Legislature(2021 - 2022)BUTROVICH 205
04/30/2021 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR5 | |
| SJR7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SJR 6 | TELECONFERENCED | |
| += | SB 53 | TELECONFERENCED | |
| += | SJR 4 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SJR 5 | TELECONFERENCED | |
| += | SJR 7 | TELECONFERENCED | |
SJR 5-CONST. AM: APPROP LIMIT; BUDGET RESERVE
1:33:56 PM
CHAIR HOLLAND announced the consideration of SENATE JOINT
RESOLUTION NO. 5, Proposing amendments to the Constitution of
the State of Alaska relating to an appropriation limit; and
relating to the budget reserve fund.
[This was the first hearing on SJR 5.]
1:34:52 PM
NEIL STEININGER, Director, Office of Management & Budget, Office
of the Governor, Juneau, Alaska, began a PowerPoint on SJR 5 by
reviewing slide 2, historical savings balances. He said this
chart shows the historical saving balances, revenues and
expenditures over the last decade. In FY 2013, the state savings
peaked at over $16 billion in the Constitutional Budget Reserve
(CBR) and the Statutory Budget Reserve accounts. The state also
increased expenditures at that time, as shown by the red lines
on the chart. Those expenditures were allowed to increase due to
the higher revenues that preceded the buildup of these savings
balances. The state's current constitutional spending limit is
ineffective in controlling state spending growth, so as revenue
has increased, peaking in fiscal year 2012, expenditures kept
pace with revenues. These expenditures were unsustainable once
revenues diminished. This is better illustrated on the graph on
slide 3, he said.
1:35:56 PM
MR. STEININGER reviewed the current limit in Art. XI, Sec. 16 of
the Alaska Constitution, on slide 3. He said the solid dark line
shows the current constitutional spending limit, which in FY
1982 was a reasonable constraint. However, spending has outpaced
any reasonable limitation since then. The graph shows that there
were only two years in which the state had sufficient revenues
to meet the calculated spending limit. The green line shows the
unrestricted general fund (UGF) revenue, the orange line shows
unrestricted general fund (UGF) spending, and the dotted line
shows "what if" SJR 5 had been implemented in 1982. Under that
regime, the spending limit more closely matched the constrained
spending with some flexibility for change. He said it would have
prevented the run-up when revenue peaked in the early 2000s.
MR. STEININGER reviewed the historical spending limit enacted in
FY 1982 and approved by the people. He said it had a window for
reconsideration and was reaffirmed by the voters. The spending
limit concept is fairly popular. He maintained that the current
spending limit is ineffective.
1:37:55 PM
SENATOR SHOWER asked for comments on the projected fund balance
if SJR 5 had been enacted in 1982.
CAROLINE SCHULTZ, Policy Analyst, Office of Management & Budget
(OMB), Office of the Governor, Juneau, Alaska, responded that
the area shown under the orange and green lines would represent
about $35 billion. If those funds had been added to the
permanent fund, the permanent fund balance would currently be
about $105 billion had happened. She said a 5 percent
percentage-of-market-value (POMV) would be sufficient to cover
the UGF expenditures for government.
1:39:23 PM
SENATOR SHOWER recalled that Mr. King previously estimated that
the permanent fund balance could be as high as $125 billion,
depending on the interest and other deposits into the fund. He
asked him how deposits made to the Public Employees Retirement
System (PERS) several years ago would affect this chart.
1:41:03 PM
MR. STEININGER answered that the PERS payment was not reflected
in this graph since those funds were deposited into another
state savings account. It is not an expenditure subject to the
spending cap. However, the PERS payment was included in graph 2
to illustrate the state's current position since it shows how
the Rainy Day Account balances were drawn down by $16 billion in
the last 10 years. He explained that a lot of reductions shown
in the orange line were made in the capital budget. He explained
that most of the growth in the high years was due to a growing
capital budget. When the state began cutting the budget due to
declining revenues, the first place it cut was the capital
budget.
1:42:20 PM
SENATOR HUGHES referred to UGF spending in FY 1982, depicted by
the red line on the graph and said she was surprised to see UGF
spending that high. She asked whether it was nominal or
inflation-adjusted dollars.
MR. STEININGER answered that the graft reflects nominal dollars.
