Legislature(2003 - 2004)
06/22/2004 03:08 PM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE JOINT RESOLUTION NO. 101
Proposing amendments to the Constitution of the State of
Alaska relating to and limiting appropriations from the Alaska
permanent fund based on an averaged percent of the fund market
value.
SENATE JOINT RESOLUTION NO. 102
Proposing amendments to the Constitution of the State of
Alaska relating to and limiting appropriations from the Alaska
permanent fund based on an averaged percent of the fund market
value and relating to permanent fund dividend payments.
SENATE JOINT RESOLUTION NO. 103
Proposing amendments to the Constitution of the State of
Alaska relating to an appropriation limit.
SENATE BILL NO. 1003
"An Act relating to the income of and appropriations from the
Alaska permanent fund under art. IX, sec. 15(b), Constitution
of the State of Alaska, and making conforming amendments;
relating to permanent fund dividend payments of at least
$1,000; relating to the determination of net income of the
mental health trust fund; and providing for an effective
date."
SENATE BILL NO. 1004
"An Act providing for and relating to the issuance of general
obligation bonds for the purpose of paying the cost of design,
construction, and major maintenance of facilities at the
University of Alaska; and providing for an effective date."
SENATE BILL NO. 1005
"An Act providing for and relating to the issuance of general
obligation bonds for the purpose of paying the cost of state
surface transportation projects; and providing for an
effective date."
This was the first hearing for these bills in the Senate Finance
Committee.
GOVERNOR FRANK MURKOWSKI stressed that this special session was
necessary in order to further efforts to resolve the State's fiscal
dilemma. While there are differing opinions about how to address
the State's fiscal crisis, it could be agreed upon that Alaskans
are looking for and expect a solution from the Legislature. He
recounted that today's Anchorage Daily News newspaper contains an
editorial titled "Let's see some action" as well as an
advertisement from the Conference of Alaskans urging consideration
be given to their recommendations regarding how to remedy the
fiscal situation.
Governor Murkowski stated that one of the "paramount" issues of
this deliberation would be the decision regarding whether or not to
authorize that no more than five-percent of the value of the
Permanent Fund could be spent in support of State government. Were
this Percent of Market Value (POMV) proposal supported, the next
decision would entail how that process should be implemented. The
State has been dealing with its fiscal situation for more than a
decade. He urged that a bipartisan solution be developed.
Governor Murkowski stated that the convening of the Conference of
Alaskans this year was a different approach to addressing the
State's fiscal dilemma. The Conference Delegates recognized that
there is a problem and developed recommendations through which to
address the fiscal issue. In addition, the Legislature listened to
presentations from national bond rating agencies that portrayed
that the State's "bond rating is in jeopardy." The Committee would
be discussing, today, bond proposals amounting to $76 million
dollars for transportation enhancements as well as approximately
$36 million in University of Alaska bond authorizations.
Governor Murkowski reiterated that the State's citizens want a
resolution to the State's fiscal dilemma. In addition to the $410
increase that the Legislature authorized for the Student Foundation
Funding Formula this year, additional monies would be required to
appropriately fund education. The Constitutional Budget Reserve
(CBR), the Permanent Fund's Earnings Reserve Account (ERA) and
other funding sources could be utilized to support education. He
reminded the Committee of his support for establishing a minimum
CBR balance in order to address cash flow needs and to recognize
that the price of crude oil "would eventually go down." In
addition, he cautioned that State communities, especially Rural
communities, would also require assistance, particularly for
expenses such as fuel. He provided a detail sheet titled "Examples
of community dividend distribution:" [copy on file] that depicts
the various components of the allocation distributions proposed in
SJR 102. This proposal would allocate approximately $70 million to
communities by distributing, for example, $25,000 to each small
community plus $87 per resident. Large communities such as
Anchorage would receive $24 million and Fairbanks would receive
seven million dollars.
