Legislature(2021 - 2022)BUTROVICH 205
05/12/2021 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR6 | |
| HB109 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 129 | TELECONFERENCED | |
| + | HB 3 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 109 | TELECONFERENCED | |
| += | SJR 6 | TELECONFERENCED | |
SJR 6-CONST. AM: PERM FUND & PFDS
1:42:18 PM
CHAIR HOLLAND announced the consideration of SENATE JOINT
RESOLUTION NO. 6 Proposing amendments to the Constitution of the
State of Alaska relating to the Alaska permanent fund,
appropriations from the permanent fund, and the permanent fund
dividend.
[SJR 6 was previously heard on 4/30/21 and 5/3/21. Public
testimony was opened and closed on 4/30/21.]
1:42:39 PM
SENATOR SHOWER mistakenly made a motion on SB 129. [The
committee treated it as though the motion was rescinded.]
1:43:08 PM
SENATOR SHOWER moved to adopt the proposed committee substitute
(CS) for SJR 6 [work order 32-GS1694\I, Version I] as the
working document.
CHAIR HOLLAND objected for discussion purposes.
1:43:30 PM
ED KING, Staff, Senator Roger Holland, Alaska State Legislature,
Juneau, Alaska, reviewed the changes in the committee substitute
(CS) for SJR 6, Version I. He stated that the bulk of the
changes were made to Section 2. He stated that the original
version of SJR 6, [work order 32-GS1694\A, Version A,]
subsection (b) required an appropriation of the percentage-of-
market-value (POMV) but the amount was unspecified. He said
Version I would identify that amount as not more than five
percent of the POMV of the permanent fund for the first five of
the preceding six fiscal years.
MR. KING said that Version A, subsection (c) provided that a
portion of the amount appropriated under (b) of this section
shall be allocated for dividends as provided by law. Version I
would change that language to require an amount equal to fifty
percent of the amount available for appropriation under
subsection (b) shall be allocated as dividend payments.
1:44:20 PM
MR. KING explained that Version A, subsection (d) required a
vote of the people for an amendment to the law that allowed for
the dividend to take effect. Version I would remove that
language because the dividend is specified in the Alaska
Constitution. That provision in Version I states the legislature
shall appropriate a portion of the amount appropriated under
subsection (b) for Power Cost Equalization (PCE). He stated that
the amount to be appropriated is defined as the amount necessary
to equalize the cost of power in the state as provided by law.
MR. KING explained that Version I would add a new subsection
(f), which provides that the permanent fund may be used to pay
the costs associated with making investments under section (a)
of the permanent fund amendment.
MR. KING explained that the transition language was adjusted to
conform to the changes in Section 2, Version I.
1:45:27 PM
SENATOR KIEHL asked for an explanation of the language in
Version I, subsection (f) that states the permanent fund may be
used to pay costs associated with investments. He related his
understanding that the Alaska Permanent Fund Corporation (APFC)
runs the fund very leanly.
MR. KING explained that placing this language in the Alaska
Constitution also provides an exemption from the dedicated fund
clause for APFC investments. Thus, the investment earnings from
the fund could be used to pay for management of the fund.
Currently, APFC's management fees are paid for by the fund
according to statute but are considered general fund
expenditures. This change would place the language in the Alaska
Constitution.
1:46:22 PM
SENATOR KIEHL asked for an explanation of the language for PCE
in Version I, subsection (d).
MR. KING explained that this language ensures that a situation
could not arise in which the cost of equalizing power cost
across the state would be greater than the amount eligible to be
withdrawn from the fund minus the amount paid to dividends.
Currently, the amount available to the general fund far exceeds
the amount necessary for PCE; however, 50 or 100 years from now
it might not be so.
1:48:13 PM
BRANDON BREFCZYNSKI, Special Assistant to Policy Advisor, Office
of the Governor, Anchorage, Alaska, on behalf of the governor,
responded that this resolution would solve a number of issues to
allow the legislature to focus on the next steps, such as
addressing the spending limit and state revenues.
SENATOR SHOWER related his understanding that this resolution is
similar to one he introduced in a prior legislature. He stated
it is important for people to understand that a number of
legislators have worked on this issue. Some provisions are new,
including the PCE language, which may require statutory changes.
He said he hopes that the committee will fully vet the
resolution. He asked Mr. Brefczynski to speak to statutory
language that would be necessary if SJR 6 were to pass.
1:52:08 PM
MR. BREFCZYNSKI, after first clarifying the question, explained
that under SJR 6 there will be a five percent percentage-of-
market-value (POMV) draw based on a five-year lag average, of
which 50 percent would be allocated to permanent fund dividends
(PFDs). The other 50 percent would fund the PCE program as
provided by law, and the remainder would be deposited to the
general fund to fund government services. The PCE formula would
be provided in statute.
SENATOR SHOWER asked him to address the statutory changes for
PCE since the program was previously subsidized.
MR. BREFCZYNSKI responded that a number of programs are
currently funded from the PCE Endowment Fund earnings. SJR 6
speaks to the PCE program itself. He deferred specific questions
about the PCE program to Curtis Thayer with the Alaska Energy
Authority. Since SJR 6 references the PCE program as provided in
law, the program could be amended in the future to reflect the
policy of the legislature. For example, if the legislature
wanted to use some of the funding for infrastructure or to
continue to subsidize electrical costs, it would come from the
50 percent allocation directed towards government.