SENATOR HUGHES offered her view that the spending limit was
bringing down expenditures. She said she was surprised to see
the spending cap set lower than the most recent budget. She
asked if he had any insights as to how that happened.
1:43:44 PM
MS. SCHULTZ responded by briefly reviewing the history of the t.
The legislature enacted the constitutional appropriation limit,
which the voters approved in 1982 before it went into effect.
She offered her belief that voters did not intentionally
implement the spending cap lower than expected appropriations.
SENATOR HUGHES stated that SJR 5 proposes a spending limit not
designed to start at a point lower than the current
appropriation level. According to the graph, in FY 1982, it
appears that UGF revenue was about $.5 billion above the
spending limit, which is a considerable difference. She was
unsure of the reason for the difference. She related her
understanding that perhaps the formula was wrong, such that the
adjustment for population and inflation was too much, and it
allowed the budget to ramp up.
1:45:28 PM
CHAIR HOLLAND asked OMB to research the figures and report back
to the committee.
1:45:42 PM
MS. SCHULTZ responded that she would not read that assumption
into the graph on slide 3. There may be some imprecision in the
historical review of UGF spending and differences in accounting
for the historical budget figures. She said it is far more
likely that there is imprecision in the chart on slide 3, rather
than that voters intentionally started with a spending limit
that was lower than spending at the time. She offered to
research this and report back to the committee with more
accurate accounting.
1:46:27 PM
MR. STEININGER reviewed the SJR 5 constitutional appropriation
limit on slide 4, which read:
SJR 5 would amend Art. IX, Sec. 16 of the Alaska
Constitution,
Fixing the calculation to limit spending
square4 May not exceed prior three-year average by more than
the greater of inflation or population growth
Clarifies definition of appropriations subject to cap
square4 Includes appropriations of state funds (UGF, DGF)
square4 Excludes the following appropriations:
square4 PFD
square4 Bond proceeds and debt service costs
square4 Deposits to state savings accounts
square4 Disaster response
square4 Non-state funds for a specific purpose
MR. STEININGER explained that SJR 5 changes the way the spending
limit is calculated in terms of how it is based and the
adjustors applied to it. While the current spending cap sets a
dollar value base compounded by inflation and population, SJR 5
would use an average base of the prior three years, which is
closer to actual spending and the current situation than the
ones the state used during the 80s.
MR. STEININGER said this would be accelerated only by the
greater of inflation and population. This would still allow for
adjustments in spending based on natural pressure on the cost of
government, but it does not create a compounding effect over
time.
MR. STEININGER said OMB also examined and clarified which
appropriations are subject to the cap. The funds subject to the
cap include any state funds, including UGF and designated
general fund (DGF) but excluding the PFD payments, expenditure
of bond proceeds and debt service costs and deposits to the
state savings accounts, such as the $3 billion deposit to the
PERS system. It also excludes disaster response and non-state
funds for a specific purpose, such as federal receipts for
federal programs.
1:48:59 PM
SENATOR MYERS expressed concern that excluding federal funds
could make the state more dependent on the federal government.
He related his understanding that about half of the state's
budget consists of federal funding.
MR. STEININGER answered that about 40 to 45 percent of the state
budget is derived from federal receipts.
1:49:56 PM
SENATOR HUGHES highlighted that the Medicaid expansion was
primarily federally funded, which became problematic when the
federal funds were reduced, increasing the state's obligation.
She asked if any consideration was given to address this issue.
MR. STEININGER responded that OMB has been discussing this,
especially given the current federal climate. Currently, the
state is set to receive federal funding for COVID-19. Questions
arise as to how this funding will be accounted for with a
spending limit based on a three-year average of general fund
expenditures once that funding no longer occurs. For example, it
raises the issue of how the state will account for funds when
the federal government starts a program and then backs off. He
said that that issue would need to be resolved to have a
spending limit that more effectively constrains growths in
general fund expenditures.
1:51:51 PM
SENATOR SHOWER recalled discussions in prior legislatures about
establishing a spending limit. He asked how the capital budget
would fit in, including the waterfall provision. The waterfall
provision would allow some ability to spend outside the cap in
high revenue years to fund capital projects for needed
infrastructure. He asked if deflation was addressed because it
will place downward pressure on the formula.