Governor Murkowski stated that this Special Session was called
because the Legislature did not develop a fiscal solution during
the Twenty-Third Alaska State Legislature. The Conference of
Alaskans adopted recommendations. The House of Representatives
adopted a Percent of Market Value (POMV) proposal and the Senate
did not.
Governor Murkowski stated that his Administration has developed
legislation that would meet the needs of most Alaskans: The terms
proposed in SB 1003 are simple; the State's citizens must be
assured that they would receive a dividend. The proposal would
guarantee a minimum Dividend of $1,000 or 50-percent of the five
percent of the value of the Permanent Fund (PF), whichever is
greater. The dividend would grow with the PF over time. He noted
that when the gas pipeline and other resource developments come to
fruition, the State would not require money from the PF. However,
this "bridge" would be required until those supplemental revenue
sources become available. Forty-five percent of the fifty-percent
balance of the five percent of the value of the PF would be used to
support education and five-percent of the amount would provide
dividends to local governments.
Governor Murkowski also stated that a Constitutional Spending Limit
must be implemented in order to limit or reduce government
spending. In 18 months, State spending was reduced $245 million,
and, even thought the education budget was increased $88 million
this year, the overall FY 05 budget only increased by $17 million.
State government staffing positions have been reduced by
approximately 400 positions. He thanked the Legislators for their
efforts in reducing the rate of State government growth.
Governor Murkowski stated that efforts must be made over the next
decade to increase oil production, construct a gas line, extent the
Alaska Railroad lines, open new mines, grow the economy, and
develop new revenue streams. This is the time frame designated in
SB 1003: the plan would be enacted for 10 years and then terminate.
The dividend component would not be enshrined in the Constitution
and would terminate at the end of ten years. The proposal would be
accommodated by "modernizing the Fund as an endowment and spending
a limited amount of its income." This would guarantee dividends,
guarantee funding for education, and guarantee assistance for local
governments. Through modernizing the Fund's management and spending
five-percent of its income, the Fund would continue to grow. The
Fund earned $4.1 billion dollars the previous year. This 50/45/5
percent split proposal would cost approximately $1.3 billion.
Governor Murkowski declared that a long-term fiscal plan would
assist the State in increasing job opportunities and would assure
the business community that the State is a good place to invest. It
would continue the State's excellent credit rating, and thereby
allow for bonds to be available at good interest rates to support
State projects.
Governor Murkowski urged the Legislators to address these proposals
and allow the State's citizens to vote on them. The alternate
choice would be to raise revenue or deplete the Earnings Reserve
Account after the CBR were depleted. Let the public vote on these
issues and make the decision. Polls reflect that 71-percent of
Alaskans feel they have the right to vote on whether or not to
utilize Permanent Fund earnings. 59-percent of those polled would
support a minimum $1,000 Dividend.
Governor Murkowski remarked that the Administration's proposals are
"just a plan" that was drafted to address Alaskans' concerns. They
could be altered. He urged that through compromise, the issues
could be resolved. In addition to the fiscal proposals he
highlighted, there is also a proposal through which to address
workers' compensation issues that would reduce expenses to small
businesses and a proposal to increase the tobacco tax in order to
address health issues.
Governor Murkowski concluded his remarks.
Senator Dyson expressed concern with the proposal to utilize the
principal of the Permanent Fund even were a ten-year provision
included. In addition, the funding priorities specified in the
proposal appear to place more importance on the specified
components and his concern is that funding for such things as law
enforcement, which is not an identified component, would be
jeopardized.
Governor Murkowski acknowledged the concern, but pointed out that,
the protection of the PFD is paramount to the public's "prevailing
attitude." Education is their second highest priority. Public
health and safety are among the top five public concerns. He noted
that the number of Alaska State Troopers has increased and attempts
have been made to further health care concerns such as prescriptive
medication expenses. The proposal before the Committee would allow
for the amount of the PFD to be declared each year based on a five-
year average of the value of the Fund. The proposal would guarantee
that the Dividend would be paid as supported by the citizens. The
process would be re-evaluated at the end of the ten-year period.
