Legislature(2019 - 2020)BUTROVICH 205

03/26/2019 01:30 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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+= SJR 6 CONST AM:APPROP. LIMIT; RESERVE FUND TELECONFERENCED
Moved SJR 6 Out of Committee
*+ SJR 4 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SJR  6-CONST AM:APPROP. LIMIT; RESERVE FUND                                                                       
                                                                                                                                
1:33:50 PM                                                                                                                    
CHAIR  SHOWER   announced  the  consideration  of   SENATE  JOINT                                                               
RESOLUTION  NO. 6,  Proposing amendments  to the  Constitution of                                                               
the State of Alaska relating  to an appropriation limit; relating                                                               
to the budget  reserve fund and establishing  the savings reserve                                                               
fund; and relating to the permanent fund.                                                                                       
                                                                                                                                
He reviewed  the committee's work  on the bill including  that it                                                               
was last  heard on March 25  when public testimony was  taken and                                                               
then closed. He  noted that written testimony  could be submitted                                                               
to senate.state.affairs@akleg.gov and will  be accepted until the                                                               
bill  moves from  committee. He  asked  Mr. King  to discuss  the                                                               
additional  slides  that  he  prepared  in  response  to  earlier                                                               
questions and requests for updated information.                                                                                 
                                                                                                                                
1:34:40 PM                                                                                                                    
ED  KING,  Chief  Economist, Office  of  Management  and  Budget,                                                               
Office  of  the  Governor,  Juneau,  directed  attention  to  the                                                               
document  he prepared  that responds  to questions  the committee                                                               
had  on the  slide  presentation. Senator  Micciche requested  an                                                               
alternate  graph to  those on  slides 9  and 10  that adjust  the                                                               
spending  values  for  inflation.  The first  graphic  shows  the                                                               
inflation adjusted unrestricted general fund spending for FY75-                                                                 
FY19 reported by  legislative finance. He moved to  the next page                                                               
of the handout  that shows slide 10 updated  to include inflation                                                               
adjustments.   It  shows   that  government   spending  increased                                                               
significantly in the early 1980s  when oil first started to flow,                                                               
followed  by   about  20  years  when   government  spending  was                                                               
relatively  flat,  which  is  decreasing   when  the  values  are                                                               
adjusted  for  inflation. Then  in  FY05-FY13  there was  another                                                               
significant increase in spending.                                                                                               
                                                                                                                                
1:36:05 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
1:36:10 PM                                                                                                                    
CHAIR SHOWER  reconvened the meeting. He  asked for clarification                                                               
about  applying inflation  to  the period  of  flat spending.  He                                                               
noted  that the  slope  is downward  when  numbers are  inflation                                                               
adjusted.                                                                                                                       
                                                                                                                                
MR. KING  explained that  spending was  decreasing in  real terms                                                               
but that isn't considered deflation.                                                                                            
                                                                                                                                
CHAIR SHOWER noted  that the percentages changed  when the values                                                               
were adjusted for inflation.                                                                                                    
                                                                                                                                
MR.  KING confirmed  that the  tags were  updated to  reflect the                                                               
inflation adjusted numbers.                                                                                                     
                                                                                                                                
SENATOR  COGHILL commented  that he'd  be watching  the inflation                                                               
aspect.                                                                                                                         
                                                                                                                                
1:37:30 PM                                                                                                                    
MR.  KING said  the next  request  was from  Senator Coghill.  He                                                               
asked  for slides  [11  and  12] to  be  updated  to reflect  the                                                               
proposed  spending   cap  excluding  capital   expenditures.  The                                                               
graphic on page  2 of the memo does this,  which brings the total                                                               
that  could not  have been  spent down  to $19  billion from  $29                                                               
billion.                                                                                                                        
                                                                                                                                