MR. STEININGER responded that OMB removed from SJR 5 the
language set aside for the capital budget. Thus, all capital
spending, including UGF and DGF would be counted under the cap.
Similarly, there is no relief value built-in for peak revenue
years. How to handle or accommodate those situations would
require a policy discussion. In terms of deflation, the way SJR
5 is structured, it is the greater of inflation or population.
If the state experiences a deflationary period while the
population is stagnant, such that the consumer price index (CPI)
dropped and population was zero, this will adjust by zero
percent. If population and inflation were down, for example, and
the state experienced significant out-migration and a
deflationary effect on CPI, it would result in the spending
limit ratcheting down by whichever is greater. It could happen,
he said.
1:54:26 PM
SENATOR SHOWER continued to stress the necessity of examining
how to fund capital projects to catch up in years when revenues
are higher than anticipated.
1:54:59 PM
SENATOR HUGHES remarked that she does not like to see Alaska's
population reduced. She asked the reason why SJR 5 considers
population growth. "I'm not a fan of taxes," she said. When a
broad-based tax exists and the population increases, revenue
also increases. Without a broad-based tax, as more people move
to the state, it will result in a greater need for state
spending because the state must provide more public safety,
schools, and PFDs. She added that another 10,000 people living
in the state does not mean that all state agencies will need
more employees.
MR. STEININGER agreed that it does not scale perfectly. When the
population increases, not every cost for government services
will increase. However, using population growth and inflation as
factors makes it a little easier to calculate the escalator. It
also avoids the necessity for an economic study each time
population fluctuates to determine what portion of that
population drove up government services, such as social services
programs. He said that using the greater of population or
inflation allows for some growth but not unconstrained growth.
He explained that OMB contemplated several escalators with
sufficient data that were fairly stable and reliable. He pointed
out that CPI will not necessarily align to cost changes in
Medicaid programs.
1:57:32 PM
SENATOR MYERS referred to the non-state funds for a specific
purpose category, usually federal funds. He stated that the
federal government will provide $1 billion to the state for
COVID-19 impacts without requiring any specific purpose be
assigned. He asked how those funds would interact with this
proposal.
1:58:04 PM
MR. STEININGER responded that those federal funds will still
fall under the category of non-state funds for a specific
purpose. He stated that the American Rescue Plan (ARP) does
require specific criteria even though they are broad. He
cautioned that these funds are not unrestricted funds available
for appropriation.
1:59:10 PM
MR. STEININGER reviewed slide 5, SJR Constitutional
Appropriation Limit:
SJR 5 amends article 9, section 17 of the Alaska
Constitution: Amends budget reserve fund (CBR) access
provisions
square4 Appropriations from CBR may be made by a majority
vote if there are inadequate general fund
revenues to meet expenditures
Removes general fund liability to CBR (CBR "sweep")
He explained that Art. IX, Sec. 17 of the Alaska Constitution
amends the Constitutional Budget Reserve Fund (CBR) access
provisions and allows for appropriations from the CBR by a
simple majority vote. It would also remove the CBR "sweep" where
the legislature repays CBR debt by sweeping the sub-funds of the
general fund. This will enable the CBR to continue being used as
a Rainy Day Account, but it removes the 3/4 vote provision.
2:00:15 PM
MR. STEININGER reviewed slide 6, constitutional appropriation
limit. He explained that this slide begins to get into modeling.
He deferred to Ms. Schultz to review the economic modeling.
MS. SCHULTZ highlighted hypothetical situations if the
legislature had previously implemented SJR 5. She pointed out
that the background dotted-gray line represents the current
constitutional spending limit, which is ineffective. The lower
dotted-gray line shows what would happen if the constitutional
spending limit were reset on the current budget year. It would
grow with the compound in population and inflation metric. The
green line reflects revenue and the orange line represents UGF
spending. She directed attention to the blue lines, which
reflect alternate hypothetical situations if SJR 5 had been
implemented in four different years: 2000, 2005, 2010, and 2015.
She explained that the three-year moving average concept allows
the spending limit to ratchet down to reflect fiscal realities
when the base is reset. If SJR 5 had begun in FY 2000 or FY
2005, the appropriation limit would have been fairly restrained
by revenue and the overall fiscal situation at the time. In FY
2010 or FY 2015, the appropriation limits under SJR 5 would have
started high but adjusted downward based on real spending due to
the three-year moving average reset of the base each year. This
graph highlighted a couple of years when the spending limit was
a little higher than real appropriation. Still, it adjusts and
allows the spending limit to move with the changes based on the
revenue or spending situation.
