Legislature(2005 - 2006)SENATE FINANCE 532
04/05/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB100 | |
| SB151 | |
| SB88 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 141 | TELECONFERENCED | |
| += | SB 100 | TELECONFERENCED | |
| + | SB 88 | TELECONFERENCED | |
| *+ | SB 151 | TELECONFERENCED | |
| + | SB 70 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 88
"An Act relating to the policy of the state regarding the
source of funding used to cover a shortfall in general fund
revenue."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken, the bill's sponsor, informed the Committee that
this legislation is an enhanced and updated version of the
information that he presented during the June 2004 Legislative
Special Session. In addition to the bill, the sponsor statement,
and a zero Fiscal Note from the Department of Revenue, Members'
packets contain a copy of a March 2, 2005 letter he had received
from Chris Phillips, Director of Finance of the Alaska Permanent
Fund Corporation. A copy of the "Senate Bill 88 A Bridge to
Development A policy on General Fund Revenue Shortfall" power point
presentation titled dated April 5, 2005 [copy on file] has also
been provided.
Co-Chair Wilken read his sponsor statement as follows.
Senate Bill 88
A Policy on General Fund Revenue Shortfall
Senate Bill 88 reads as follows: It is the policy of the State
of Alaska that the amounts necessary to cover a projected
shortfall in general fund revenue during a fiscal year be
appropriated equally from the Constitutional Budget Reserve
fund and the Earnings Reserve Account. These few words adopt a
course of action that balances the state budget when a
shortfall in general fund revenue exists.
Senate Bill 88
• When needed, fills the potential fiscal gap in a way
that minimizes the financial impact on Alaska
families.
• When needed, provides a bridge over the gap between
general fund expenditures and general fund revenues
until our state's natural resources can be further
developed.
• Doubles the life expectancy of the Constitutional
Budget Reserve fund.
• May strengthen the State of Alaska bond rating, and
save millions of dollars on future bond offerings.
Senate Bill 88 affirms a policy of the state that provides
fiscal certainty when the general fund revenue is
insufficient to fully fund the state budget. Please join me
in support of this legislation.
Co-Chair Wilken pointed out that the term "'the bridge' is a
metaphor [meaning] to get us from here to there." "There are only
nine letters that describe economic development in this State: Oil
and Gas ? it's not mining, it's not fishing, it's not tourism, and
its certainly not taxes."
Co-Chair Wilken noted that the aforementioned power point
presentation is available on the Internet at
"www.akrepublicans.org/Wilken".
Co-Chair Wilken stated that were this legislation adopted, it would
be a component of the AS 37.07.010 Executive Budget Act as opposed
to being incorporated into State Statute. "It's policy and can be
ignored as needed". The fact that it would not be mandated is "an
important consideration".
Co-Chair Wilken stated that the pie chart on page three of the
presentation depicts the FY 06 $7,600,000,000 Operating and Capital
Budget, as proposed by Governor Frank Murkowski. 75-percent of the
State's revenue budget is attributed to three primary things: the
Permanent Fund (PF) equating to $1.42 billion or 19 percent of the
budget; federal funds of $2.52 billion or 33 percent of the budget;
and General Fund (GF) Revenue amounting to $2.63 billion or 34
percent of the budget. The General Fund "is the home of the fiscal
gap". He noted that Oil and Gas Tax Revenues typically comprise
between 68-percent and 90-percent of the State's GF revenues. It is
anticipated that they would amount of 87-percent of the GF revenue
in FY 06. It should also be noted that, in FY 06, the federal and
GF funding are expected to mirror each other. The State should "be
vary of any changes" that might alter federal funding support in
the future.
Senator Dyson asked for examples of what types of funding comprise
the "Statutory Restricted" component, which at $744 million, would
equate to ten percent of the proposed FY 2006 budget.
Co-Chair Wilken replied that those revenues consists of Department
of Fish and Game receipts or federal money that is considered "flow
through money" in that it is earmarked to support a specific
program.
Co-Chair Wilken remarked that the information on page four titled
"What's the problem?" presents three variables in graph form: the
State's General Fund Budget, the General Fund Baseline, and New
General Fund Revenue from the years FY 1990 through FY 2020. As
shown, the General Fund Baseline tapers downward as the years
advance; the General Fund Budget trends upward two percent per
year; and the New General Fund Revenue reflects the insertion of
new oil and gas development revenue in approximately FY 2013.