1:55:04 PM
CHAIR HOLLAND explained that questions on PCE and SJR 6 arose
during the press conference today. He said adding PCE funding to
SJR 6 would help provide support for the bill. He characterized
the committee substitute (CS) for SJR 6, Version I, as a grand
solution to a lot of smaller problems.
1:55:44 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority,
Anchorage, Alaska, stated that the PCE endowment has been a
political football for many years. Two years ago, the reverse
sweep issue drew more attention to it. SJR 6 would remove PCE
from the political realm by placing this language in the
constitution. It would allow for the continued PCE energy
subsidy of approximately $32 million to serve 85,000 Alaskans.
He stated that the PCE program currently provides a cash payment
to offset the high cost of energy bills in rural Alaska. The
state has invested in infrastructure for some areas of the
state. For example, the state built transmission lines from
Willow to Healy to serve Railbelt communities. This subsidy
saves Fairbanks $40 million in energy costs. The state's policy
has been to provide PCE payments to offset energy costs in rural
Alaska since it is not feasible to run transmission lines to
serve communities in rural Alaska.
1:57:37 PM
LUCINDA MAHONEY, Commissioner, Department of Revenue, Anchorage,
Alaska, on behalf of the administration, stated that the
governor introduced SJR 6 to establish a foundation and
framework using a two-phased approach to the plan. The governor
recognizes the importance of involving the legislature and
citizens in the process. She stated that SJR 6 would transition
the Alaska Permanent Fund into a single account to protect it
from ad hoc spending. She reported that over the past ten years
nearly $18 billion was spent from the Earnings Reserve Account
(ERA). Creating one account with a five percent percentage-of-
market-value (POMV) draw would significantly impact spending and
help the state move towards a structured and disciplined fiscal
environment.
CHAIR HOLLAND asked if she was referring to spending from the
Constitutional Budget Reserve Account.
MS. MAHONEY answered no. She said she was speaking about the
Earnings Reserve Account expenditures.
SENATOR HUGHES joined the meeting.
1:59:11 PM
MS. MAHONEY stated that enshrining the permanent fund dividend
(PFD) in the constitution would fulfill a promise to Alaskans
that they will share the state's wealth from natural resources.
She characterized the PCE program as important to protect. One
component of the plan would provide bridge funding to give the
administration time to develop phase two of the plan. The next
essential level will entail making structural changes to the
expenditures and considering new and diverse revenue sources to
complete the plan, she said.
2:00:31 PM
SENATOR SHOWER asked if constitutionally protecting a subsidy,
such as PCE, creates any equal protection concerns. He recalled
the March briefing in Senate Finance highlighted the PCE
Endowment Fund's purpose as a financing source for electrical
utilities. He offered his view that some statutory changes were
necessary since the program has been used as a subsidy. Further,
there have been some discussions about moving rural Alaska to a
more sustainable energy source.
MR. BREFCZYNSKI deferred to Bill Milks, Department of Law to
respond.
2:02:05 PM
WILLIAM MILKS, Senior Assistant Attorney General, Legislation &
Regulations Section, Civil Division, Department of Law, Juneau,
Alaska, in response to Senator Shower's question of equal
protection to fund the PCE program from the permanent fund,
opined that it would not be a violation. Currently, the state
funds the PCE program and other programs that affect some of the
states' population and some regions of the state differently
than others.
He explained that any language placed in the Alaska Constitution
must pass muster with the equal protection clause in the U.S.
Constitution. However, the types of decisions made by state
legislatures to fund various programs are given the lowest
constitutional review to assess whether the state had a rational
basis to fund one program over another. The state could easily
identify differences in electrical costs in various parts of the
state, so the PCE funding provision would not pose a difficult
burden to meet. He reiterated that DOL does not view spending a
portion of the permanent fund monies on a PCE program as a
violation of the equal protection clause.
2:04:31 PM
SENATOR KIEHL related his understanding that the state
subsidizes rural Alaska electrical costs and provides a tax
subsidy to in-state natural gas for the Kenai Peninsula and
Anchorage. He asked if DOL's analysis would be different if the
proposed constitutional amendment in SJR 6 were placed in
statute.
MR. MILKS answered that the same analysis would apply related to
use of state revenues for a specific purpose.
SENATOR SHOWER asked to have the Legislative Legal Services
attorneys respond.
2:06:00 PM
CHAIR HOLLAND removed his objection. There being no further
objection, CSSJR 6(JUD), Version I was before the committee as
the working document.
2:06:15 PM
SENATOR KIEHL moved to adopt Amendment 1, [work order 32-
GS1694\I.2].
32-GS1694\I.2
Nauman
5/8/21
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR KIEHL
TO: CSSJR 6(JUD), Draft Version "I"
Page 2, line 5:
Delete "fifty"
Insert "at least twenty-five"
Page 2, line 10:
Delete "fifty"
Insert "twenty-five"
CHAIR HOLLAND objected for discussion purposes.
2:06:24 PM
SENATOR KIEHL explained that Amendment 1 would set the floor for
permanent fund dividends (PFDs) at not less than 25 percent of
the sustainable draw. Second, it would cap the draw for the PCE
program at no more than 25 percent. He advocated for the PCE
program funding, noting that he represents some communities that
rely on the program. It would not create any ambiguity that
would allow the state to exceed the total five percent
percentage-of-market-value (POMV) draw. Instead, it would leave
25 percent as an undesignated draw. He acknowledged that this
would not cover all the costs to fund PCE but it would establish
25 percent of the draw as a floor. The legislature could
appropriate additional funds to meet Alaska North Slope energy
needs and increase PFD amounts. However, it would not obligate
the state to issue PFDs at $2,800 under the proposed 50:50 split
with an unbalanced budget. He related his understanding that the
proposed plan would require an extra draw from the permanent
fund of about three billion dollars to cover a couple of years.