The first  graphic on page 3  of the memo is  a hypothetical that                                                               
shows what  the current  fund balances would  be if  the proposed                                                               
cap had been in place. The  permanent fund balance would be about                                                               
$110 billion  rather than the  earlier $130 billion  when capital                                                               
expenditures were included.                                                                                                     
                                                                                                                                
MR.  KING said  Senator Micciche  also asked  what the  Permanent                                                               
Fund   Principal  account   balance  would   be  today,   if  the                                                               
legislature had not made special  appropriations to the principal                                                               
account. [The memo provides the following background]:                                                                          
                                                                                                                                
     As  background, all  earnings from  the Permanent  Fund                                                                    
     are placed in a holding  account known as the "earnings                                                                    
     reserve  account" or  ERA. Each  year, the  legislature                                                                    
     decides what to do  with those earnings. They typically                                                                    
     use about half of them  to pay dividends and transfer a                                                                    
     portion to  the ERA to offset  inflation. The remaining                                                                    
     amount has historically been either  held in the ERA or                                                                    
     has  been transferred  to the  principal account.  When                                                                    
     those   additional  transfers   are   made,  they   are                                                                    
     considered "special appropriations."                                                                                       
                                                                                                                                
He directed  attention to the bar  graph at the bottom  of page 3                                                               
of the memo. It illustrates  the special appropriations over time                                                               
as reported  by the Alaska  Permanent Fund Corporation.  The fund                                                               
was  capitalized initially  and then  there was  a large  deposit                                                               
into  the principal  account in  1987. After  that there  were no                                                               
real deposits until 1996 when  the legislature swept the ERA into                                                               
the  principal account.  Since then  there have  been just  three                                                               
significant deposits  in addition to inflation  proofing from the                                                               
earnings  reserve to  the  principal accounts.  The  last was  in                                                               
2003. He  noted that the  graph on page 4  of the memo  shows the                                                               
historical balance of  the ERA. He highlighted  that the earnings                                                               
reserve account  balance typically  was about $1  billion through                                                               
about  year  2000.  Then  the   legislature  changed  course  and                                                               
retained the additional earnings  in the earnings reserve instead                                                               
of moving  it to  the principal  account. He  said the  result is                                                               
that  the earnings  reserve balance  has increased  substantially                                                               
over the last 5-6 years.                                                                                                        
                                                                                                                                
CHAIR SHOWER  asked what happened  in 2000-2004 and  2008-2010 to                                                               
draw down the earnings reserve account.                                                                                         
                                                                                                                                
MR. KING said there were market  corrections then and in the 2009                                                               
timeframe. The  entire fund lost  value and the  earnings reserve                                                               
balance was  depleted to almost  zero. There were no  earnings to                                                               
deposit yet  money was still  flowing out based on  the five-year                                                               
averaging for the permanent fund  dividend. He noted that the ERA                                                               
has recovered since  then and now has a balance  in excess of $18                                                               
billion.                                                                                                                        
                                                                                                                                
CHAIR SHOWER asked him to  discuss what happened then versus what                                                               
could   happen  now   if  the   legislature  continues   to  take                                                               
unstructured draws, and nothing else changes.                                                                                   
                                                                                                                                
MR.  KING  explained  that  the  earnings  reserve  balance  will                                                               
decrease if  the legislature draws more  out of the ERA  than the                                                               
fund earns.  He said  that includes  inflation-proofing transfers                                                               
from the ERA to the principal  account as well as payments to the                                                               
general fund or dividend fund.  The current balance of the entire                                                               
fund is about $65 billion and  the expected earnings are about $4                                                               
billion per year.  As long as the legislature does  not draw more                                                               
than the earnings,  the total account balance  will not decrease.                                                               
However, if the earnings either  don't meet the projection or the                                                               
legislature draws  more than the  earnings, the ERA  balance will                                                               
decrease.                                                                                                                       
                                                                                                                                
CHAIR  SHOWER asked  him to  tie that  to the  percent of  market                                                               
value (POMV) calculation adopted in Senate Bill 26.                                                                             
                                                                                                                                