Co-Chair Wilken stated that this graph depicts the fiscal gap issue
facing the State: the General Fund budget would exceed the General
Fund Baseline beginning in approximately FY 2007; however, the
receipt of New General Fund Revenue is not projected until the year
FY 2013.
Senator Stedman asked for further information about the General
Fund Baseline".
Co-Chair Wilken responded that the General Fund Baseline reflects
general unrestricted revenues as calculated by the Division of
Legislative Finance. As mentioned earlier, 87-percent of the FY 06
General Fund Baseline component would be attributable to Oil and
Gas Tax revenue. The General Fund Baseline, as depicted on the
graph, is based "on current reserves and current production and
their forecast out to the year 2020".
Senator Stedman understood therefore that the General Fund Baseline
is General Fund revenue.
Co-Chair Wilken affirmed.
Senator Dyson asked for confirmation that the Division of
Legislative Finance based the forecast on oil prices.
Co-Chair Wilken confirmed.
Co-Chair Wilken stated that he valued the information in the "
and things can change quickly 'For the Good and the Bad'" graph
depicted on page five, so much that he had a small wallet size card
[copy on file] of the information made for distribution. The graph
depicts a variety of fiscal scenarios based on the price of oil
ranging from $25 to $50 per barrel. The graph indicates that, given
the Governor's FY 06 budget, the State's break even point would be
a North Slope Crude Oil price of $42 per barrel. The oil price
scenarios are accompanied by projections of the "Unrestricted
General Fund Revenue" as well as projected "Surplus" levels.
Co-Chair Wilken stated that, as exampled, the State's FY 06 budget
"would break even at $42 per barrel"; a price of $50 per barrel
would generate a surplus of approximately $450 to $500 million
dollars.
Co-Chair Wilken pointed out, however, that, "things can change
quickly for the good or for the bad." The price of oil on April 1,
2004 was approximately $32 dollars a barrel. The Legislature was
ecstatic at the time that the price had surpassed $30 per barrel.
"Money was rolling out of our pockets" at that price. However, were
that price applied to the Governor's FY 06 budget there would be a
$600 million shortfall. "That's how fast" the scenario changes. In
1999, the per-barrel price was ten dollars and the State was $1.3
billion out of balance. Therefore, when people bring up the subject
of how much money the State has, showing them the aforementioned
card would open the discussion to "what if" scenarios.
In response to a question from Senator Stedman, Co-Chair Wilken
calculated that the Governor's FY 06 budget would exceed the FY 05
budget by approximately $400 million. The current price of oil is
in the $33 range. A price of $42 per barrel would "essentially"
generate sufficient revenue to absorb the difference between the FY
05 and the FY 06 budget.
Senator Hoffman argued that the information conveys "only half the
story" as, while the per-barrel price has increased, oil production
has been experiencing "a steady decline" over the years.
Continuance of this trend would further increase the fiscal gap.
Co-Chair Green asked whether the Division had factored in the
reduction in oil production.
Co-Chair Wilken affirmed that the decline in production was
factored into the projections. The projection is based on a flat
930,000 barrels per day. Were the Trans Alaska Pipeline to operate
at full capacity the scenario would definitely change. The fact
that things do change is exemplified by the fact that the State has
had to withdraw a total of $5.5 billion from the CBR over eight out
of the last twelve years, in order to balance the budget.
Co-Chair Wilken stated that the information on page six specifies,
as authorized by Article IX of the Alaska Constitution, that the
CBR was established in 1990 as a separate fund to be used to
support the State budget when necessary.
Co-Chair Wilken stated that the chart on page seven reflects the
draws on the CBR since the initial draw in 1994. The chart depicts,
from FY 94 through FY 05, the "CBR Ending Balance", the "Draw"
amount, and the "Average Draw". $369,000,000 was drawn in FY 94, a
peak draw of $1,042,000,000 was drawn in FY 99, no draws occurred
in FY 97 or FY 01, and a low draw of $11,000,000 occurred in FY 04.
