Legislature(1995 - 1996)
01/28/1995 10:10 AM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 28, 1995
10:10 A.M.
TAPE HFC 95-10, Side 1, #000 - end.
TAPE HFC 95-10, Side 2, #000 - end.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 10:10 A.M.
PRESENT
Co-Chair Hanley Representative Kohring
Co-Chair Foster Representative Martin
Representative Mulder Representative Navarre
Representative Brown Representative Parnell
Representative Grussendorf Representative Therriault
Representative Kelly
ALSO PRESENT
Representative Brian Porter; Representative Gail Phillips;
Representative Joe Green; Representative Ivan Ivan; Pat
Pourchot, Legislative Liaison, Office of the Governor; Kevin
Richie, Executive Director, Alaska Municipal League; Pam
Neal, Alaska State Chamber of Commerce; Judy Brady, Vice
President, Commonwealth North; Brian Rogers, Fairbanks; Ron
Larson, Wasilla; Mary Nordale, Attorney, Seattle; Vince
O'Reilly, Kenai; Nancy Schoephoester, Anchorage Chamber of
Commerce & The Group; Vince O'Reilly, Kenai; Cheryl Frasca,
Anchorage; David Young, Investor, Merrill Lynch; Roger
Cremo, Anchorage.
SUMMARY
STATEWIDE TELECONFERENCE
HCR 1 Creating the Long Range Financial Planning
Commission.
HCR 1 was assigned to a subcommittee consisting of
Representative Parnell as Chair and
Representatives Brown and Kohring.
HOUSE CONCURRENT RESOLUTION NO. 1
Creating the Long Range Financial Planning Commission.
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Co-Chair Hanley noted that HCR 1 would be assigned to a
subcommittee consisting of Representative Parnell as Chair
and Representatives Kohring and Brown.
JUDY BRADY, VICE-PRESIDENT, COMMONWEALTH NORTH, ANCHORAGE
testified via the teleconference network from Anchorage.
She explained that Commonwealth North is a non-profit, non-
partisan group involved in state public policy issues. She
noted that Commonwealth North produced a report in March
1994, as the result of the 1993-1994 budget conference. The
report recommended that the state create an Alaska Finance
Commission to produce a financial plan. She emphasized that
Commonwealth North is in complete support of the creation of
a Long-Range Financial Planning Commission. She stressed
that the Commission gives the state the opportunity to
create new spending patterns to resolve the state's fiscal
crisis.
BRIAN ROGERS, FAIRBANKS testified via the teleconference
network from Anchorage. He noted that he participated in
Governor Knowles' fiscal policy transition team. He
testified in support of HCR 1. He recommended that a
October 1, 1995 report date be adopted. He urged additional
public members to allow the inclusion of a broad cross
section of the public. He recognized that some budget
reductions suggested by the Commission will be unpopular.
He advised that the Committee not under estimate the cost of
the Commission. He asserted that the Department of Revenue
does not have the capability to evaluate a state income tax
or state sales tax. He noted that the Resolution calls for
analysis of taxes as revenue options. He expressed concern
with the creation of a ten year financial plan. He
suggested that the plan would be out of date at the end of
five years. He advised that the Commission develop a ten
year strategy with recognition that the plan will need to be
altered as circumstances change.
In addition, Mr. Rogers asked the Committee to consider the
following changes:
* On page 1, line 7 add language to address
stabilizing expenditures at a sustainable level;
and
* page 2, line 27 add reference to economic
development opportunities which generate more
state revenues than cost to the state.
Co-Chair Hanley recalled that the Committee had previously
discussed increased public representation and the October 1
report date. He agreed that it is important to address
stabilizing expenditures.
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RON LARSON, FORMER REPRESENTATIVE, WASILLA testified via the
teleconference network from Mat-Su. He emphasized that the
State needs, not only a goal, but a method of achieving its
goals. He recognized the efforts of previous legislators.
He compared the Long-Range Financial Planning Commission to
the Capitol Site Planning Commission. He noted that the
Commission will need to look at a broad range of issues. He
emphasized that the plan must be flexible to provide
alternatives. He reiterated the need to fund the Commission
at an adequate level.