2:02:47 PM
SENATOR SHOWER asked her to recap debates held in a previous
legislature on the spending cap using different approaches.
MS. SCHULTZ agreed to do so. She said that it is mathematically
possible to incorporate historical revenue into the spending
cap, which would allow for some flexibility depending on the
revenue situation. Essentially, there are many ways to craft a
spending cap. The fundamental question is identifying policy
makers' overall goal and determining how much flexibility versus
restraint to build in.
SENATOR SHOWER asked if that was why OMB chose this model.
MS. SCHULTZ responded that OMB selected this model because it
gives some flexibility but is fundamentally a restrained
spending limit. This matches the administration's goal to avoid
runaway spending, she said.
2:04:48 PM
MS. SCHULTZ reviewed slide 7, SJR 5 constitutional appropriation
limit: forecast.
She pointed out that it is challenging to model forward
appropriation limits that are based on a three-year moving
average because not only is it necessary to forecast economic
conditions but the model must forecast future spending. She
explained that this slide shows projections over time. The blue
line on the graph represents the official Department of Revenue
forecast. The orange line represents UGF spending as presented
in OMB's 10-year Plan, which is based on some assumptions
looking forward on spending.
SENATOR HUGHES stated that the graph contained in members'
packets does not match the PowerPoint slide 7.
2:06:16 PM
At ease
2:06:34 PM
CHAIR HOLLAND reconvened the meeting.
CHAIR HOLLAND referred members to the graph on the screen rather
than the one provided in members' packets.
2:06:49 PM
MS. SCHULTZ referred to two dotted lines on the graph on slide
7, which reflect different spending caps as proposed by SJR 5.
The top one reflects the maximum level of spending given
inflation assumptions of 2.25 percent growth in CPI and zero
percent population growth. This represents the spending cap if
the legislature maximizes spending each year. Of course, the
spending limit is a cap but not necessarily a goal, she said.
The lower dotted line reflects the spending cap if the spending
matches the OMB 10-year plan. It is a much lower cap because the
spending is lower, which makes sense. After all, with the three-
year average, the spending cap will adjust to the state's level
of spending.
2:07:46 PM
SENATOR HUGHES stated that State v. Wielechowski indicates that
the legislature's appropriation power overrides the statutes. If
this were adopted, the legislature would have two different
provisions that would apply. She asked whether there was any
conflict with SJR 5 and the legislature's appropriation power in
the Alaska Constitution.
2:08:51 PM
WILLIAM MILKS, Senior Assistant Attorney General, Legislation &
Regulations Section, Civil Division, Department of Law, Juneau,
Alaska, responded that the Alaska Constitution provides that the
legislature has the power to appropriate. SJR 5 would amend the
Alaska Constitution by placing a limit on the legislature's
appropriation power, similar to the existing spending limit.
Those two constitutional provisions need to work together. The
legislature will have the power of appropriation but it will
also be limited to the total sum of the appropriations. It will
not change the law as interpreted by the Alaska Supreme Court's
State v. Wielechowski case. That case related to programs set
out in statute, such as the permanent fund dividend (PFD). He
added there have been several other cases that apply. The courts
interpreted the Alaska Constitution and determined that the
legislature has the power to appropriate but a statute cannot
override it. This means that the constitutional appropriation
requirement continues regardless of what a particular statute
might read. The general constitutional power of the legislature
to appropriate would be interpreted in the same way as it is
now, which is that there is an overall appropriation limit.
2:10:49 PM
SENATOR SHOWER related his understanding that the courts can
adjudicate. However, if the legislature were to pass SJR 5 and
the voters approved it, the prior court case would no longer
apply.
MR. MILKS answered yes. He explained that the Alaska
Constitution also provides that a constitutional amendment
passed by the legislature, ratified by a vote of the people,
will amend the Alaska Constitution.
In State v. Wielechowski, the Alaska Supreme Court indicated
that the Alaska Constitution was amended to identify specific
revenues to be deposited in the permanent fund. This is the
principal of the fund; it is dedicated and cannot be accessed
without further amending the Alaska Constitution.