No draw is expected for FY 05. The "Average Draw" is approximately
$320,000,000. The CBR Balance is currently $2.1 billion and the
balance is expected to increase to $2.5 billion by June 2005.
Senator Bunde asked whether the presentation would address the ERA
balance.
Co-Chair Wilken assured that ERA information is forthcoming. He
reiterated that the current CBR balance is $2.1 billion.
Co-Chair Green understood therefore, that contrary to previous
projections, the CBR would not be depleted by the year 2006.
Co-Chair Wilken affirmed and recalled that, at one time, it was
thought that the CBR would be depleted by the year 2002. "It's like
the furniture store at the corner, it's been going out of business
in the same location for years." "The CBR is pretty healthy" today.
10:43:39 AM
Co-Chair Wilken noted that page eight of the presentation provides
samplings of press releases pertaining to the State's oil and gas
resource opportunities. Reiterating that Oil and Gas Tax revenue
would generate 87-percent of the FY 06 General Fund monies, he
noted that in order for the State to continue to pay for the
demands placed on State government, the State must develop its
natural resources.
Co-Chair Wilken stated that because new natural resource
development would evolve gradually rather than overnight, the State
must address the points in time between now and then. This scenario
is depicted in the " ? a bridge is needed from today to
development" chart on page nine. This page projects oil and gas
revenues from the years 2006 through 2016.
Co-Chair Wilken noted that the General Fund Budget on the chart
encompasses a two percent growth factor. The "Unfilled Fiscal Gap"
in the General Fund is depicted as is the "onset of the Gas
Pipeline" and new oil expected from the development of the Arctic
National Wildlife Refuge (ANWR). The projected unrestricted General
Fund Revenue is also included.
10:45:03 AM
Senator Bunde asked for further information about the "General Fund
Budget" variable depicted on the chart, as, oftentimes, the
argument is heard that the State's fiscal gap could be addressed by
reducing State expenditures. He commented that the inclusion of a
two percent per year growth factor in the General Fund Budget would
be less than the inflation rate that would be experienced.
Therefore, what is depicted in the information "is a very modest
budget growth prediction".
Co-Chair Wilken agreed. He shared that during his Special Session
presentation of this proposal, the General Fund Budget was
presented with no growth. "Many people took exception to that and
rightfully so". The two-percent growth included in this
presentation "is the literary license to just kind of throw a
number up there": three percent "is probably too high" and one
percent "is probably too low".
Senator Bunde pointed out that a two percent growth calculation
would be less than that proposed in separate spending limit
legislation proposed by Senator Dyson.
Co-Chair Wilken expressed that a two-percent growth in general fund
spending over a 15-year period would reflect "a great deal of
fiscal constraint."
Senator Stedman commented that a two-percent general fund growth
rate would be a lesser level than that proposed in the FY 06
budget.
Co-Chair Wilken agreed.
Co-Chair Wilken stated that, as portrayed on page ten, there are
seven possible sources or "pots" of money for the State: State
spending could be reduced; between $50 and $100 million dollars
might be raised through increased Corporate Taxes; between $200 and
$300 million might be raised by implementing a State Sales Tax;
$400 to $600 million dollars might be generated by a State Income
Tax; approximately $30 million could be raised under Other Revenue
by increasing such things as Tobacco Taxes, Alcohol Taxes,
Fisheries Taxes, Car Rental Taxes, and Studded Tire Fees; the
Constitutional Budget Reserve could provide $2.1 billion; and the
$2.1 billion in realized earnings of the Permanent Fund, referred
to as the Earnings Reserve Account (ERA), could be used, after
accounting for the Permanent Fund Dividends and Inflation-proofing.
Utilizing the ERA is the focus of this legislation.
Co-Chair Wilken stated that, as depicted in the chart titled "
why not just the CBR?" the CBR could be used to sustain State
Budget shortfalls for a finite time, as, absent another funding
source, the CBR would be deleted by FY 2010. However, at that
point, there would still be "a gap to bridge".
Co-Chair Wilken stated, therefore, that the question, as written on
page twelve, is " ? so what if ? The Legislature splits the future
fiscal gaps with equal contributions from the Constitutional Budget
Reserve and the Earnings Reserve Account?"