Even at the state's low levels of spending that has left many
unmet needs for Alaskans, SJR 6 would not balance the budget.
The net effect of Amendment 1 would be to lower the cap to a 25
percent draw for PCE and establish a 25 percent floor for PFDs.
Amendment 1 would constitutionally guarantee the dividend but
give the legislature fiscal room without resorting to taxes to
balance the budget.
2:09:39 PM
CHAIR HOLLAND offered his belief that if the floor were set at
25 percent for PFDs, the legislature would never pay more than
that for PFDs.
2:09:49 PM
SENATOR SHOWER stated that since 2006, the budget has nearly
doubled. However, during that same period, the state's
population increased by 100,000. He noted the state has
experienced an outflow for the past six years. He agreed with
Chair Holland that the legislature would limit PFDs under
Amendment 1 because it would spend the additional funds on state
services. He offered his belief that the 50:50 proposal is fair.
He recalled Senator Wielechowski indicated that the 50:50
proposal would shrink PFD amounts to only 2.5 to 3 percent of
total taxes and royalties. He said he cannot support Amendment 1
because ultimately voters will not support it.
2:11:49 PM
SENATOR HUGHES said if state spending were more in line with the
overall population, she might entertain Amendment 1. However,
state spending is not where it should be, she said. She
emphasized that the state must settle this matter. Since the
Wielechowski v. State case, the legislature knows that statutory
changes will not remedy the situation whereas a constitutional
amendment will. However, a constitutional amendment requires a
public vote. If the remedy is not seen as fair and reasonable by
the voters, it will likely fail. She offered her belief that
permanent fund dividend issues have absorbed a majority of the
legislature's time, which could be better spent on addressing
revenue shortfalls and other major issues, including reducing
sex offense crimes, and improving student reading abilities. She
agreed with Senator Shower that the proposed constitutional
amendment language must be acceptable to the voters. She said
she would not support Amendment 1 since it would establish a 25
percent minimum draw for PFDs.
2:14:07 PM
CHAIR HOLLAND related that some of his constituents support the
statutory formula but that does not appear to be the way
forward. He estimated that PFDs would be $3,200 under the
statutory formula and that the percentage-of-market-value (POMV)
draw would be about $2,300 to $2,400, of which 50 percent for
PFDs would be between $1,150 and $1,200. He offered support for
the 50:50 split.
2:14:59 PM
SENATOR KIEHL agreed that the state faces tremendous problems.
He disagreed with Senator Shower because he views Alaskans
collectively as the government since the people elect their
representatives. He reminded members that the preamble of the
Alaska Constitution supports his view. He acknowledged that
cutting the budget has long been desired. However, the
governor's proposed budget would shift the cost of prosecutions
to local taxpayers but not cut government. He suggested that if
cuts could be made, they would already have been made. He
reminded members that Alaska must meet the needs of Alaskans.
2:16:15 PM
CHAIR HOLLAND maintained his objection.
2:16:21 PM
A roll call vote was taken. Senator Kiehl voted in favor of
Amendment 1 and Senators Myers, Hughes, Shower, and Holland
voted against it. Therefore, Amendment 1 failed by a 1:4 vote.
2:16:47 PM
SENATOR MYERS moved to adopt Amendment 2, work order 32-GS
1694\I.4, which was amended to include additional language:
32-GS1694\I.4
Nauman
5/12/21
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR MYERS
TO: CSSJR 6(JUD), Draft Version "I"
Page 1, line 11:
Delete "(b), (c), (d), and (e)"
Insert "(b) - (f)"
Page 2, line 2:
Delete "to the general fund"
Page 2, line 7, following "Each":
Insert "fiscal"
Page 2, following line 11:
Insert a new subsection to read:
"(e) Each fiscal year, the legislature may
appropriate that portion of the amount appropriated
under (b) of this section remaining after the
appropriations under (c) and (d) of this section to
the general fund."
Reletter the following subsection accordingly.
Amendment 2 included additional handwritten language,
which read:
Page 2, line 5, "remove appropriated, add calculated"
Page 2, line 1: delete "may", insert "shall".
CHAIR HOLLAND objected for discussion purposes.
2:17:05 PM
SENATOR MYERS explained that SJR 6 proposes a percentage-of-
market-value (POMV) draw of "not more" than 50 percent. He
related a scenario, such that if revenues significantly
increased in one year, the legislature might decide to draw less
than 5 percent and retain some of the excess earnings to the
permanent fund. The current language would limit PFDs to half of
the draw. At the time the PFD program was established, the
legislature's intent was to require the first call of the
permanent fund earnings to be distributed to Alaskans. One
reason for the public anger in the past five or six years was
that the legislature did not follow the statutory formula.
Amendment 2 would establish the PFDs at a straight 2.5 percent
of the percentage-of-market-value (POMV). The legislature could
draw an additional amount up to a total of 5 percent for
dividends. The legislature would not be able to change the
formula. He offered his view that this will fulfill the initial
intent for establishing a PFD and it would still fulfill the
late Governor Hammond's 50:50 principle.