This is an effort to address the public's position in this regard.
He emphasized that rather than abandoning this issue were this
proposal unacceptable, Legislators could approach it differently.
He urged them to address it.
Senator Dyson addressed the comment that, were a spending plan not
adopted, the choices would be to either utilize the CBR and the ERA
or increase taxation. However, a third option, which would be a
further reduction in State spending, was not addressed. Therefore,
he asked what efforts are being taken by the Administration, and in
particular the Department of Health and Social Services, to
streamline operations and further contain spending. Further
reductions in State spending are his top priority. He pointed out
that the fact that the FY 05 overall budget is only $17 million
more than FY 04, even with the $88 million increase for education,
signifies the efforts made by the Legislature to reduce spending.
Further cooperation with the Administration in this regard would be
beneficial. He opined that even were the Administration's Spending
Limit, POMV, and the 50/45/5 proposals adopted, without an increase
in revenues through taxation, funding from the CBR and eventually
the ERA would be required next year. A "disservice" would continue
to be provided to education, as, in order to adequately fund it
were the price of oil to decline, funding from the CBR would be
required. In conclusion, he asked whether further reductions to
State government would be required in order to address the State's
fiscal situation.
Governor Murkowski stated that he would welcome recommendations
from the Legislature in this regard.
Senator Bunde asked the Governor's response were the Legislature to
address these proposals in a Statutory manner rather than to
further them via a statewide ballot proposal process. He warned
that a vote of the people might preclude the Legislature from
utilizing Permanent Fund earnings for an extensive period of time
rather than allowing them to use it.
Governor Murkowski expressed that he is aware that the Legislature
has this authority. That right would not be challenged. However, he
communicated the belief that a vote of the people should be allowed
when a change in the Permanent Fund is being proposed.
Co-Chair Wilken thanked the Governor for his comments.
Co-Chair Wilken announced that Ms. Frasca would be presenting brief
overviews on the bills.
CHERYL FRASCA, Director, Office of Budget and Management, Office of
the Governor, stated that SJR 101 mirrors the HJR 26-CONST. AM:
PERMANENT FUND P.O.M.V legislation that passed the House of
Representatives at the end of the second session of the Twenty-
Third Alaska State Legislature. It proposes that five percent of
the value of the Permanent Fund could be appropriated.
Ms. Frasca stated that SJR 102 is the Constitutional distribution
legislation that would specify that fifty-percent of the five-
percent of Fund Value POMV proposal allotment would support a
minimum $1,000 PFD and the fifty-percent balance of that allotment
would be divvied up with 45-percent going to support education and
five-percent going to support local communities.
Ms. Frasca stated that SB 1003 would mirror SJR 102 with the
exception being that the provisions would be enacted Statutorily
rather than Constitutionally. This approach would address Senator
Bunde and Senator Dyson's concerns.
Ms. Frasca stated that the level of the Permanent Fund, as it is
currently formulated, could be very volatile in the future. Were
SJR 102 enacted, the PFD amount declared in October 2005 would be
$1,000. At status quo, there is a 24-percent chance that it would
be at that level. This would be further addressed in forthcoming
testimony from the Permanent Fund Corporation Executive Director,
Robert Storer.
Ms. Frasca stated that the 45-percent to education proposal would
assist in addressing future Public Employee Retirement System
(PERS) and Teacher Retirement System (TRS) obligation expenses to
school districts. The FY 05 obligation is projected to amount to
$39 million with another $130 million projected for the following
three years. This would be a challenge. The 45-percent to education
proposal would provide a solid funding base through which to
support the K-12 student foundation funding formula and the
University of Alaska. In FY 05, $970 million would be provided to
support the K-12 formula and the University.
