Legislature(2021 - 2022)BUTROVICH 205
03/02/2021 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB83 | |
| SB84 | |
| SJR1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 83 | TELECONFERENCED | |
| *+ | SB 84 | TELECONFERENCED | |
| += | SJR 1 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SJR 1-CONST AM: GUARANTEE PERM FUND DIVIDEND
4:33:26 PM
CHAIR SHOWER announced the consideration of SENATE JOINT
RESOLUTION NO. 1 Proposing amendments to the Constitution of the
State of Alaska relating to the Alaska permanent fund and
appropriations from the Alaska permanent fund.
He noted that the committee previously heard the bill and today
would hear a summary followed by invited and public testimony.
4:33:51 PM
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, Juneau,
Alaska, sponsor of SJR 1, reminded the committee that that SJR 1
enshrines the original permanent fund dividend (PFD) in the
Alaska Constitution and limits the draw from the fund corpus to
five percent of a five-year averaged market value (POMV). The
bill prioritizes the POMV draw to first pay a dividend to the
people and government may use the remainder to pay government
expenses. He explained that this is similar to an endowment
program used by institutions worldwide.
SENATOR WIELECHOWSKI highlighted that SJR 1 eliminates the
Earnings Reserve Account (ERA) because legislatures have access
to that account. If earnings from the permanent fund continue to
flow into the ERA, he said legislatures could repeatedly
withdraw funds to the point that there would not be enough to
pay a dividend.
He referenced the chair's earlier question about historic
funding of PFDs through automatic transfers and directed
attention to the brief in the bill packets. It recounts numerous
occasions of fund transfers from the permanent fund to the
dividend fund without appropriation. He explained that the basis
of the argument in his lawsuit [Wielechowski v. Alaska] was that
there does not need to be an appropriation for a dividend;
therefore, the governor cannot veto the dividend.
4:36:25 PM
SENATOR HOLLAND asked if this legislation affected the
Constitutional Budget Reserve (CBR).
SENATOR WIELECHOWSKI answered no.
4:37:10 PM
JOE GELDHOF, Board Member, Alaska Permanent Fund Defenders
("Defenders"), Juneau, Alaska, stated that Clem Tillion, chair
of Defenders asked him to make a couple of macro points about
the permanent fund and the PFD, the first of which is that the
permanent fund was never intended to be a rainy day account for
government spending. The second point is that the permanent fund
is arguably the best idea that Alaska has had since statehood;
it saves a portion of nonrenewable resources for future
generations. Third, the PFD is not an entitlement; it is a form
of ownership designed to meet the constitutional requirement
that the resources of the state, which are held in common, are
developed for the maximum use and benefit of Alaskans.
He related that Defenders believe that there is a critical need
to quickly address the permanent fund and the PFD because too
much has already been spent and too little has been saved. The
state's savings accounts are dwindling and the options to
address the state's fiscal problems are quickly disappearing. He
said Defenders strongly believe that the legislature needs to
enact legislation this session so the measure can be on the
ballot in 2022. He recounted the basic principles that Defenders
adopted for looking at any proposal such as SJR 1. The corpus of
the fund must be protected from inflation; the permanent fund
needs to continue to grow; spending funds that go into the ERA
needs to stop; the annual brawl over the PFD must stop; and the
legislation needs straightforward language that pays an equal
PFD to all Alaskans and is easy for the public to understand.
4:41:30 PM
MR. GELDHOF said Chair Tillion likes what SJR 1 does in terms of
allocation of the fund. The problem is that 5 percent arguably
will jeopardize the corpus of the account. He reported that
economists that Defenders worked with, the Permanent Fund
Corporation and the people who run stress tests all agree that 5
percent may fail. He pointed out that the Rockefeller Foundation
used 4 percent when it moved to a POMV structure. He emphasized
that when shifting from a trust fund structure to an annuity
structure, it is very important to set the percentage low enough
for the fund to continue to grow and provide sufficient returns
to provide for the PFD and general fund spending into
perpetuity.
4:45:52 PM
RICK HALFORD, representing self, Chugiak, Alaska, stated that he
was involved in the initial management structure of the PFD and
it received broad support and was viewed as clearly
constitutional. He agreed with the previous testimony and added
that what was lost most in the court case was the connection
between the performance of the fund and the management structure
that created such a successful fund. He said the dividend grew
as a defense of the fund and the element of that defense was the
realized gain averaged over five years.
MR. HALFORD pointed out that the POMV structure bases the draw
on the gross value of the fund, not the performance of the fund
and does not affect trustee decisions and the investment system.
Transitioning to the POMV offers security and constitutional
protection but the connection between the fund performance and
the dividend is lost. He said that loss may be worthwhile if the
number is low enough that the fund increases in value.