2:20:39 PM
SENATOR HUGHES pointed out that changing "may" to "shall" on
page 2, line 1 would ensure that the 5 percent percentage-of-
market-value (POMV) draw would be made. She highlighted that
while Senator Meyer's explanation for Amendment 2 referred to
2.5 percent, that 2.5 percent represents 50 percent of the draw,
which would go to PFDs.
2:21:23 PM
SENATOR SHOWER asked for clarification that changing "may" to
"shall" on page 2, line 1, would ensure that the legislature
could not have less than 2.5 percent of the draw. Instead, each
year 50 percent of the percentage-of-market-value (POMV) would
be allocated to PFDs.
SENATOR MYERS agreed that was correct.
SENATOR SHOWER said he wanted to be sure that the committee was
not creating a loophole.
2:22:28 PM
SENATOR HUGHES pointed out that this language would mirror what
the original statute intended and the legislature did for
several decades. She said the statute basically defined the draw
at 50 percent of the percentage-of-market-value (POMV) formula.
The government did not need its 50 percent of the draw since the
state had significant revenues to pay for government services.
In fact, the reason the permanent fund grew was because the
legislature was not using its portion. Making the draw smaller
than the original draw as proposed in SJR 6 will ensure that the
fund will continue to grow. Otherwise, it would be possible to
spend more than was earned, she said.
2:24:28 PM
SENATOR KIEHL reminded members that when the constitutional
amendment passed to create the permanent fund, there was no
dividend. The government could use whatever funds it decided to
appropriate for state services. He referred to page 2, line 6 of
SJR 6, Version I, which read, "(c) Each fiscal year, fifty
percent of the amount appropriated under (b) of this section
shall be allocated for dividend payments?. He asked why it reads
"appropriated" and not "allocated" for the PFD program.
2:25:52 PM
MR. KING agreed that the language in Version I makes a
distinction between appropriation and allocation. He
acknowledged that the PCE fund was a transfer to the general
fund and an appropriation. He said it sounds like this suggests
the distribution out of the permanent fund is an allocation and
not an appropriation. He deferred to Mr. Milks to further
explain.
MR. MILKS answered that the language in subsection (b) provides
not more than five percent of the percentage-of-market-value
(POMV) can be withdrawn from the permanent fund. Subsection (c)
provides that 50 percent of the appropriation shall be allocated
for permanent fund dividends. (PFDs). In that circumstance, it
means that of the amount being appropriated, 50 percent will be
for dividends. He opined that there is no appropriation
discretion. Once the percentage-of-market-value (POMV) funds are
appropriated, one half will be for dividend payments.
2:27:52 PM
SENATOR KIEHL asked why Version I subsequently uses the term
"appropriate" for the PCE program. He asked if a different term
should be used.
MR. MILKS explained that the language in Version I, subsection
(d) states that the legislature shall appropriate funds for PCE
but it does not set a designated amount for it. Thus, the
distinction is that Version I, subsection (c) identifies a
specific calculation for the permanent fund dividend (PFD).
2:28:30 PM
SENATOR KIEHL said this bears further study. He asked whether
this is a reaction to the Alaska Supreme Court ruling under
Wielechowski v. State. That ruling essentially states that all
of the appropriations from the permanent fund first go to the
general fund and then wherever the legislature appropriates
them. He offered his view that this appears to take a different
approach. He asked for the reason to do so.
SENATOR MYERS responded that Amendment 2 would take a different
approach by removing any legislative discretion related to the
PFD amount, which he preferred.
2:29:59 PM
SENATOR KIEHL said he understood the intention was to remove
legislative discretion. He stated his support for placing the
PFD formula in the Alaska Constitution. However, he would like
Legislative Legal Services to explain the mechanics to do so.
2:30:26 PM
SENATOR HUGHES asked if the term "appropriate" was used because
it was an indeterminate amount whereas "allocate" was a
determinate amount since the language on page 2, lines 5 and 6
established a formula.
2:31:10 PM
CHAIR HOLLAND offered his view that the term "appropriate" was
used to pull out funds and the term "allocate" was used to
distribute that appropriation. An allocation of the
appropriation refers to the disbursement of the funds, he said.
2:31:45 PM
MR. MILKS agreed with Chair Holland on the drafter's intent.
Once the funds are appropriated, they could be allocated,
distributed, or set aside. The appropriation would be based on
the percentage-of-market-value (POMV), and the allocation would
specify the percent of the appropriation that could be allocated
to the program.
2:32:32 PM
SENATOR HUGHES stated the sponsor's intent with Amendment 2 was
to ensure that half of the 5 percent of the POMV draw would be
allocated for PFD payments. However, it assumes that the amount
appropriated under subsection (b) would be 5 percent of the
average draw. She said she was not sure that this language
guaranteed that amount. The language in subsection (b) "not more
than five percent" allows the legislature the flexibility to
appropriate a range from zero to five percent. She asked if this
would guarantee that the appropriation for PFDs would be 50
percent of the five percent POMV of the fund.
2:33:59 PM
SENATOR SHOWER said he would like that issue clarified before
SJR 6 moves to the Finance Committee.
2:34:52 PM
SENATOR HUGHES referred to [Senator Myer's handwritten portion
of Amendment 2, which would remove "appropriate" and replace it
with "calculated" on page 2, line 5 of SJR 6, Version I. She
explained that the committee would like to ensure that 50
percent of the five percentage-of-market-value (POMV) of the
permanent fund would go to pay PFDs.