Co-Chair Wilken conveyed that the graph on page thirteen, titled "
? and we build a bridge" portrays the scenario were both an ERA and
CBR draw to occur. This scenario would provide "a bridge" of
funding that would support the State's budget until the time when
"Potential Resource Development Revenue" could support the budget
beginning in approximately the year 2013.
Co-Chair Wilken declared, "so, there's the bridge to development."
Senator Hoffman asked how, in this scenario, the capital needs of
State would be addressed.
Co-Chair Wilken clarified that capital projects are included in the
operating budget in the overall State budget.
Senator Hoffman understood therefore that the proposed FY 2006 $2.5
billion budget would include capital expenditures.
Co-Chair Wilken affirmed.
Senator Hoffman asked regarding the level of capital funding that
would be included in the FY 06 budget.
Co-Chair Wilken responded that it is embodied in the two percent
growth.
Senator Hoffman asked whether the amount would be above or below
$100 million.
Co-Chair Wilken stated that the Division of Legislative Finance
would provide specific information in that regard.
Co-Chair Wilken stated that the information presented on page
fourteen, affirms that the Legislature, by a simple majority vote,
could access the earnings of the Permanent Fund.
10:52:05 AM
Senator Bunde suggested that consideration be given to obtaining
the information that included in the State's voter pamphlet at the
time the Establishment of the Permanent Fund was voted on in the
early 1970s. That information "clearly" stated that the money would
be available "for appropriation and use to support State services
when oil revenues have diminished".
Co-Chair Wilken assured that that would be done.
Senator Hoffman, referencing the graph on page 13, asked whether
the total CBR/ERA Draw amount that would be required until new
resource development comes on line is known.
Co-Chair Wilken stated that that information was included in a
Division of Legislative Finance spreadsheet titled "50/50 model",
dated Feb 18, 2005 [copy on file] that had been previously
distributed.
Senator Hoffman asked whether this proposal would deplete the CBR.
Co-Chair Wilken replied in the affirmative.
Co-Chair Green asked whether CBR growth was included in the
projections.
Co-Chair Wilken deferred to the Division of Legislative Finance.
Senator Hoffman restated his question regarding the total amount of
the CBR and ERA draws that would be expected.
ROB CARPENTER, Fiscal Analyst, Division of Legislative Finance,
Legislative Affairs Agency, clarified that the proposal would split
the draws equally between the CBR and the ERA. The total amount
required from the ERA and the CBR would exceed $2.1 billion.
Earnings of the funds would also be utilized.
Senator Hoffman estimated that the total could exceed $4.2 billion.
Mr. Carpenter responded that the amount would be approximately $2.4
billion.
Mr. Carpenter re-distributed the aforementioned spreadsheet to
Members.
Senator Stedman suggested that a "sensitivity table" be included in
the presentation in order to recognize the changing price of oil as
it increases and decreases. This would reflect the expansion and
retraction and the price of oil that would be required.
Co-Chair Wilken stated that such a presentation could be developed.
Continuing, he noted that the thrust of the issue is whether or not
the Legislature, after considering all these components, should
adopt a policy that would allow joint use of the CBR and the ERA.
Co-Chair Wilken stated that the Alaska Permanent Fund, Fund
Financial History & Projections as of December 31, 2004 spreadsheet
is provided on page 15. It was included as verification that the
numbers provided in the presentation have a legitimate basis. This
sheet is the source for the forthcoming conclusions reached in this
proposal.
10:56:55 AM
Co-Chair Wilken voiced the importance of the realization that, as
reflected on page 16, there are two pots of money in the Permanent
Fund: the principal consisting of 25-percent of oil revenues with
the exception of the National Petroleum Reserve-Alaska (NPR-A);
"special deposits" authorized by the Legislature; and inflation
proofing drawn from the ERA. The Permanent Fund principal is
protected in the State's Constitution. While it is highly unlikely,
it "would be a dark day" for the State were the time to come that
it would be required to ask voters to approve accessing the PF
principal to provide for State services.
Co-Chair Wilken continued that the second pot of money comprising
the Permanent Fund is the ERA, currently valued at $3.3 billion.