2:12:19 PM
SENATOR HUGHES said that some argue that a spending cap is
unnecessary because using the percentage-of-market-value (POMV)
draw, even if placed in the constitution, will take care of it.
She said she disagreed. For example, if a new industry brought
in more revenue, revenues could peak again. She asked if the
Alaska Constitution were amended to include a POMV draw, whether
it would provide a sufficient spending cap.
2:13:14 PM
MR. STEININGER responded that SJR 5 should not be considered
alone. Other constitutional amendments that constitutionalize
the POMV also fix different parts of the state's fiscal problem.
He offered his view that solely adding a percentage-of-market-
value (POMV) in the Alaska Constitution would not constrain
spending in the future. The increased spending was due to
increased oil revenues, he said. It might not be due to oil
revenues next time, but some new industry could lead to
increased revenue and spending. Without a spending cap, the
state will experience the same run-up in expenditures. While the
POMV will add stability to a portion of the state's revenues, it
alone will not constrain spending. He said that adjusting the
spending cap early is the only way to constrain spending
effectively when additional revenues are available.
2:14:37 PM
SENATOR HUGHES remarked that some legislators discussed a
revenue cap to keep spending down. She disagreed since she tends
to like the approach of storing up during the good times to
prevent famine. She asked for his thoughts on revenue caps.
MR. STEININGER referred to slide 2 for discussion purposes. He
said a revenue cap would not necessarily control expenditures,
but it would prevent the state from building up any Rainy Day
Accounts. The state would never have built up $16 billion in
savings in FY 2013 if a revenue cap prevented the state from
collecting additional revenue. However, these savings allowed
the state to weather a decade of declining revenue years.
2:16:03 PM
SENATOR KIEHL referred to slide 3, to the significant run-up of
revenues and expenditures. He said he noticed that as revenues
dropped, expenditures also dropped from FY 1982 to FY 2001. He
stated that the Alaska Constitution allowed that to happen
without SJR 5.
MR. STEININGER answered that the graph shows a significant
spending constraint to stay near the state's revenues. There
were years of deficit spending and several years of revenue
surpluses during this time. However, under SJR 5, the dotted
line shows what would have occurred. It would have effectively
followed the revenue line on the graph, providing a similar
constraint for revenue. In years with peak revenues,
expenditures jumped up to match without the spending cap. That
exponential growth is what the administration hopes to prevent
by adjusting the spending cap.
SENATOR KIEHL asked if this chart went back to the time of the
first North Slope lease sales, whether revenues would increase
and subsequently expenditures would also increase.
MR. STEININGER responded that he did not believe OMB has done
that economic modeling. He offered to produce the graph and
report back to the committee.
SENATOR KIEHL said he thinks it would occur, but somehow without
SJR 5, the state matched its revenues and expenditures pretty
well during that timeframe.
2:18:05 PM
SENATOR MYERS offered his view that in the 80s and 90s, revenues
and expenditures matched because the legislature lacked state
savings accounts to draw from, so it was forced to curtail
spending. He asked why the legislature would eliminate the
Constitutional Budget Reserve (CBR) payback since it could
provide a possible constraint on spending.
MR. STEININGER explained that eliminating the CBR payback is
part of the restructuring plan for legislative access to the CBR
and how those funds can be spent. If the state has an effective
spending cap, the legislature will be less concerned about using
the CBR for a revenue source. It will also be less concerned
about controlling access to it. SJR 5 would also eliminate the
backpay provisions to rework access to the CBR. He characterized
it as a policy decision as to how the state's fiscal outlook
interacts with the CBR and the reality of the ability to repay
the current $13 to $14 billion.
2:19:56 PM
SENATOR SHOWER remarked that historically if the legislature has
money, it will spend it.
2:20:51 PM
SENATOR KIEHL said that slide 5 does not discuss the reduction
that SJR 5 makes and what flows into the CBR in the first place.
SJR 5 uses the language "directly" so all manner of taxes that
are currently required to be deposited to the CBR would not be
required to be deposited. He asked for the rationale for this
provision. In response to Chair Holland, he referred to page 2,
line 26.