She explained that half of the amount calculated under
subsection (b) would be allocated for dividend payments.
However, subsection (b) would allow up to five percent, or
essentially a range from zero to five percent, of the POMV draw
to be appropriated. She expressed concern whether this language
would truly guarantee that a PFD would equal 50 percent of the
five percent POMV draw from the fund.
2:35:47 PM
EMILY NAUMAN, Attorney, Legislative Legal Services, Legislative
Affairs Agency, Juneau, Alaska, responded that Senator Hughes is
correct that the amount for the PFD would be 50 percent of the
percentage amount the legislature elected to appropriate from
the permanent fund up to the five percent.
SENATOR HUGHES asked how Amendment 2 could be amended to comport
with the sponsor's intent.
MS. NAUMAN suggested that the language could read, "Each fiscal
year 2.5 percent of the market value of the permanent fund shall
be appropriated for the payment of dividends." Further,
subsection (b) could be amended to read, "The legislature could
appropriate up to 2.5 percent of the POMV to the general fund."
She explained this would also allocate funds to the PCE Fund.
2:36:43 PM
SENATOR HUGHES expressed concern that when voters vote on the
constitutional ballot proposition, they might misconstrue the
2.5 percent of POMV as something other than 50 percent of the
draw. She expressed interest in having the language clear so
voters understand that fifty percent of the draw will fund PFDs
and the other half would fund government.
2:36:59 PM
MS. NAUMAN opined that it was confusing to have a math problem
as language in the Alaska Constitution that "fifty percent of
five percent" would be allocated. That language led her to
wonder why it does not just state "2.5 percent." Thus, an
argument could be made for each approach.
2:37:46 PM
SENATOR HUGHES asked if the language could read, "fifty percent
of the maximum amount."
2:38:02 PM
SENATOR KIEHL was unsure he agreed with Ms. Nauman. There are
only two calculations in subsection (b): one is an average and
the other is five percent of that average. Thus, half of the
average value of the fund is a nonsensical result so the only
sensible result is that it means half of the five percent
calculated but not necessarily the amount drawn. He asked how
the amount calculated would mean the amount drawn.
2:38:48 PM
MS. NAUMAN stated the committee was apparently working off a
different document. She directed attention to page 2, line 5 of
the committee substitute (CS) for SJR 6, Version I, which read,
"Each fiscal year, fifty percent of the amount appropriated
under (b) of this section shall be allocated for dividend
payments ?." She interpreted this to mean that the legislature
could appropriate any amount from zero percent to five percent.
[After ascertaining that Ms. Nauman did not have the language
for Amendment 2,] Senator Myers read the first handwritten note
on Amendment 2:
Page 2, line 5: "remove appropriated, add calculated."
MS. NAUMAN acknowledged that would change her analysis. She
suggested it could read "maximum amount available for
appropriation" in order to conform to the existing language of
SJR 6. She agreed with Senator Kiehl's point.
2:40:43 PM
SENATOR MYERS moved to adopt Conceptual Amendment 1 to Amendment
2, to add "the maximum amount calculated" on line 5.
CHAIR HOLLAND confirmed Conceptual Amendment 1 to Amendment 2
would add "maximum amount calculated"
SENATOR SHOWER stated the effect of Conceptual Amendment 1 to
Amendment 2. On page 2, line 5 of Version I would read, "(c)
Each fiscal year, fifty percent of the maximum amount calculated
under (b) of this section shall be allocated for dividend
payments to residents of the State."
SENATOR SHOWER directed attention to the second change in
Conceptual Amendment 1 to Amendment 2. Page 2, line 1 of Version
I, changes "may" to "shall" appropriate the dividend payments.
He asked if this language would guarantee that residents will
have first draw and either 50 percent or 2.5 percent of the
amount appropriated will fund the PFDs.
MS. NAUMAN opined that proposed Amendment 2, as amended, would
require the legislature to appropriate an amount equal to half
of the 5 percent draw for a dividend every year, even if the
legislature chose not to make a draw on the permanent fund.
2:43:04 PM
MS. NAUMAN asked to revert back to Conceptual Amendment 1 to
Amendment 2. She said she was rethinking the language to be
certain that the legislature would appropriate funds for
dividends even if no draw were made to the permanent fund. She
suggested adding language to Conceptual Amendment 1 to read "an
amount equal to" fifty percent of the maximum amount. She
explained that the legislature would want to be certain that
this amount would be appropriated from the general fund even
when a draw on the permanent fund did not take place in a
current fiscal year.
CHAIR HOLLAND asked if she was suggesting changes to Conceptual
Amendment 1 to Amendment 2, in subsection (c), after the "," to
add language "an amount equal to".
MS. NAUMAN answered yes.
2:44:06 PM
SENATOR SHOWER asked if the administration agreed to the
changes.
2:44:23 PM
MR. BREFCZYNSKI stated that the administration was comfortable
with the additional language to the amendment.
2:44:44 PM
CHAIR HOLLAND directed attention to lines 5 and 6, to subsection
(c). He stated that line 5 uses "appropriate" and line 6 uses
"allocate."
SENATOR MYERS noted that the Conceptual Amendment 1 to Amendment
2 was not yet adopted.
CHAIR HOLLAND agreed.