Money from the ERA is used to provide for annual Permanent Fund
Dividends, inflation proofing of the Principal, and, by a simple
majority vote of the Legislature, the balance of the fund could be
accessed in order to fund a State fiscal gap. He voiced surprise
that a large portion of the population are unaware that the ERA
could be accessed in this manner.
Co-Chair Green commented that the "Other" ERA expenditure,
reflected on page 16 as $2.1 billion, could be referred to as
"excess earnings".
Co-Chair Wilken asserted that Co-Chair Green's term or the word
"remaining" would be descriptively appropriate.
10:59:09 AM
Senator Bunde shared the suggestion that the excess earnings be put
toward Permanent Fund Dividends. It should be pointed out however,
that the previous year, Alaskans sent $180 million to the Internal
Revenue Service (IRS) as the federal tax on that year's dividend.
"A great deal" more money would be sent to the IRS were the
Dividend increased substantially. That money, being sent out of
State, would not thereby support the building of new roads or
schools or some other "State service that people would value".
Co-Chair Wilken stressed the importance of clarifying the
distinction between the principal of the Fund and the ERA when
discussing the Permanent Fund with people.
Senator Bunde concurred.
Co-Chair Wilken characterized the CBR and the ERA as "Alaska's
Crown Jewels" as referenced on page 17. We are the only Legislature
in the nation "deciding how to manage $31 billion for 650,000
people". Only a few countries have that sort of wealth. While the
State is not at the financial level of major oil producing
countries like Qatar or Saudi Arabia, "it is in the next level
down". The power of the PF earnings could be a big consideration,
and each day, through a variety of avenues such as the financial
market, "the world helps build Alaska". Stock market and real
estate investments assist in building the State's Permanent Fund
holdings. It is a form of economic development for the State.
11:01:47 AM
Co-Chair Wilken reminded that the average CBR draw has been $318
million. Under this proposal, a hypothetic $500 million annual
fiscal gap for the next ten years would be equally split with $250
million being drawn each year from both the CBR and the ERA. The
chart depicted on page eighteen was developed to address the
concern about how withdrawing money from the ERA would affect the
Permanent Fund Dividend (PFD) check. The $250 million ERA draw
specified in this example, would result in a total PFD reduction of
$446 for the ten-year period. "This is a very important" chart, "as
it brings home" the realization of how much money is in the ERA. In
order to communicate this information to the public, the page
eighteen chart is duplicated on the flip side of the aforementioned
wallet sized card.
Co-Chair Green agreed that this is "great" information.
Senator Hoffman suggested that, to further alleviate public
concern, a column that reflects the expected dividend amount for
each of the ten years should be included on the chart. This
information would be based upon the "Alaska Permanent Fund History
and Projections as of December 31, 2004" information on page 15,
and would assure people that their dividends would continue to
grow.
Senator Bunde stated that the information on page eighteen could
address the difficulty that some citizens have in recognizing the
fact that, unlike the federal government, the State cannot print
more money. State services are supported in a manner somewhat akin
to "robbing Peter to pay Paul", in that, through either citizen
taxation or other means, the State must raise money to pay for
services. While some people opine that a State income tax would be
the most fair, others say it would be regressive. Therefore, it
might be instructive to develop "a parallel chart" to the one on
page eighteen that would reflect what folks might pay were an State
income tax in place.
Co-Chair Wilken replied that a forthcoming presentation chart might
address Senator Bunde's suggestion.
Co-Chair Wilken stated that the chart on page nineteen provides, as
suggested Senator Hoffman, information regarding the estimated PFD
for the next ten years compared to the PFD amount were $250 million
withdrawn from the ERA as per this proposal. After his initial
review of the numbers, he had asked the Division of Legislation
Finance to recalculate them, as they appeared "too good to be
true". They are legitimate.
Co-Chair Wilken noted that the information on page twenty reflects
the potential impact of this proposal to one's PFD in common terms:
there would be almost no impact the first year; the amount lost the
second year could equate to the cost of a specialty cup of coffee;
the amount lost the third year might amount to the price of a movie
ticket; the amount the fourth year could equate to the price of a
large pizza; the amount lost the fifth year could equate to the
price of a woman's haircut, and the amount lost the tenth year
would equate to the price of a dinner for two at a fancy
restaurant.