MR. KING said  this committee looked at scenarios  where the fund                                                               
balance could  be depleted through  excess unstructured  draws or                                                               
underperformance or  both. But as  things sit today, he  said, as                                                               
long as the draws are structured  and the performance of the fund                                                               
is average  or better, the  risk of fund depletion  is relatively                                                               
low.                                                                                                                            
                                                                                                                                
MR. KING turned  to Senator Kawasaki's request for  a breakout of                                                               
the  $5 billion  increase in  the budget  from 2005  to 2013.  He                                                               
explained  that  about  $2  billion  was  capital  increases,  $1                                                               
billion   was    statewide   items   both    through   retirement                                                               
contributions and tax credit purchases,  and about $2 billion was                                                               
from  increases in  agency operations.  He directed  attention to                                                               
the  table on  the last  page of  the memo  that breaks  down the                                                               
general  fund expenditures  in 2005  versus 2013.  It shows  that                                                               
agency operations  increased by $1.4  billion more than  the rate                                                               
of inflation  over that period.  He noted that  agency operations                                                               
have reduced  with the budget cuts  over the last four  years but                                                               
they are still in excess of  what agency operations were in 2005,                                                               
even adjusted for inflation.                                                                                                    
                                                                                                                                
1:44:42 PM                                                                                                                    
SENATOR  KAWASAKI clarified  that  he was  looking  for the  FY19                                                               
management  plan  numbers because  that  would  provide a  better                                                               
snapshot of where  things are today. "Just for the  record, if we                                                               
could get that it would be great," he said.                                                                                     
                                                                                                                                
CHAIR SHOWER  suggested Mr. King add  a second chart for  2005 to                                                               
2019 to show "the  reality of where we stand today  and why we do                                                               
or do not need to make  changes." He asked if the expenditures on                                                               
the chart are  inflation adjusted. He pointed to  Health & Social                                                               
Services expenditures in  2005 of $490 million  versus $1 billion                                                               
in 2013.                                                                                                                        
                                                                                                                                
MR.  KING  answered no;  those  are  actual expenses  in  nominal                                                               
terms.  For  Health  &  Social Services,  the  increase  of  $510                                                               
million  is a  104 percent  increase  over what  spending was  in                                                               
2005. Over the same period  inflation totaled 23.6 percent so the                                                               
actual  change  was about  70  percent  more than  inflation.  He                                                               
apologized to  Senator Kawasaki for misunderstanding  the request                                                               
and agreed  to provide the  information. He noted that  from 2013                                                               
to the  2019 management plan,  almost all the capital  growth has                                                               
abated  and about  half the  statewide items  have decreased  but                                                               
increases still exist in agency operations.                                                                                     
                                                                                                                                
1:47:01 PM                                                                                                                    
SENATOR MICCICHE joined the committee.                                                                                          
                                                                                                                                
CHAIR SHOWER asked  what would explain the  dramatic increases in                                                               
the  Education and  Health &  Social  Services expenditures  from                                                               
2005 to 2013.                                                                                                                   
                                                                                                                                
MR.  KING  clarified  that  the   chart  represents  just  agency                                                               
operations.  He  then  deferred the  question  to  administrative                                                               
services directors and analysists.                                                                                              
                                                                                                                                
CHAIR  SHOWER said  he may  prepare a  list of  questions to  ask                                                               
another  time because  this "shows  a cautionary  tale of  why we                                                               
have to put appropriate constraints on ourselves."                                                                              
                                                                                                                                
SENATOR COGHILL pointed out that  the chart shows just the agency                                                               
operations part  of the picture and  the rest of the  slides show                                                               
the whole picture.                                                                                                              
                                                                                                                                
CHAIR SHOWER  said he  understands the  point but  the cautionary                                                               
point is  that, in  retrospect, the  dramatic increase  in agency                                                               
operations was  probably unwise.  The salient question,  he said,                                                               
is whether the legislature needs  to make the spending limit more                                                               
relevant.                                                                                                                       
                                                                                                                                