2:45:08 PM
SENATOR SHOWER expressed an interest in whether the
administration and the Legislative Legal Services attorney both
agree that the effect of Conceptual Amendment 1 to Amendment 2,
was that residents would have first draw plus 50 percent of the
earnings even when the state's revenues were down and if the
legislature decided not to draw the full five percent of the
percentage-of-market-value (POMV). He stated for the record that
everyone was nodding yes. He stated support for Conceptual
Amendment 1 to Amendment 2.
2:45:40 PM
CHAIR HOLLAND asked if anyone objected to Conceptual Amendment 1
to Amendment 2, which would add "maximum" before "amount".
CHAIR HUGHES interjected it would add "an amount equal to".
CHAIR HOLLAND added after the "," Conceptual Amendment 1 to
Amendment 2 would add "an amount equal to."
SENATOR MYERS suggested that procedurally the committee should
adopt his original Conceptual Amendment 1 to Amendment 2, and
then offer a second conceptual amendment to add the language "an
amount equal to".
SENATOR MYERS restated his original motion to adopt Conceptual
Amendment 1 to Amendment 2, on page 2, line 5 to add "the
maximum amount calculated".
CHAIR HOLLAND objected for discussion purposes.
2:46:35 PM
SENATOR HUGHES clarified Senator Myers' motion, which was to
move to adopt Conceptual Amendment 1 to Amendment 2, on page 2,
line 5 to insert "maximum" before "amount".
SENATOR MYERS agreed.
[The committee treated it as though the objection was removed.]
There being no further objection, Conceptual Amendment 1 to
Amendment 2 was adopted.
2:47:14 PM
SENATOR MYERS moved to adopt Conceptual Amendment 2 to Amendment
2, on page 2, line 5, to insert "an amount equal to" after
"year," and before "fifty".
SENATOR SHOWER asked if the administration agreed to the
language.
MS. NAUMAN answered yes.
There being no further objection, Conceptual Amendment 2 to
Amendment 2 was adopted.
CHAIR HOLLAND stated that Amendment 2, as amended, was before
the committee.
2:48:14 PM
SENATOR KIEHL said some provisions of SJR 6 use "appropriate"
but other provisions use "allocate." He recalled that in the
budget, the legislature appropriates funds for a purpose. He
asked whether there was a constitutional effect to use
"allocate" rather than "appropriate."
MS. NAUMAN pointed out that the word "allocated" appears in the
original draft. She said she would rely on Mr. Milk's
explanation. She surmised that a court would find that the words
had different meanings. She opined that "allocate" would mean
that the monies would automatically be transferred without an
appropriation. She suggested that there is value in being
consistent with the usage. Stating "The legislature shall
appropriate " would make it clear how the movement of monies
would happen, she said.
2:50:20 PM
CHAIR HOLLAND said he was fine with using the term "allocate."
2:50:43 PM
SENATOR KIEHL said he preferred the consistent use of the term,
"appropriate" because the intent was clear.
2:50:58 PM
SENATOR HUGHES recalled that "allocate" would mean an automatic
transfer of monies, which was due to the Wielechowski v. State
decision. She expressed concern that using "allocate" may mean
the legislative process could be skipped.
MS. NAUMAN answered that she was unsure what "allocate" meant.
The statutes that were challenged in Wielechowski v. State used
the word "transfer" so that decision provided statutory history
for what "transfer" might mean. However, she recalled the
legislature continued to make appropriations despite the word
"transfer" being in statute. One of the reasons she was not
concerned about the Wielechowski decision is because SJR 6 would
amend the Alaska Constitution. She said she would rely on Mr.
Milks to determine what the administration's intent was when
using the word "allocation."
2:52:14 PM
SENATOR HUGHES recalled that when the fund was created, funds
were automatically transferred and PFDs were distributed to
eligible residents. She asked if the administration envisioned
this process would be used.
MR. BREFCZYNSKI responded that the intent was to guarantee 50
percent of the draw for the POMV as dividends for the eligible
recipients in the state. Since the committee adopted several
conceptual amendments to SJR 6, he said he would defer to Mr.
Milks.
2:53:21 PM
MR. MILKS responded that Mr. Brefczynski explained the
administration's intent in SJR 6 was for the process to be
automatic. He explained that the overall intent was that 50
percent of the amount appropriated shall be distributed for
dividend payments. The appropriation would be based on
allocating 50 percent of the POMV. The common understanding was
this would mean that the funds would be set aside. The committee
could decide to insert "appropriate" if it chooses to do so.
2:54:47 PM
SENATOR HOLLAND encouraged members to close out Amendment 2. He
offered to solicit a further amendment to address "allocate."
2:55:01 PM
SENATOR HUGHES asked Mr. Milks to consider the effect of the
amendments to SJR 6 since "appropriated" was replaced by
"calculated." She asked if that language means that it would
bypass the legislature and go straight to distribution. She
offered her belief that the legislature appropriates. She
wondered if using "calculated" and "allocated" would mean it
would be an automatic transfer.
2:55:50 PM
MR. MILKS explained that he was responding to the issue Senator
Kiehl raised on page 2, line 6 of SJR 6. If the committee is
speaking to SJR 6, as amended by Senator Myers, it would be
helpful to hear that language since he does not have it in
writing.
2:56:29 PM
SENATOR HUGHES stated it would read, "Each fiscal year an amount
equal to fifty percent of the maximum amount calculated under
(b) of this section shall be allocated for dividend payments to
residents of the State."
MR. MILKS remarked that it was important that the language means
what the members intended it to mean.
2:58:21 PM
SENATOR KIEHL said he liked the Chair's suggestion that the
committee finish its action on Amendment 2. He offered to take
up whether to use "allocate" or "appropriate" on its own.