Ms. Frasca stated that the five-percent to local governments would
provide funding to State communities. She referenced a Department
of Community and Economic Development handout, titled "Examples of
community dividend distribution" [copy on file] that depicts
various community allocations, but noted that the Legislature would
have the final determination in this allocation. In addition to the
challenge of funding fuel expenses, local communities must also
provide an estimated $22 million in PERS expenses in FY 05 and $61
million over the following three years.
Ms. Frasca clarified that while SJR 102 contains a ten-year
Constitutional termination date, SB 1003 does not, as changes in
Statute could be made by a majority vote.
In response to a question from Senator Bunde, Ms. Frasca stated
that were SJR 102 enacted, its provisions would terminate in ten
years. The Legislature at that time could introduce a new proposal
or ask voters to re-ratify the existing proposal.
Ms. Frasca informed that SJR 103 proposes a Constitutional Spending
Limit this mirrors the legislation adopted by the Senate Finance
Committee this past Session.
Ms. Frasca stated that SB 1005 is a $77 million Transportation Bond
package that addresses congestion issues, primarily in Anchorage.
Other projects that would be addressed by this bond package are
located in Fairbanks, the Mat-Su valley, the Yukon-Kuskokwim
transportation corridor, and other areas.
Ms. Frasca explained that SB 1004 would provide approximately $39
million for the University of Alaska system Statewide.
Ms. Frasca stated that these two bond packages would not transpire
were a fiscal plan not authorized as the goal is to not to further
burden the State's bond rating.
Co-Chair Wilken announced that the bills would now be discussed
individually.
[NOTE: Co-Chair Green chaired this portion of the meeting.]
SENATE JOINT RESOLUTION NO. 103
Proposing amendments to the Constitution of the State of
Alaska relating to an appropriation limit.
Co-Chair Wilken stated that this legislation would repeal and
replace the existing appropriation limit in the Constitution with a
spending limit that would establish a moving three-year average as
the base for the application of the limit. This legislation would
terminate on July 1, 2009.
Ms. Frasca commented that this proposal mirrors the committee
substitute for HJR 9 that was adopted by the Senate Finance
Committee. That committee substitute incorporated three new
amendments into the bill. The House accepted two of those: the no-
ratchet down clause and the exemption provided to the receipts of
the University of Alaska.
Senator B. Stevens recounted the Committee and Senate floor action
on the bill. This resulting Senate Finance bill essentially failed
passage three times in the Senate.
Ms. Frasca interjected that it failed two rather than three times.
Co-Chair Wilken understood that the Committee had passed an amended
House version of the bill.
Senator Dyson commented that insufficient time has been made
available to review the material. Language in this bill appears to
differ from the version reported out of the Senate Finance
Committee as SJR 103 does not specify which of the two limiting
factors depicted in Section 1, Subsection 16(a)(1)(B) on line 14,
page one or in Section 1, Subsection 16(a)(2) on page two, line two
should be used in the calculation. The desire was that the lesser
of either Section 1, Subsection 16 (b) or (c) be utilized.
Ms. Frasca responded that this would be reviewed with the bill's
drafter, as the understanding was that the bill reflects that
desire.
Senator Dyson voiced support for the language that was adopted by
the Senate Finance Committee. He asked for confirmation that such
things as the exemption of the University's bookstore receipts were
incorporated into SJR 103.
Ms. Frasca assured that the University exemptions were provided in
the bill as reflected on Section 1, Subsection 16(d)(11) on page
three, line twelve.
Senator Dyson acknowledged.
Senator Dyson asked for assurances that the exceptions approved by
the Senate Finance Committee were, in their entirety, included in
SJR 103.
Ms. Frasca assured that while drafting clarifications were
conducted, the intent of the language in SJR 103 should mirror that
of the Senate Finance Committee bill that reported from Committee.
This would be further verified with the drafter. Language
pertaining to the drafting of language for clarification purposes
is specified in Section 1, Subsection 16 (e) on page three, line 22
of the bill.
| Document Name | Date/Time | Subjects |
|---|