SENATOR  KAWASAKI  pointed out  that  this  legislation does  not                                                               
account  for  how litigation  might  be  treated and  that  could                                                               
potentially  jeopardize funding  for an  entire agency.  He noted                                                               
that  when  a  lawsuit  was   settled  in  2007-2008,  the  joint                                                               
legislative   education  taskforce   made  recommendations   that                                                               
resulted in significant increases in education spending.                                                                        
                                                                                                                                
CHAIR  SHOWER countered  that  the lawsuit  forced  the state  to                                                               
reset the  baseline spending [for  education] and if  that static                                                               
position makes  sense today,  that should  cover the  question of                                                               
lawsuits going forward.                                                                                                         
                                                                                                                                
SENATOR COGHILL noted that the state  has lived under a couple of                                                               
consent decrees that do not take  the budget into account, one of                                                               
which was the  Kasayulie case. He said  "equality" and "adequacy"                                                               
are always considerations  and if the budget is cut  to the point                                                               
that  one  of  those  is  out  of  balance,  another  lawsuit  is                                                               
inevitable.                                                                                                                     
                                                                                                                                
CHAIR  SHOWER  said  he'd  be  curious  to  see  what  drove  the                                                               
increases because some expenditures were probably a choice.                                                                     
                                                                                                                                
He asked if anyone from the  Department of Law had data about the                                                               
increases in agency operations.                                                                                                 
                                                                                                                                
1:53:23 PM                                                                                                                    
CORI   MILLS,  Assistant   Attorney   General,  Civil   Division,                                                               
Legislation and  Regulation Section,  Department of  Law, Juneau,                                                               
confirmed that  the consent  decrees in  the Moore  and Kasayulie                                                               
settlements  had   monetary  provisions  that  were   subject  to                                                               
appropriation by  the legislature,  just as in  most settlements.                                                               
She talked  about not binding  the hands of the  legislature when                                                               
it comes to  appropriations and that departments  work within the                                                               
constraints they're faced with in that regard.                                                                                  
                                                                                                                                
CHAIR SHOWER asked  if SJR 6 ensures that the  state will be able                                                               
to  continue to  meet  its  obligations or  if  it increases  the                                                               
likelihood of  a new  court case. "Where  does that  baseline put                                                               
us, above or below that threshold?"                                                                                             
                                                                                                                                
MS. MILLS said  the state can always be sued,  but the litigation                                                               
in the Moore and Kasayulie cases  is over. The consent decrees in                                                               
both cases  were satisfied.  It's not clear  what new  issues may                                                               
arise, she said.                                                                                                                
                                                                                                                                
CHAIR SHOWER  clarified that  he was  curious about  whether this                                                               
spending cap would meet those past obligations.                                                                                 
                                                                                                                                
1:56:06 PM                                                                                                                    
MR. KING  responded that  if SJR  6 were to  pass in  its current                                                               
form,  a restriction  to  the  average of  the  last three  years                                                               
spending  would  be required.  If  the  resolution were  to  pass                                                               
without any budget cuts, the  legislature would have the capacity                                                               
to maintain  the same level of  spending as today. If  there were                                                               
significant  reductions to  spending,  that would  set the  limit                                                               
lower.  If  there  were future  settlements  or  agreements  that                                                               
require appropriations,  those appropriations would have  to live                                                               
within that cap.                                                                                                                
                                                                                                                                
CHAIR SHOWER commented that he heard the answer to be "maybe."                                                                  
                                                                                                                                
SENATOR MICCICHE pointed  out that if inflation  were factored in                                                               
the  numbers  would be  reduced  by  the difference  between  two                                                               
percent and whatever actual inflation was each year.                                                                            
                                                                                                                                