2:58:40 PM
CHAIR HOLLAND stated that Amendment 2, with [handwritten
amendments added], and as amended by Conceptual Amendments 1 and
2 was before the committee.
CHAIR HOLLAND removed his objection.
There being no further objection, Amendment 2, as amended, was
adopted.
2:59:07 PM
SENATOR KIEHL moved to adopt Conceptual Amendment 3, on page 2,
line 6, to replace the word "allocated" with "appropriated."
CHAIR HOLLAND objected for discussion purposes.
SENATOR KIEHL explained that the courts look to legislative
intent and the committee's understanding when the words are not
clear. The courts also assume that different words mean
different things. He offered his belief that Senator Myers was
clear and if the legislature intends to constitutionalize the
permanent fund dividend the language should be very clear, such
as "shall be appropriated." He directed attention to Art. IX,
Sec. 13, and read, "No money shall be withdrawn from the
treasury except in accordance with appropriations made by law."
Therefore, he would like the language in every section of SJR 6
to match the language in the Alaska Constitution by using the
word "appropriate."
3:00:15 PM
CHAIR HOLLAND stated that this resolution will be going to the
Finance Committee next.
3:00:24 PM
SENATOR HUGHES offered her belief that this was a policy call.
If the language in SJR 6 uses "appropriate" it means that the
funds will pass through the legislative process as a line item
in the budget. She said she understood Art. IX, Sec. 13 as read.
However, if the legislature decides to make an exception and not
have the fifty percent draw for PFD payments to go through the
legislative process, it could be accomplished via a direct
transfer. That is what initially happened with the original PFD.
According to Ms. Nauman, the word "allocate" would be a direct
transfer and bypass the legislative process. She further
understood her intent that residents receive half of the five
percent draw. She expressed an interest in knowing her view on
bypassing the legislature and reverting to transferring the
funds for PFDs. She asked for the administration's intent and if
it was interested in the direct transfer for PFD payments to
avoid the potential for the legislature to muddle it up.
MR. BREFCZYNSKI responded that the administration would prefer a
direct transfer. He suggested that the budget process may entail
delays or be subject to vetoes. The intent would be to guarantee
the dividend as fifty percent of the POMV. He deferred to Mr.
Milks in terms of whether "allocate" will satisfy the transfer.
3:02:42 PM
SENATOR HUGHES asked whether "allocate" indicates a transfer
that would bypass the legislative process.
MR. MILKS responded that he believes that is what it states.
MS. NAUMAN responded that she reviewed the section of the Alaska
Constitution that Senator Kiehl referenced. She said she agrees
with him that this section would be better and less likely to
conflict with that section if this sentence read, "The
legislature shall appropriate fifty percent of the maximum
amount calculated to go to dividends for state residents."
3:03:58 PM
SENATOR HUGHES asked if there could be an exception in the
Alaska Constitution. She suggested it might not work in statute
due to the dedicated funds prohibition.
CHAIR HOLLAND asked if the language "appropriate" could allow a
future legislature to adjust the amount.
SENATOR HUGHES clarified that she was not concerned about that
but rather that the PFD payments could be slowed down or vetoed.
However, allocating the direct transfer ensures that PFDs would
be paid to residents.
3:05:17 PM
MR. KING responded that if it is the committee's will to accept
this amendment, it might be good to insert an exemption from the
line item veto. Otherwise, leaving the language as "allocation"
may create some ambiguity. That ambiguity could force the courts
to discuss why that ambiguity exists. He said there is extensive
legislative intent during this debate. He suggested that
Legislative Legal Services may be able to clarify whether the
legislative intent would survive a court challenge. One of those
two options seems viable to him, he said.
3:05:55 PM
CHAIR HOLLAND stated his intention to maintain his objection.
SENATOR SHOWER read online definitions [no source given] that An
Act of appropriation means an Act of the legislature authorizing
money to be paid from the treasury for a specified purpose.
However, "allocate" means to set aside for a purpose.
3:06:36 PM
A roll call vote was interrupted by an at-ease.
3:06:55 PM
At ease
3:07:37 PM
CHAIR HOLLAND reconvened the meeting.
3:07:53 PM
SENATOR HUGHES stated her preference was to use "allocate. The
PFDs initially used a process that provided more certainty and
will avoid a potential veto. She suggested that if the Chair is
eager to pass SJR 6 from committee, this discussion could be
taken up by the Finance Committee. She said she does not want to
change the language to "appropriate" because it means that PFDs
will use the budget process unless another amendment could
provide veto proofing. She pointed out that Mr. Milks previously
stated that the administration's intent was to use the language
"allocate," which means that funds would automatically transfer
and not require legislative appropriation.
CHAIR HOLLAND stated his preference was to use "allocate" rather
than "appropriate." He offered his view that a future
legislature could decide not to "allocate" the funds.
3:09:19 PM
SENATOR KIEHL commented that the committee has heard that the
attorneys disagreed about the meaning of the specific terms. If
the intention is for the Alaska Constitution to read "transfer
without appropriation" or "be used without appropriation", that
language should be added, he said. He recalled that Senator
Shower read a definition of "allocation" but he questioned the
meaning. He stated that the language that is closest to the
meaning was "shall appropriate."
3:09:53 PM
SENATOR SHOWER related his understanding that the committee
would like to move SJR 6 as the vehicle for further discussion.