MR. HALFORD described a 4 percent POMV with language that
retains the old calculation versus 50 percent of the new
calculation as a big step in the right direction.
CHAIR SHOWER commented on the value of his historical
perspective.
SENATOR REINBOLD asked if he would broaden the permanent fund to
include taxes on all resources to promote development and better
management of state resources.
MR. HALFORD replied he has many friends who believe severance
tax should have been included initially, but the permanent fund
is not based on taxes; it is based on ownership. The hope is
that the renewable resources ownership will maintain value into
the future. The concern is that this generation is spending in
one generation the nonrenewable resources ownership that is the
property of all generations of Alaskans. "We have not saved
enough. We are spending the endowment as a trust land state of
all future Alaskans in one generation," he said.
4:54:01 PM
CHAIR SHOWER asked him to comment on the prevalent attitude
among some current and former legislators that the dividend is
free money and they do not want an income tax to pay for it,
which is very much at odds with the view that it belongs to the
people.
MR. HALFORD related that Wally Hickel was famous for saying
Alaska is an owner state and Jay Hammond individualized that by
giving the people a stake in all of it. He said it is
interesting that people who were close to being in diapers are
telling people what we meant when we created the permanent fund.
He highlighted that Elmer Rasmusson and members of the permanent
fund working group spent two years trying to get an answer to
what the reason for the permanent fund was and they never
reached a conclusion. The only agreement was that it was a
savings account and the money should not be wasted.
4:57:34 PM
CHAIR SHOWER found no further questions and opened public
testimony on SJR 1.
4:58:15 PM
CRIS EICHENLAUB, representing self, Wasilla, Alaska, stated that
he supported SJR 1 generally but he did not support the POMV or
the elimination of the ERA. He suggested that if the legislature
repealed the POMV legislation [Senate Bill 26] the ERA could be
left intact. Do it the way it's been done for the last 40 years,
he said.
5:00:06 PM
SHERRY EICHENLAUB, representing self, Wasilla, Alaska, stated
support for SJR 1 and enshrining the PFD in the constitution.
She suggested that people who do not want their dividend can
donate it through Pick Click Give of not apply. She wants the
dividend to continue so her children and grandchildren can have
a future in Alaska as college graduates and good citizens.
5:01:07 PM
EDWARD MARTIN, representing self, Cooper Landing, Alaska, stated
that SJR 1 is an important aspect of the future of Alaska and
its children. He reported that he has supported the dividend his
entire life and his dad gathered signatures on the peninsula to
get the advisory vote. Nothing has changed and there is no need
for another advisory vote. He said the decision about what is
done with the dividend should be an individual decision. The
future of Alaska is the people as owners benefiting from the
resources of the state.
5:03:30 PM
BERT HOUGHTALING, representing self, Big Lake, Alaska, began his
testimony on SJR 1 by Governor Jay Hammond:
Alaska's dividend program is, of course, anything but
socialistic. Socialism is taking from the wealthy to
provide what government thinks is best for all.
Permanent Fund Dividends do just the opposite. They
take the money, which by constitutional mandate,
belongs to all and allows all individuals to determine
how to spend some of his or her share. What could be
more capitalistic?
MR. HOUGHTALING stated full support for enshrining the PFD in
the constitution but not having Senate Bill 26 involvement with
the POMV or the elimination of the ERA and combining it with the
corpus. They need to be separate so the corpus cannot be spent,
he said. He advocated for continued meaningful cuts to state
government.
CHAIR SHOWER advised that written comments could be sent to
ssta@akleg.gov.
5:06:01 PM
CHAIR SHOWER closed public testimony on SJR 1.
5:06:15 PM
At ease
5:06:47 PM
CHAIR SHOWER reconvened the meeting and solicited a motion.
5:06:58 PM
SENATOR REINBOLD moved to report SJR 1, work order 32-LS0015\A,
from committee [with individual recommendations and attached
fiscal note(s)].
CHAIR SHOWER found no objection and SJR 1 was reported from the
Senate State Affairs Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 84 Dept of Revenue PPT.pdf |
SSTA 3/2/2021 3:30:00 PM |
SB 84 |
| SB 84 Sectional Analysis.pdf |
SSTA 3/2/2021 3:30:00 PM |
SB 84 |
| SB 84 Bill.PDF |
SSTA 3/2/2021 3:30:00 PM |
SB 84 |
| SB 83 Sectional Analysis version A.pdf |
SSTA 3/2/2021 3:30:00 PM |
SB 83 |
| SB 83 Sponsor Statement version A.pdf |
SSTA 3/2/2021 3:30:00 PM |
SB 83 |
| SB 83 A.PDF |
SSTA 3/2/2021 3:30:00 PM |
SB 83 |
| SB 83-1-2-021221-GOV-N.PDF |
SSTA 3/2/2021 3:30:00 PM |
SB 83 |