MR.  KING  agreed  and  added that  as  written,  the  resolution                                                               
provides  that the  allowable annual  increase in  the budget  is                                                               
lower than the anticipated rate of inflation.                                                                                   
                                                                                                                                
1:57:37 PM                                                                                                                    
SENATOR MICCICHE commented  that it's creative to  look at agency                                                               
spending through just  2013 (the highest spending  year) but it's                                                               
not  very  helpful  with  actuals  because  the  growth  rate  is                                                               
significantly lower if the data for  the five years after that is                                                               
also included.  He asked  Mr. King  if he  could provide  a chart                                                               
that  has the  expanded data  and if  the 23.6  percent inflation                                                               
over  the  period reflects  the  Anchorage  consumer price  index                                                               
(CPI).                                                                                                                          
                                                                                                                                
MR.  KING  agreed  to  provide   the  expanded  data  that  shows                                                               
reductions  in  the  last  4-5   years  and  confirmed  that  the                                                               
inflation is  based on  the Anchorage CPI.  He clarified  that he                                                               
highlighted that  particular time  period to illustrate  the type                                                               
of growth that was allowed under the constitutional limit.                                                                      
                                                                                                                                
SENATOR MICCICHE said  he assumes everyone at the  table knows he                                                               
strongly  supports  an  appropriation  limit. He  was  trying  to                                                               
evaluate the  actual growth rate  that is required  by inflation.                                                               
He expressed interest in looking at the additional numbers.                                                                     
                                                                                                                                
SENATOR COGHILL  recalled there was double-digit  inflation years                                                               
ago and  because that could  happen again,  he didn't know  if it                                                               
was wise to lock in outside the limits of normal inflation.                                                                     
                                                                                                                                
CHAIR SHOWER  asked Mr. King  to discuss the smoothing  effect of                                                               
the three year averaging.                                                                                                       
                                                                                                                                
2:02:03 PM                                                                                                                    
MR. KING  explained that the  resolution, as   currently drafted,                                                               
limits  spending  increases  to  no more  than  one-half  of  the                                                               
combined  rate  of  population  and  inflation  or  two  percent,                                                               
whichever is  less. While the  maximum rate of  growth year-over-                                                               
year  is two  percent,  that  is based  on  a rolling  three-year                                                               
average of  actual expenditures that  are subject to the  cap. He                                                               
said  the way  the  numbers work  out for  what  was proposed  is                                                               
effectively   0.8  percent   growth  per   year,  at   the  given                                                               
projections.                                                                                                                    
                                                                                                                                
MR.  KING  said the  spending  cap  is  intended to  help  smooth                                                               
volatility in oil prices and  other revenue so the legislature is                                                               
forced  to   save  for   the  future   in  high   revenue  years.                                                               
Historically,  the  legislature  has responded  to  increases  in                                                               
revenue  with  increases in  spending.  This  bill is  trying  to                                                               
rectify that, he said.                                                                                                          
                                                                                                                                
SENATOR  MICCICHE said  people need  to understand  that the  0.8                                                               
percent growth trend is 1.9  percent below typical inflation over                                                               
the last 10 years. Flat spending  (like was seen in the 1990s) is                                                               
controllable in the  short term as the legislature  is looking to                                                               
get to an efficient baseline, but  when spending is flat too long                                                               
legitimate needs do pop up.                                                                                                     
                                                                                                                                
CHAIR SHOWER  said the next  committee of referral  will continue                                                               
looking for  potential modifications  to make the  spending limit                                                               
that is already in the constitution more relevant.                                                                              
                                                                                                                                
2:05:35 PM                                                                                                                    
SENATOR  KAWASAKI  noted that  in  addition  to the  base  agency                                                               
operations  for education,  the  Moore and  Kasayulie cases  also                                                               
added funds for school construction.                                                                                            
                                                                                                                                
MS. MILLS said  that's correct; the Kasayulie  case in particular                                                               
was  primarily about  building  schools.  The Regional  Education                                                               
Attendance Area  (REAA) fund was  created at that time  to ensure                                                               
equity between urban and rural schools.                                                                                         
                                                                                                                                