He stated that he would not support Conceptual Amendment 3 since
he would prefer to move the bill to the Finance Committee to
debate the most relevant language to use. He related that staff
raised the issue of the line item veto so the language needs
further vetting.
CHAIR HOLLAND maintained his objection.
3:10:38 PM
A roll call vote was taken. Senator Kiehl voted in favor of
Conceptual Amendment 3 and Senators Shower, Hughes, Myers, and
Holland voted against it. Therefore, Conceptual Amendment 3
failed by a 1:4 vote.
3:11:10 PM
SENATOR SHOWER asked if the committee wanted to entertain a
conceptual amendment to add language to veto proof the
appropriation.
3:11:42 PM
At ease
3:12:44 PM
CHAIR HOLLAND reconvened the meeting.
3:13:00 PM
SENATOR HUGHES directed attention to page 2, line 6 of SJR 6.
She asked what language would ensure that the funds for PFD
payments will be transferred without going through the
legislative budget process or being subject to any delays.
She asked Mr. Milks to first respond, followed by Ms. Nauman.
She added that Mr. Milk's opinion was that "allocate" would
allow the transfer of funds to bypass the legislative process
and ensure PFD payments were made. She expressed concern that
additional language may be needed to ensure the funds would not
be subject to the budget process and be susceptible to a veto.
3:14:21 PM
MR. MILKS responded that if the committee was interested in
protecting against the possibility of a veto, he suggested
inserting language, "The transfer is not subject to a veto under
Art. II, Sec. 16.
3:14:48 PM
SENATOR HUGHES expressed concern that with that language, the
funds could still end up as part of the budget process. She
asked whether there was some way to directly transfer funds to
avoid being part of the legislative budget process and subject
to a veto.
3:15:20 PM
MR. MILKS responded that Ms. Nauman identified the appropriation
provision in the Alaska Constitution as Art. IX, Sec. 13. He
related his understanding that the committee seeks language for
maximum coverage so it is not an appropriation and funds would
not be subject to a veto, such that both Articles would be
referenced. It would not be an appropriation subject to Art. IX,
Sec. 13 and not subject to veto under Art. II, Sec. 16.
3:16:14 PM
SENATOR HUGHES asked whether this language means it cannot be
vetoed. She offered her belief that the language would still not
prevent transferred funds from being a line item in the budget.
3:16:26 PM
MS. NAUMAN explained that part of the reason that two attorneys
are grappling with the language is because the committee seeks
to create a new mechanism to move monies that does not currently
appear in the Alaska Constitution.
She agreed with Mr. Milks if the committee would like to exempt
PFDs from the current process that all the money flows through
under the constitution, the language could read,
"Nothwithstanding Art IX, Sec 13 in the Constitution of the
State of Alaska, each year fifty percent of the maximum amount
calculated under (b) of this section shall be allocated for a
payment of dividends to residents of the state." Further, to
ensure against a veto, to add language, "A governor may not veto
or reduce the amount allocated under this section under Art. II,
Sec. 15."
SENATOR HUGHES was unsure if she could repeat the exact language
in a conceptual amendment.
3:17:38 PM
MR. MILKS concurred with Ms. Nauman's suggested language.
3:17:44 PM
CHAIR HOLLAND asked Ms. Nauman to state the suggested language.
MS. NAUMAN restated the proposed language:
On page 2, line 5, before the word "Each", add
"Notwithstanding Art. IX, Sec. 13 Constitution of the
State of Alaska, Each year, ?." On page 2 line 6,
following, "State.", insert a new sentence to read,
"Notwithstanding Art. II, Sec. 15, the governor may
not veto or reduce the amount allocated under this
section.
MS. NAUMAN further suggested changing "allocate to "transfer"
since Senator Kiehl and her budget colleagues stated an
implication that "allocation" means money could be moved within
an appropriation. Since the goal was to create a new
constitutional concept, perhaps using "transfer" might better
describe the goal the committee wishes to accomplish, she said.
3:19:24 PM
SENATOR HUGHES moved to adopt Conceptual Amendment 4, using Ms.
Nauman's suggested language and her suggested change, on line 6,
to delete "allocated" and insert "transferred". Conceptual
Amendment 4 to Version I read:
On page 2, line 5, subsection (c), before "Each" to
add, "Notwithstanding Art. IX, Sec. 13, Constitution
of the State of Alaska." In subsection (c), Each year,
?." On page 2 line 6, following, "State.", insert,
Notwithstanding Art. II, Sec. 15, the governor may not
veto or reduce the amount transferred under this
section.
MR. BREFCZYNSKI stated that the administration agreed with the
language.
3:20:06 PM
CHAIR HOLLAND acknowledged that the recording would capture the
language in Conceptual Amendment 4. He restated the motion
before the committee. On page 2, line 5, after subsection (c),
before "Each" to add, "Notwithstanding Art. IX, Sec. 13,
Constitution of the State of Alaska." After the "." at the end
of [subsection] (c) add, "Notwithstanding Art. II, Sec. 15, the
governor may not reduce or veto the amount transferred under
this section."
CHAIR HOLLAND removed his objection. There being no further
objection, Conceptual Amendment 4 was adopted.
3:21:13 PM
SENATOR SHOWER moved to report the proposed committee substitute
(CS) for SJR 6, Version I, as amended, from committee with
individual recommendations and attached fiscal note(s). There
being no objection, CSSJR 6 (JUD) was reported from the Senate
Judiciary Standing Committee.
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