Co-Chair John Torgerson replied that the
reductions were addressed in the text of the balance budget
plan. Senator Randy Phillips referred to distinctions made
in earlier ballot language adopted by the Committee.
Senator Lyda Green questioned the amendment's title of the
forth descriptive paragraph of Plan A, Public
Accountability. She interpreted the title to mean that the
public will be held accountable, when the intent is for the
legislature to be accountable to the public.
Senator Sean Parnell moved to amend Amendment #2 (a) to
delete "Public" from the title of the forth descriptive
paragraph. Without objection, the amendment to the
amendment was adopted and Amendment #2 was AMENDED.
Senator Dave Donley commented that the amendment proposes
implementing a recommendation made by the governor to
create a citizen's revenue task force. Senator Dave Donley
believed that if there is to be a citizen's tax force on
revenue, there should also be a citizen's task force on
spending reductions. He spoke of an earlier commission on
long-range fiscal policy that was statutorily charged with
making recommendations for budget reductions but did not
actually do that.
Senator Sean Parnell asked if Senator Dave Donley intended
to create two separate task forces or one task force to
address both revenue and spending reductions. Senator Dave
Donley replied that he felt there is a need for two
committees because the earlier commission assigned with
both budget aspects only preformed half its duties and
never recommended any budget reductions.
Senator Randy Phillips suggested amending the amendment's
third descriptive paragraph of Plan A, Reduce Spending, by
inserting language providing for the establishment of a
citizen's review committee to identify spending reductions.
Senator Sean Parnell moved to amend the amended Amendment
and a" [citizen Revenue Task Force] in the summary of Plan
A. He noted that conforming language could also be inserted
elsewhere in the ballot language.
Senator Loren Leman cautioned against setting up task
forces, who served and how long they functioned. He
stressed the bottom line is that the Legislature is the
task force for Alaska. While he supported public input, he
did not want the legislature to "pass the buck." Co-Chair
John Torgerson commented that it sometimes helped to have
additional input and he approved of the creation of task
forces for this purpose.
Without objection, the amendment to the amended amendment
was ADOPTED.
The discussion continued with Senator Sean Parnell agreeing
with Senator Randy Phillips's earlier suggestion to create
an oversight committee on spending reductions along with a
committee to review new revenues. Senator Sean Parnell
moved to amend the amended Amendment #2 (c) to change the
fifth descriptive paragraph of Plan A to read, "Explore
Spending Reductions and Revenue Options: Establish a
citizen's Spending Reduction Task Force and a citizen's
Revenue Task Force to present options to identify spending
reductions and revenue sources." Senator Sean Parnell
expressed that this amendment shows the public that
oversight is given to "both sides of the ledger."
The amendment to the amended amendment was ADOPTED without
objection.
Senator Randy Phillips moved to amend the amended Amendment
paragraph of Plan A. This changes the language to read,
"reduce state general fund spending $60 million for fiscal
years 2000 and 2001."
Senator Dave Donley stated that this language was ambiguous
because it did not state whether $60 million in reductions
would be made in each of the two fiscal years or if a total
of $60 million would be made over the two fiscal years. He
had a suggestion to clarify the language. Senator Randy
Phillips and Senator Dave Donley discussed possible
language.
Senator Randy Phillips moved to withdraw his motion to
amend the amended amendment #2 (d). Senator Al Adams
objected. He stated that the Minority would agree to a
reduction in general fund spending but could not agree to a
set dollar amount. Co-Chair John Torgerson commented that
the governor agreed to the $60 million figure.
Tape: SFC - 99 SS1 #1, Side B
By roll call vote of 8-1, the amendment was WITHDRAWN.
Senator Al Adams voted cast the nay vote.
Senator Randy Phillips moved to amend the amended Amendment
paragraph of Plan A with, "Reduce state general fund
spending at least $60 million over the next two fiscal
years, 2000 and 2001." Senator Al Adams objected and
restated his opposition to assigning a definite amount to
the budget reductions.
The amendment to the amended amendment was ADOPTED by a
vote of 8-1. Senator Al Adams voted in opposition.
Senator Al Adams objected to the adoption of the amended
Amendment #2. The amendment as amended read as follows:
Balanced Budget Plan: This will preserve the
permanent fund dividend, inflation-proof the
permanent fund, support public services, and
establish a citizen Spending Reduction Task
Force and a citizen Revenue Task Force. The
plan will
(1) Protect the Permanent Fund: The principal
of the Alaska permanent fund will remain
untouched and inflation-proofed to protect
the value of the fund for current and
future generations.
(2) Preserve the Dividend: Dividend payments to
qualified Alaskans are continued, and the
dividend will grow over time. Dividends
will be paid based on the market value of
the Alaska Permanent fund. The dividends
payable are projected to be as follows:
1999 = $1,740, 2000 = $1,700 and thereafter
at approximately $1,394 and higher.
(3) Reduce Spending: Reduce state general fund
spending at least $60 million over the next
two fiscal years, 2000 and 2001.
(4) Accountability: All permanent fund
expenditures will be disclosed to each
Alaskan who receives a permanent fund
dividend check.
(5) Explore Spending Reductions and Revenue
Options: Establish a citizen's Spending
Reduction Task force and a citizen's
Revenue Task Force to present options to
identify spending reductions and revenue
sources.
(6) No Income Tax: No personal income tax will
be enacted as part of this plan.