SENATOR  KAWASAKI  asked  what  would   happen  if  there  was  a                                                               
"Kasayulie II"  case and  it specifically  talked about  the REAA                                                               
school construction and maintenance fund.                                                                                       
                                                                                                                                
MS. MILLS replied that without a  specific set of facts she could                                                               
not say what a claim might  be. Her understanding of Kasayulie is                                                               
that it had to do with  equity between urban and rural schools so                                                               
the question  would be is there  an inequity or is  there another                                                               
claim being brought forward.                                                                                                    
                                                                                                                                
SENATOR  KAWASAKI discussed  the  tax  cap in  his  city and  the                                                               
process the  city uses to  handle disagreements. He  described it                                                               
as  a way  to get  around the  tax cap  and acknowledged  that it                                                               
hasn't been very successful. The  state wouldn't want to use that                                                               
process,  he said,  but there  should be  some sort  of a  relief                                                               
valve to  pay for  litigation. He  cautioned against  putting the                                                               
proposed  constitutional spending  limit  in  place because  it's                                                               
already low and  even declining with inflation.  A legislature in                                                               
the future could find itself in a bad situation, he said.                                                                       
                                                                                                                                
CHAIR  SHOWER  highlighted the  safety  valve  of overriding  the                                                               
limit with a  super majority vote in cases of  true emergency. He                                                               
acknowledged  that getting  45 legislators  to agree  could be  a                                                               
problem.                                                                                                                        
                                                                                                                                
2:09:18 PM                                                                                                                    
SENATOR  MICCICHE  said  he supports  the  traditional  statutory                                                               
dividend, but  he wonders  why the  administration thinks  it's a                                                               
good idea to  increase the rate of growth for  the permanent fund                                                               
dividend beyond what it is today.                                                                                               
                                                                                                                                
MR. KING  said he didn't know  the policy intent other  than that                                                               
the excess  revenue would  be off limits  to the  legislature and                                                               
the  principal  account of  the  permanent  fund is  the  highest                                                               
yielding account.                                                                                                               
                                                                                                                                
SENATOR   MICCICHE  asked   if   the  administration   considered                                                               
isolating  the revenue  into a  separate  permanent fund  account                                                               
that not only  would be out of reach of  the legislature but also                                                               
would not result in accelerated growth of the dividend.                                                                         
                                                                                                                                
MR. KING  said he was not  part of the deliberative  process, but                                                               
his team  would  be  happy to look at  any options that  might be                                                               
proposed.                                                                                                                       
                                                                                                                                
SENATOR MICCICHE continued  to argue in support  of isolating the                                                               
new account  from the traditional  calculations because  it would                                                               
result in such accelerated growth of the dividend.                                                                              
                                                                                                                                
MR. KING  said he'd be  happy to work  with the committee  on any                                                               
future ideas.                                                                                                                   
                                                                                                                                
SENATOR MICCICHE  asked if  he agrees with  the comment  that the                                                               
current proposal  would result in  such an accelerated  growth of                                                               
the  permanent  fund  dividend  that  it  would  be  outside  the                                                               
original spirit of the program.                                                                                                 
                                                                                                                                
2:14:42 PM                                                                                                                    
MR. KING  said he's be  happy to model  that, but he  agrees with                                                               
the concept that putting more  money into the account will result                                                               
in higher earnings and therefore future PFDs will become larger.                                                                
                                                                                                                                
CHAIR SHOWER  posited that  it was  less likely  now than  in the                                                               
past that the dividend would grow dramatically over time.                                                                       
                                                                                                                                