Co-Chair Wilken stated that the information on page 21 might
address Senator Bunde's earlier suggestion as it compares the
affect of an ERA draw to that of implementing alternate revenue
generating sources such as a State income or sales tax. An income
tax would cost a married couple with two children earning an
adjusted gross income of $57,000 approximately $1,000 a year; a
State sales tax would cost that family approximately $950; and
tapping the ERA would cost that family approximately $12. This
information is based on the second year of implementation.
11:10:10 AM
Senator Bunde suggested that a comparison reflecting the costs to
someone earning $30,000 a year be developed, as that was the
minimum income baseline utilized during income tax proposal
discussions.
Co-Chair Wilken stated that the graph depicted on page 22 indicates
how adopting this policy would extend the life of the CBR to the
time when resource development revenues would come online.
Co-Chair Wilken stated that "unlike" the Percent of Market Value
(POMV) budgeting concept legislation that had been recently
considered, the policy proposed in SB 88 would only be implemented
when there were a fiscal gap. Years might pass without there being
the need to tap the CBR or the ERA or they could be tapped one year
and not the next. This legislation would establish a "unique
accountability" between the Legislature and the electorate because
the affect of the decision could be quantified. As presented on
page 23, this legislation "demands spending accountability because
? (1) the Earnings Reserve Account is the people's money and (2)
each legislator must answer to the public on how much was spent
from the Earnings Reserve to fund state services."
Co-Chair Wilken read the summary of the presentation, as presented
on pages 24 and 25.
The Bridge to Development Plan
• Bridges the State of Alaska revenue needs until development
can occur
• Recognizes Alaska's natural resource potential and
opportunity for jobs
• Recognizes the power of the Earnings Reserve - the crown
jewel of a fiscal plan
• Establishes accountability by forming a investment
partnership will all voters
? and
• When needed, minimizes the financial impact on Alaska
families
• Doubles the life of the CBR
• Strengthens the Alaska's bond rating and saves millions of
dollars
• Provides Alaska with a stable and dependable long term
fiscal plan
Senator Bunde pointed out that, were this legislation adopted, the
CBR and the ERA would not be utilized in FY 06 as oil price
projections indicate that sufficient revenue would be generated to
support that year's budget. In addition, were those who are more
optimistic than him about oil prices and production correct, this
might be the scenario for the next several years.
Co-Chair Wilken agreed, but cautioned that oil prices could
decrease as quickly as they had increased. He voiced the belief
that the State "has a structural deficit" in that over a ten-year
period, State revenues would be inadequate more often than they
were "flush". "We need to be ready."
Senator Stedman "liked the presentation and the concept" of "a
bridging mechanism" that could be utilized until the time that new
resource revenues came on line, but opined that further discussion
should occur on a couple of issues. To that point, he suggested
that "some sidebars" or a maximum limit on the amount that could be
drawn from the ERA be considered. This would address the concern
that there might be budget increases of five, ten, or twelve
percent were no limits placed on the revenue side. The objective
would be include "sidebars" in order to prevent the occurrence of
"ballooning budgets". "This year's a good example."
Senator Hoffman declared that, "this year is a really good
example". To that point, however, he opined that, "when it's all
said and done, we would find that we were the sideboards".
11:18:08 AM
Co-Chair Green applauded the presentation, and reminded the
Committee that regardless of the outcome of this legislation, the
ability for the Legislature to access the ERA, via a simple
majority vote, has always been an option. She agreed with Senator
Hoffman that the Legislature does play the roll of the sideboards.
She doubted that the Legislature "would limit, under any
circumstances", the amount that could be withdrawn as that could
jeopardize appropriate action in the case of an emergency.
11:18:53 AM
Senator Bunde stated that while the Legislature could have
exercised its ability to access the money in the ERA "many times"
that has not occurred. There is a "huge political dike between" the
Legislature and its ability to spend the ERA. Therefore, the
question is were a mechanism such as the one provided by this
legislation available, would future Legislators take "more
political courage" and utilize it.
Senator Bunde also noted that, in order to further the spending
limit goal as previously proposed in separate legislation by
Senator Dyson, provisions could be included in this legislation
that would allow this ERA/CBR mechanism to be utilized only were
the budget no more than perhaps a three percent increase over the
previous year's budget.
