Legislature(2019 - 2020)SENATE FINANCE 532

04/30/2019 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 91 NUYAKUK RIVER: HYDROELECTRIC SITE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 103 PFD APPROPRIATIONS TELECONFERENCED
Moved CSSB 103(FIN) Out of Committee
+= SB 104 APPROPRIATION LIMIT TELECONFERENCED
Heard & Held
SENATE BILL NO. 104                                                                                                           
                                                                                                                                
     "An Act relating to an appropriation limit; relating                                                                       
     to the budget responsibilities of the governor; and                                                                        
     providing for an effective date."                                                                                          
                                                                                                                                
10:42:12 AM                                                                                                                   
Co-Chair Stedman MOVED to ADOPT proposed committee                                                                              
substitute for SB 104, Work Draft 31-LS0804 (Wallace,                                                                           
4/29/19).                                                                                                                       
                                                                                                                                
Co-Chair von Imhof OBJECTED for discussion.                                                                                     
                                                                                                                                
10:43:18 AM                                                                                                                   
                                                                                                                                
JULI LUCKY, STAFF, SENATOR NATASHA VON IMHOF, noted that                                                                        
there was one substantive change and one technical change                                                                       
in the CS. The changes would not impact the fiscal note.                                                                        
                                                                                                                                
Ms. Lucky read from an Explanation of changes document                                                                          
(copy on file):                                                                                                                 
                                                                                                                                
                       version: 31-LS0804\K                                                                                     
                                                                                                                                
     Changes appropriation  limit to $6.0 billion  from $5.0                                                                    
     billion [Page 1, line 13;                                                                                                  
     conforming change page 3, line 11].                                                                                        
                                                                                                                                
     Technical  correction   deleting  unnecessary  language                                                                    
     referencing the use of capital                                                                                             
     appropriations exceeding the cap  in the calculation of                                                                    
     the spending limit in subsequent years [Sec. 2].                                                                           
                                                                                                                                
                       version: 31-LS0804\U                                                                                     
                                                                                                                                
     An exception  for capital spending is  added. An amount                                                                    
     equal  to up  to five  percent of  the total  allowable                                                                    
     spending  under  the  cap  can   be  spent  on  capital                                                                    
     improvements                                                                                                               
     outside the cap.                                                                                                           
                                                                                                                                
     Technical corrections to two  sections of the bill that                                                                    
     do not change the intent:                                                                                                  
                                                                                                                                
               Spending cap is increased by the cumulative                                                                    
          change in inflation [Page 1, line 13 through page                                                                     
          2, line 2].                                                                                                           
               Debt exceptions are clarified [page 2 lines                                                                      
          5-7 and 19-20].                                                                                                       
                                                                                                                                
10:44:35 AM                                                                                                                   
                                                                                                                                
Senator Micciche  asked whether the bill  allowed additional                                                                    
spending on  capital in years  where there were  extra funds                                                                    
and there was additional need for spending.                                                                                     
                                                                                                                                
Ms.  Lucky  clarified   that  the  bill  put   in  place  an                                                                    
appropriation   limit    of   $6   billion.    The   capital                                                                    
appropriations  language would  allow  an  exception for  an                                                                    
amount up  to 5 percent of  the $ 6 billion.  It would allow                                                                    
an additional  expenditure, not  included in  the cap,  of 5                                                                    
percent  of the  cap for  the given  year. Capital  spending                                                                    
could be done under  the cap as well and would  be up to the                                                                    
legislature to decide.                                                                                                          
                                                                                                                                
10:46:15 AM                                                                                                                   
                                                                                                                                
Senator  Micciche  asked  why  the cap  went  so  far  above                                                                    
current UGF spend.                                                                                                              
                                                                                                                                
CAROLINE SCHULTZ,  STAFF, SENATOR NATASHA VON  IMHOF, stated                                                                    
that after  discussions on  SB 103 and  SB 104  the previous                                                                    
day  in committee,  it was  considered that  the $5  billion                                                                    
appropriation limit  was inadequate. She  referenced updated                                                                    
spreadsheets entitled "Unrestricted  General Fund short-term                                                                    
budget  expectation  (1.5   percent  inflation),"  (copy  on                                                                    
file). She clarified that  the spreadsheets considered three                                                                    
scenarios:  PFD: Surplus  to dividend,  PFD:  50 percent  of                                                                    
POMV, and PFD: Current statutory PFD.                                                                                           
                                                                                                                                
10:48:06 AM                                                                                                                   
                                                                                                                                
Senator Micciche  summarized that because the  bill chose to                                                                    
have   the  dividend   inside  of   the  cap,   a  realistic                                                                    
probability was that the 5  billion cap would be impossible.                                                                    
He  added  that  even  $6   billion  would  require  prudent                                                                    
spending in the future to remain within the cap.                                                                                
                                                                                                                                
Ms. Schultz  agreed. She added  that the  second spreadsheet                                                                    
reflected a  50 percent  POMV split. Under  that calculation                                                                    
for  the dividend  the cap  only allowed  an additional  $56                                                                    
million.                                                                                                                        
                                                                                                                                