MR.  KING  said the  opportunity  for  required sweeps  into  the                                                               
principal  account are  fairly  small at  the  current price  and                                                               
production  levels. However,  at some  point in  the future  it's                                                               
likely that  oil prices will  rise to  the $100 per  barrel range                                                               
and  the  question is  how  will  the  legislature react  to  the                                                               
circumstance  of  excess  revenues.  It's also  likely  that  oil                                                               
prices will  fall to $30 per  barrel in the next  decade and it's                                                               
important  that government  and  the expectations  of the  people                                                               
haven't  grown  to  levels  that can't  be  sustained  when  that                                                               
circumstance unfolds.                                                                                                           
                                                                                                                                
2:17:14 PM                                                                                                                    
SENATOR  MICCICHE  said  what he's  trying  to  protect  Alaskans                                                               
against is  taxing to pay  the bills and  saving to pay  a larger                                                               
permanent fund  dividend. He clarified  that saving the  way it's                                                               
done  today   to  protect  the   existing  PFD  is   a  different                                                               
discussion.                                                                                                                     
                                                                                                                                
2:18:36 PM                                                                                                                    
SENATOR COGHILL  observed that  this proposal is  for a  hard cap                                                               
that doesn't allow  any cash flow wiggle room.  Under the current                                                               
process the legislature  can address cash flow  issues by drawing                                                               
from  the  CRB. He  specifically  cited  the open-ended  Medicaid                                                               
budget as an example                                                                                                            
                                                                                                                                
MR. KING  said the proposed cap  has six or seven  exceptions but                                                               
no  other  opportunity  to  exceed  the  cap.  If  an  additional                                                               
appropriation  is required,  the legislature  would need  to back                                                               
out some  other appropriation  so as  to not  exceed the  cap. He                                                               
clarified that the current resolution  does have a provision that                                                               
if excess revenues exist, then the  CBR is refilled in the amount                                                               
of one  year's appropriations. There's room  to manage volatility                                                               
but the  resolution would not  allow an  additional appropriation                                                               
for a structural issue.                                                                                                         
                                                                                                                                
SENATOR COGHILL  mentioned the $100 million  supplemental request                                                               
last year  that was funded  at $45  million and pointed  out that                                                               
that would  not be  possible under  the current  resolution. This                                                               
means the  legislature will  need to rethink  all the  open ended                                                               
entitlements, he said.                                                                                                          
                                                                                                                                
MR. KING described the statement as accurate.                                                                                   
                                                                                                                                
2:21:25 PM                                                                                                                    
CHAIR SHOWER  noted that  there were  no proposed  amendments and                                                               
asked if there was any further discussion on SJR 6.                                                                             
                                                                                                                                
SENATOR  KAWASAKI asked  Ms. Mills  to comment  on the  March 23,                                                               
2019 memo from Legislative Legal  Services and the March 25, 2019                                                               
memo  from the  Department of  Law. They  both cite  the Bess  v.                                                               
Ulmer case yet they came to different conclusions.                                                                              
                                                                                                                                
MS.  MILLS explained  that the  Alaska Supreme  Court in  Bess v.                                                               
Ulmer adopted  a hybrid approach  for looking at  the qualitative                                                               
and  quantitative effect  of an  amendment.  If the  quantitative                                                               
effect of the proposed change  is minimal, the qualitative effect                                                               
would have  to be greater,  and vice versa. She  said Legislative                                                               
Legal Services  laid out a  test in  the second paragraph  of its                                                               
memo that  describes the test  the Florida Supreme  Court adopted                                                               
whereas the Alaska Supreme Court  adopted a test that's closer to                                                               
the  California  approach,  which   weighs  the  qualitative  and                                                               
quantitative impacts  of a proposed amendment.  The Department of                                                               
Law's position is that SJR 6  does not make a foundational change                                                               
to  the  constitution. That's  the  main  difference between  the                                                               
memos that resulted in different conclusions, she said.                                                                         
                                                                                                                                
SENATOR KAWASAKI  asked what would  happen if the  Alaska Supreme                                                               
Court struck  this down before  the measure appeared on  the 2020                                                               
ballot.                                                                                                                         
                                                                                                                                