Co-Chair Green remarked that such a provision would prohibit this
CBR/ERA funding mechanism from being utilized in regards to the FY
06 budget.
Senator Bunde continued that, while such legislation could be
modified, it would put in place "pretty serious sideboards that a
future Legislature would be changing at its own political peril."
Senator Dyson suggested that the passage of this legislation could
be contingent on the passage of a Constitutional spending limit.
Co-Chair Wilken, in response to Senator Bunde's comment, stated
that his recent bid for re-election to his Senate seat had provided
him the opportunity to discuss this ERA/CBR concept with a variety
of people. Although he had been initially "afraid" to discuss this
plan, which his opponent painted as a raid on the PF, the public
response to it was gratifying. The opportunity proved successful in
enlightening people about the power of the earnings of the PF. He
encouraged people who might run for a public office to continue the
dialogue of positioning the earnings "as an asset".
Co-Chair Wilken commented that the idea of imposing a spending
limit of two or three percent above the previous year's budget
could be doable provided the Legislature "could define what goes
into the two or three percent increase".
Senator Bunde commented that, "the groundwork has been
established".
Senator Hoffman asked Co-Chair Wilken's position in regards to
placing this proposal on a Statewide ballot.
Co-Chair Green interjected that this proposal would not require
voter approval.
Co-Chair Wilken stated that this issue is not addressed in the
proposal.
Senator Hoffman agreed.
Co-Chair Wilken expressed that the Legislature should not request
voter permission to spend the ERA. "That's our job".
Senator Hoffman argued that, rather than the issue being whether
the Legislature could access the ERA, the issue is whether this
proposal, rather than a State sales tax, income tax, or user tax,
would be the mechanism through which to fill the State's fiscal
gap. Rather than his concern being that voter permission should be
required to spend money from the ERA, his concern is whether this
proposal should be the long-term solution. He surmised that upon
voter review of the various options, this option "would have a high
potential of passing."
11:24:43 AM
Co-Chair Wilken characterized this legislation as "soft policy"
which future Legislators could either use or ignore. Future
legislators would continue to have the opportunity to pursue other
options if needed to raise revenue. The ramifications of
implementing a sales tax or income tax would include placing
pressure upon corporations and families. He opined that were this
legislation in place and used, it would work. At that point, "it
would become the standard". He voiced discomfort at the thought of
asking the voters whether this should be "the" fiscal plan.
Senator Hoffman questioned the reason for Co-Chair Wilken's
unwillingness to allow the people to vote on the issue since he had
previously mentioned that after discussing the proposal with people
during his re-election campaign, they had recognized its worth.
Therefore, they would support it.
Co-Chair Wilken stated that it would be a challenge to discuss this
issue with 640,000 citizens.
In response to a comment from Co-Chair Green, Senator Hoffman re-
stated Co-Chair Wilken's remarks about how, during his bid for re-
election, he had broached the subject of this bill and that, as a
result, people had warmed up to the idea. The other options had
drawbacks; this proposal "is markedly different".
Senator Bunde questioned the reason for there being such a thing as
the Senate Finance Committee, were the Legislature "to accept what
State law says" regarding the availability of the ERA for
appropriation, but nonetheless putting that action to a vote of the
people. Were that to occur, perhaps all spending of State funds
should be put before a vote of the people. There is no difference
between the ERA, "corporate income tax, and any other source of
funds that the State has access to".
Senator Olson recognized there to be "a lot of difference" between
a State income tax and corporate income tax, and the spending of
the ERA. He echoed Senator Stedman's concern that, were a "bigger
and bigger and more swollen budget" to evolve, few individuals
would possess the ability to hold a budget in line. He praised the
work conducted by the chair of the Senate Finance Committee
Department of Natural Resources subcommittee, who, in an earlier
presentation, had held that Department's budget down.
Co-Chair Wilken clarified, in response to Senator Stedman's and
Senator Olson's concerns, that the only time this policy would be
necessary would be when State revenue were insufficient to support
the State's budget. "That automatically dampens the desire to
spend, spend, spend". It is not something that would occur every
year.
Senator Olson respectively disagreed by commenting that, "when
somebody spends someone else's money, there is always a shortage of
money".
The bill was HELD in Committee.
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