10:48:59 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof  added that the cap would  come into play                                                                    
when  the state's  cash  flow  increased significantly.  She                                                                    
thought that  the cap  would put  pressure to  keep spending                                                                    
down. She  emphasized that the  state did not have  to spend                                                                    
to the  cap and could  put money into savings.  She pondered                                                                    
the  purpose of  a  cap  and thought  that  it  was to  keep                                                                    
spending down when cashflow was high.                                                                                           
                                                                                                                                
10:50:30 AM                                                                                                                   
                                                                                                                                
Senator Micciche appreciated  Co-Chair von Imhof's comments.                                                                    
He thought it was unfortunate  that the spending cap did not                                                                    
help in the present but would  in the future. He asked about                                                                    
the  cumulative change  in inflation.  He asked  whether the                                                                    
calculation used the 5-year lagging CPI average.                                                                                
                                                                                                                                
Ms. Schultz  replied in the affirmative.  She explained that                                                                    
the clarifying  language was intended to  emphasize that the                                                                    
5-year  moving  average  for inflation  would  be  added  in                                                                    
subsequent years.                                                                                                               
                                                                                                                                
10:51:58 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman looked  at  row  'T' on  page  two of  the                                                                    
spreadsheet document. He thought  that the numeric needed to                                                                    
be changed from 5 to 6.                                                                                                         
                                                                                                                                
Ms. Schultz  affirmed that  the change  should be  made. She                                                                    
said  she  would  make  the  change  and  redistribute.  She                                                                    
clarified that the math was still correct.                                                                                      
                                                                                                                                
10:52:52 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof WITHDREW her objection.                                                                                      
                                                                                                                                
10:53:10 AM                                                                                                                   
                                                                                                                                
Senator  Wilson OBJECTED  for discussion.  He  spoke to  his                                                                    
objection. He  shared that he  was in favor of  removing the                                                                    
dividend from the cap altogether.                                                                                               
                                                                                                                                
10:54:21 AM                                                                                                                   
                                                                                                                                
Senator Micciche  thought the  PFD being  inside of  the cap                                                                    
signified taking no position on  the PFD but highlighted the                                                                    
total amount that would need  to be accounted for at payout.                                                                    
He relayed  that he did not  have a problem with  having the                                                                    
PFD inside the cap.                                                                                                             
                                                                                                                                
Ms. Schultz agreed with Senator Micciche.                                                                                       
                                                                                                                                
10:55:43 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  agreed with Senator Wilson.  He thought the                                                                    
amount of  the PFD and  the attention the  dividend received                                                                    
ensured that it  would be a subject of  attention for future                                                                    
years.  He believed  that  for the  legislature  to put  the                                                                    
dividend  within  a  spending limit  weakened  the  spending                                                                    
limit because the  limit would be ignored. He  said that the                                                                    
number  one reason  that  the spending  limit  would not  be                                                                    
adhered  to  would be  because  it  would be  restricted  by                                                                    
whatever level the dividend was set.                                                                                            
                                                                                                                                
10:57:51 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:59:28 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  von  Imhof  reminded the  committee  that  Senator                                                                    
Wilson had objected to adopting the CS.                                                                                         
                                                                                                                                
Senator  Wilson  WITHDREW  his  OBJECTION.  There  being  NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
                                                                                                                                
Co-Chair von Imhof set the bill aside.                                                                                          
                                                                                                                                
SB  104  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair von  Imhof discussed  housekeeping. She  noted that                                                                    
the 1:30  PM meeting  would be  Delayed to  the Call  of the                                                                    
Chair following floor session.                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
SB 91 Concerns.pdf SFIN 4/30/2019 9:00:00 AM
SB 91
SB 91 Sponsor Statement, Sectional and project update.pdf SFIN 4/30/2019 9:00:00 AM
SB 91
SB 91 letters of support.pdf SFIN 4/30/2019 9:00:00 AM
SB 91
Hydro presentation 3-18_cw_3_25_18.pdf SFIN 4/30/2019 9:00:00 AM
SB 91
SB 103 Work Draft Version G.pdf SFIN 4/30/2019 9:00:00 AM
SB 103
SB 103 Explanation of Changes SB 103 (FIN).pdf SFIN 4/30/2019 9:00:00 AM
SB 103
SB 104 Work Draft Version K.pdf SFIN 4/30/2019 9:00:00 AM
SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 Explaination of Changes version K.pdf SFIN 4/30/2019 9:00:00 AM
SFIN 2/4/2020 9:00:00 AM
SB 104
SB 104 Unrestricted General Fund Spreadsheet.pdf SFIN 4/30/2019 9:00:00 AM
SB 104
SB 103 Support Letters.pdf SFIN 4/30/2019 9:00:00 AM
SB 103
SB 104 Support Letter.pdf SFIN 4/30/2019 9:00:00 AM
SB 104