2:21:57 PM
MR. MILKS referred to page 2, line 26 to Section 2 of SJR 5,
which uses the language "directly," to clarify. He said this
language does not make any substantive change to the dollar
amounts deposited to the CBR. This language relates to funds as
a result of termination, through settlement or otherwise, of an
administrative proceeding or of litigation involving mineral
lease bonuses. However, there has been some ambiguity on one
type of revenue source, which is revenue the state receives that
is not the result of a litigation or proceeding over what the
state is owed, such as oil taxes or royalties. When tariff
disputes are resolved, it can result in increased revenue so
this language provides clarification as to the monies deposited
to the CBR.
2:24:15 PM
SENATOR KIEHL offered to share a Legislative Legal Services memo
[of April 30, 2021, from Marie Marx, Legislative Counsel], that
raises a significant issue on this matter.
MR. MILKS acknowledged that a longstanding disagreement exists
between the Department of Law (DOL) and Legislative Legal
Services as to what should be deposited in the Constitutional
Budget Reserve (CBR).
2:25:05 PM
SENATOR HUGHES offered her belief that building the state's
savings is not a bad idea. However, she does not want the state
to impose higher taxes just to collect money for state savings.
She offered her belief that spending restraint is essential,
which is why the spending cap is important. She said she would
support the state lowering taxes if it could still reserve funds
for hard times.
2:26:01 PM
SENATOR KIEHL asked for the definition of a state savings
account. He said he did not recall a definition.
MR. STEININGER responded that fund transfers or fund
capitalization are listed in sections of the state budget for
general fund monies to be transferred to a designated general
fund (DGF) account. This provides deposits of general fund
revenues into a specific account that is used in future years
for a purpose. He described capitalization as depositing money
to the Public Employees Retirement System (PERS) or other
accounts to be spent for a specific purpose. He explained that
some expenditures are classified as state spending at the time
of transfer to the account and funds from these accounts can be
spent without further appropriation. This operates similarly to
the way capital projects occur. Expenditures from the state
savings account, and some other accounts, are counted in the
spending cap in the year spent. However, deposits to the general
fund are not counted in the spending cap. Further, fund
transfers into or out of the PERS account are not subject to the
cap. He acknowledged that what counts as spending gets a little
complicated depending on when funds are counted in the cap,
whether it is counted when they are deposited or spent.
2:28:33 PM
SENATOR KIEHL offered his view that in terms of constitutional
language, it sounds like "it is whatever we say it is when we
are strapped for cash."
MR. STEININGER disagreed. He said the definition of an account-
by-account basis is based on how the account is structured and
used. For example, money deposited into the Alcohol Fund from
designated general fund (DGF) tax revenue does not count as an
expenditure for the purpose of the spending cap. However,
spending from the Alcohol Fund counts as an expenditure under
the cap. This process avoids counting the funds twice: counting
the transfer of money into the account and counting spending
from the fund. Effectively, it allows money to be deposited into
savings accounts for later uses, he said.
2:30:06 PM
MR. MILKS responded that the Alaska Constitution uses the words
"state savings account." Mr. Steininger described it as money
being deposited to accounts such as the Marine Highway Vessel
Fund Account. He explained that funds that are deposited but not
spent should not be counted as an appropriation.
2:31:06 PM
SENATOR HUGHES asked how SJR 5 would appear on the ballot, if
the question appears first, followed by the resolution's
language or if the ballot measure lists a simplified version and
the election pamphlet contains the full version.
MR. MILKS suggested that the best way to view it was that the
ballot measure will provide the information listed in the
constitutional amendment and a summary of the amendment prepared
by the Legislative Affairs Agency. He reiterated that the full
text of the amendment is listed in the election pamphlet, along
with a statement in favor and one in opposition to the
amendment.
SENATOR HUGHES asked whether he was describing what was in the
pamphlet or the information that is shown on the ballot.
MR. MILKS answered that this information is all contained in the
election pamphlet.
SENATOR HUGHES asked whether the question would appear on the
ballot and include the amendment text and if the pro and con
position statements are in the election pamphlet.
2:34:07 PM
MR. MILKS related his understanding that is the case. He offered
to research this and report back to the committee.