MS. MILLS  replied it  would be  up to the  court and  whether it                                                               
struck the  amendment down  completely or  struck just  a portion                                                               
and put  the rest  of the  measure on the  ballot. She  said that                                                               
happened  in Bess  v. Ulmer  when the  court struck  one sentence                                                               
from the marriage amendment and proceeded  to put the rest of the                                                               
amendment on the ballot.                                                                                                        
                                                                                                                                
SENATOR  COGHILL  expressed  hope that  the  judiciary  committee                                                               
would consider  two issues; the  inflation formula and  a formula                                                               
that allows for construction capital.                                                                                           
                                                                                                                                
CHAIR SHOWER called for final discussion on SJR 6.                                                                              
                                                                                                                                
SENATOR KAWASAKI  said he understands  there may be  an amendment                                                               
related to  the construction capital  issue and he  looks forward                                                               
to seeing it. He also  appreciates the discussion about inflation                                                               
and  hopes the  finance  committee looks  at  that carefully.  He                                                               
added that he  feels the committee missed an  opportunity when it                                                               
didn't  ask  legislative finance  to  come  to the  committee  to                                                               
discuss  the   resolution.  Finally,  he  hopes   that  the  next                                                               
committees  of  referral  discuss the  litigation  issue  because                                                               
those costs can be significant.                                                                                                 
                                                                                                                                
CHAIR SHOWER  said he didn't consider  having legislative finance                                                               
in this  committee because  they will be  part of  the discussion                                                               
when  the finance  committee considers  the resolution.  However,                                                               
he'll entertain that in the future.                                                                                             
                                                                                                                                
SENATOR  MICCICHE   said  the  clear  message   is  the  existing                                                               
appropriation  limit in  the constitution  does not  work and  he                                                               
appreciates  the  administration  bringing   SJR  6  forward.  He                                                               
highlighted  the growth  curve as  a pressure  relief valve,  the                                                               
litigation issues, and the cascading  of excess dollars, which he                                                               
described as  probably as  important as  the other  issues moving                                                               
forward.  He   summarized  that   the  State   Affairs  Committee                                                               
addresses  the  policy  of  whether  an  appropriation  limit  is                                                               
needed,  the  Judiciary  Committee looks  at  the  constitutional                                                               
issues,  and  the Finance  Committee  looks  at the  numbers  and                                                               
trends and what the expected gap will be over time.                                                                             
                                                                                                                                
CHAIR SHOWER found no further discussion and solicited a motion.                                                                
                                                                                                                                
2:30:10 PM                                                                                                                    
SENATOR COGHILL  moved to report  SJR 6, work  order 31-GS1068\A,                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal note(s).                                                                                                                 
                                                                                                                                
CHAIR SHOWER found  no objection and SJR 6 was  reported from the                                                               
Senate State Affairs Standing Committee.                                                                                        

Document Name Date/Time Subjects
SSTA OFFICIAL AGENDA MEMO.pdf SSTA 3/26/2019 1:30:00 PM
agenda
SJR 6 Sponsor Statement.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR006A.PDF SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Slide Show Presentation & Analysis.pdf SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 ver A Sectional 3.21.19.pdf SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Fiscal Note.PDF SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Additional Slides.pdf SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
3.25.2019 - SJR6 Responses.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Various Written testimonies.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
03.27.2019 - SJR6 MORE Responses to SSTA.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 4 Transmittal Letter.pdf SJUD 4/15/2019 1:30:00 PM
SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 version A.pdf SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 Sectional Analysis.pdf SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 Fiscal Note GOV-DOE.pdf SJUD 4/15/2019 1:30:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 4
SJR 4 Fiscal Note - DLWD.pdf SJUD 4/15/2019 1:30:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 4
Senate State Affairs - SJR 6 Written Testimony uploaded (04-05-19).pdf SSTA 3/26/2019 1:30:00 PM
SJR 6