Amendment #2 as amended, was ADOPTED by a vote of 8-1.
Senator Al Adams voted against adoption.
Amendment #1: This amendment inserts language on page 2
line 9 of the committee substitute following "years." The
added language reads, "Submit a proposed constitutional
amendment to the voters that would reduce the base amount
of annual appropriations in art. IX, sec. 16, Constitution
of the State Of Alaska, from $2,500,000,000 to
$2,000,000,000 and make other changes to establish a
meaningful appropriation limit." Senator Dave Donley moved
for adoption, stating that the amendment incorporates
language into Plan A providing for, "the concept of
submitting a constitutional spending limit to the voters in
the future." He explained that the existing constitutional
spending limit is not enforced. For example, he cited that
the constitutional amendment stipulates that one-third of
total expenditures is devoted to capital projects, which is
not currently done.
Senator Dave Donley technically AMENDED the amendment to
delete, "from $2,500,000,000 to $2,000,000,000". He
expressed his intent to establish a meaningful
appropriation limit when the new constitutional amendment
is drafted. He also wanted the new constitutional spending
limit to contain the spending reduction provisions included
in Plan A.
Senator Dave Donley stated he wanted discussion on the
constitutional spending limit option as the reason for his
motion to adopt the amended Amendment #1. Senator Al Adams
and Senator Pete Kelly objected.
Senator Al Adams asked if the reduction from $2.5 billion
to $2 billion only applies to the operating budget. Senator
Dave Donley answered that the reduction applies to both the
operating and the capital budgets. He explained that the
concept is to pattern an amendment similar to the existing
constitutional appropriation amendment, but to make the
constitutional amendment meaningful. He wanted the
constitutional spending limit to facilitate the goals that
are included in Plan A.
AT EASE until 5:06PM
Senator Gary Wilken said he would be supporting Amendment
documentation to show the true effect or to give guidance
in future deliberations. He stated that more work needed to
be done to determine the ramifications of the amendment.
Co-Chair John Torgerson concurred, and added that if the
figures had been left in the amendment he would have been
compelled to oppose the amendment for the same reason.
However, he agreed with idea of submitting a constitutional
spending limit to the voters.
Senator Sean Parnell assumed the language in this amendment
would be inserted into the description of Plan A and asked
for the exact location. Senator Dave Donley replied that
Amendment #1 language as amended would be inserted as a new
sentence in the third descriptive paragraph of the amended
Amendment #2. He moved a conforming amendment to instruct
the bill drafters to make necessary changes to insert the
amended Amendment #1 language into the amended Amendment
Senator Pete Kelly was concerned that a constitutional
amendment was not before the Committee. He wanted to know
if other states had similar constitutional spending limits
that are successful that could be studied as a model.
Co-Chair John Torgerson referred to Proposition 13 from the
State of California, although he was unsure whether that
spending limit actually works.
Senator Dave Donley asserted that Alaska is the best model
with twelve years of experience with the existing
constitutional amendment. He qualified that the current
constitutional spending limit is problematic in its
drafting and the court's interpretation of its meaning.
However, he believed that improvements could be made to the
current constitution.
Senator Lyda Green asked if changes to the state
constitution were necessary before any of the proposed
versions of a balanced budget plan could be implemented.
She was not convinced that the provisions spoken about in
the various plans abided by the constitution.
Co-Chair John Torgerson stated the only way the spending
limit could be changed is through another amendment to the
constitution. It would take a vote by the people of Alaska
to enact a constitutional amendment, he advised. Statutory
changes, he added, are what will be necessary to implement
the balanced budget plan, once voters approve it through
the advisory vote.
Senator Lyda Green expressed concern that it would be
confusing to voters to insert language into Plan A on the
ballot relating to a future constitutional spending limit.
Co-Chair John Torgerson said it is his intention to not
recommend a set amount of reductions. He reiterated that
this election is simply an advisory vote to inform the
public of the intent of the legislature.
By a vote of 8-1, Amendment #1 was AMENDED and ADOPTED.
Senator Al Adams voted against the amended amendment.
Senator Randy Phillips asked if the intent is to place two
separate plans before the voters. That was determined to be
correct.
Senator Sean Parnell MOVED CSSB 1001(FIN). Senator Al
Adams OBJECTED.
Senator Randy Phillips said he would prefer if only one
plan were on the ballot with voters casting yes or no votes
on that plan. He cautioned that by offering two plans, the
legislature would not gain a clear direction of where
Alaskans wish to be fiscally, in the next five or ten
years.
Senator Randy Phillips offered a conceptual Amendment #3 to
remove Plan B from the advisory ballot.
Senator Sean Parnell moved to withdraw his motion to report
the bill from Committee to allow for consideration of
Amendment #3. Without objection, the motion to report the
bill from Committee was WITHDRAWN.
Senator Randy Phillips WITHDREW Amendment #3, saying he
would offer it in the Senate Chambers.
Senator Sean Parnell offered a motion to report from
Committee, CS SB 1001(FIN). Senator Al Adams objected. By
a roll call vote of 8-1, the bill was REPORTED OUT with
individual recommendations and a fiscal note from the
Governor, Division of Elections in the amount of $939.
Senator Al Adams cast the nay vote.
Co-Chair John Torgerson noted for the record that the cost
of the fiscal note is accounted for in the FY00 capital
budget.
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