2:34:41 PM
CHAIR HOLLAND opened public testimony on SJR 5
2:34:55 PM
MIKE COONS, President, Mat-Su Chapter, Association of Mature
Citizens (AMAC) Action, Palmer, Alaska, read into the record a
letter by Bob Carlson, President, AMAC Action to Senator Hughes
on behalf of AMAC. He read:
We are pleased to support your legislation, SJR 5,
proposing an amendment to the Constitution of the
State of Alaska to place limits on the increasing
appropriations and spending.
Specifically, this amendment effectively reduces the
appropriation's available rate of increase of 10
percent to effectively 2.5 percent by requiring that
annual appropriations shall be tied to and not exceed
the average appropriations made in the previous three
fiscal years by more than a cumulative percent change.
This approach in effect places the governor on the
appropriations and spending absent an emergency.
I am pleased to offer our organizations full support
for SJR 5.
MR. COONS said that the Alaska Chapter and the Anchorage Chapter
of AMAC supports SJR 5. He said he appreciated the conversation
about finite federal funding. He suggested that the legislature
will need to work through that issue.
2:37:24 PM
QUINN TOWNSEND, Policy Manager, Alaska Policy Forum, Pittsburgh,
Pennsylvania, read testimony on behalf of the Alaska Policy
Forum, as follows:
Chair Holland and members of the Committee, thank you
for the opportunity to testify today. I am Quinn
Townsend testifying on behalf of Alaska Policy Forum.
Alaska has had a spending problem for years that the
state has been attempting to address. While there is
not one specific solution to cure all the state's
fiscal woes, one important tool to avoid the
temptation of overspending which will hinder, not
help the state's economy is with a functioning
constitutional spending cap.
2:37:52 PM
Alaska's current cap uses a formula that calculates
allowable spending limits to such high levels that it
renders them basically meaningless today. In fact, as
of 2018, Alaska spent over 20 percent of its gross
domestic product (GDP) and personal income on state
government, which is nearly double the average of the
highest economically performing states in the country.
In contrast, high performing state spend about 11
percent of their GDP and personal income on
government. These states those that spend less and
have lower taxes experience better employment
growth, larger net in-migration, higher population
growth, higher income growth, and higher GDP. These
are all things that Alaska sorely needs to recover
from the economic effects of the pandemic.
Instead, Alaska's excessive government spending has
inhibited private sector job growth, and the economy
could benefit from an effective constitutional
spending cap now more than ever. Successful
constitutional spending caps have several
characteristics. First, the base of expenditures
covered by the spending cap needs to be broad. In
particular, all state expenditures must be covered,
not just general revenue fund items. Fee- or user
charge-based activity needs to be brought under the
rubric of the cap. Second, there must be provisions
for exceptions such as disasters and appropriations
to savings accounts to the spending limit, but they
must be extremely limited and difficult to manipulate.
One approach is to allow expenditure increases beyond
the constitutional mandate only with a vote of the
people and/or a supermajority legislative vote.
Establishing a meaningful spending limit would keep
the budgeting process disciplined, hold the government
more accountable, control the growth of government,
and make the government more efficient. By
implementing a meaningful spending cap, Alaska could
see much needed economic growth. Industry and other
job creators are drawn to the stability that a true
cap on spending would bring. A revised constitutional
spending cap is an important step toward responsible
budgeting and will encourage a thriving economy.
Alaska Policy Forum encourages establishing a sensible
constitutional spending cap.
2:40:15 PM
BERT HOUGHTALING, representing self, Big Lake, Alaska, said he
concurs with testimony by Mr. Coons and Ms. Townsend. He said
this is a valid measure. He offered his view that SJR 5 would
solve one of the biggest concerns with SJR 1. He suggested the
legislature should consider combining both resolutions to inform
Alaskans that the state will have stability within the Alaska
Permanent Fund Corporation and the permanent fund. It would
effectively institute a spending cap and pay Permanent Fund
Dividends (PFDs) first. It would use the statutory formula by
placing the proposed percentage-of-market-value (POMV) draw into
the Alaska Constitution. Further, the combined resolutions will
help restrain government via the spending cap.
2:42:06 PM
CHAIR HOLLAND, after first determining no one wished to testify,
closed public testimony on SJR 5.
[SJR 5 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR5 - Testimony - Apr 30.pdf |
SJUD 4/30/2021 1:30:00 PM |
SJR 5 |