MARY NORDALE, PRIVATE ATTORNEY, FAIRBANKS testified via the
teleconference network from Seattle. She spoke in support
of HCR 1. She noted that she served as Commissioner of the
Department of Revenue from 1984 to 1986. She observed that
state revenues were perceived as stable in the beginning of
her term but plunged beyond anyone's expectations. She
endorsed the expansion of the Commission to accommodate
additional public members. She noted that an excellent
research section existed in the Commissioner's Office,
Department of Revenue during her term. She recalled that
research indicated that a state income tax could not make up
for the tremendous drop in revenue experienced at that time.
She urged that Commissioners be appointed with power to
designate representatives. She emphasized the need to
review federal revenues to the State. She observed that
Congress is engaged in an effort to diminish its
expenditures. She noted that much of the State of Alaska's
governmental activity is driven by the availability of
federal funds. She asserted that strategies to support
economic development without ties to federal revenues must
be developed for the State's highway and airport programs.
VINCE O'REILLY, KENAI testified via the teleconference
network from Soldotna. He testified in support of HCR 1.
He suggested that the Commission consider necessary
constitutional changes. He also advised that the
deliberations and findings of the Commission be reviewed by
an external source in order to consider effects to the
State's bond rating. He emphasized the need for
flexibility. He observed that excess revenues, in the form
of tax settlements and other unanticipated revenues, have
been appropriated by past legislatures. He noted pressures
on legislators to protect programs which effect their
districts.
Mr. O'Reilly suggested that a vote of the people would
result in self imposed restraints. He emphasized that self
restraints by the vote of the people are more powerful than
restraints imposed by the legislature.
Mr. O'Reilly expressed concern with the limited
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creditability of the State of Alaska. He reiterated the
need to have the plan reviewed by investment bankers and
bond rating companies to assure the State's good standing.
Co-Chair Hanley suggested that the stability of a long range
fiscal plan would help the State's bond rating. Mr.
O'Reilly noted that when the people vote those are the rules
the people will live by.
KEVIN RICHIE, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE
emphasized that economic development only comes when there
are stable state and municipal governments in a community.
He noted that the two major goals of the Alaska Municipal
League are to provide municipal stabilization and to provide
a long range planning and development package. He stressed
that municipalities can assist with involving the public in
the process. He noted that municipalities can contribute
staff, facilities, public relations and communication.
Mr. Richie noted that municipalities have considered
realignment of services in their efforts to develop long
range fiscal plans. He suggested that the State also look
at what services should be continued by the State,
contracted or realigned to municipalities on a block grant
basis. He referred to the "1992 Governmental Roles Task
Force Report" (copy on file). He suggested that statutory
mandates be reviewed.
(Tape Change, HFC 95-10, Side 2)
Mr. Richie emphasized that municipalities have less
resources than the State. He reiterated that municipalities
will assist the process.
Representative Brown suggested that the Commission include
municipal stability in their considerations. She emphasized
the integral relationship of the State and municipalities.
She stressed that the best interest of citizens in terms of
their total tax burden be considered. She asserted that
shifting taxes to the local level will not resolve the
problem.
PAM NEAL, ALASKA STATE CHAMBER OF COMMERCE concurred with
the need for greater public membership. She referred to
page 3, line 3 (6), which says the Commission shall "review
state programs, especially formula driven programs, and
recommend reductions in state expenditures to reach a
sustainable level". She stressed that the Commission also
include an evaluation of all the services the State is
currently providing to identify those which are a
traditional responsibility of a state to its citizens. She
insinuated that services which are not a traditional
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responsibility of a state could be eliminated or
restructured. She added that performance measures should be
part of the plan. She observed that money can be saved by
increased efficiency.
Co-Chair Foster referred to the Alaska State Chamber of
Commerce Resolution 95-1 (copy on file). He asked if the
State Chamber of Commerce supports across the board
reductions. Ms. Neal replied that the Chamber feels that
everything should be considered.
PAT POURCHOT, LEGISLATIVE DIRECTOR, OFFICE OF THE GOVERNOR
testified in support of HCR 1. He outlined areas of concern
to Governor Knowles. That the Commission:
* Achieve a bi-partisan, equal balance and equal
participation structure through increased public
membership (as many public members as legislative
and administrative members);
* contain some full fledged members representing the
Administration; and
* the Governor be involved in the appointment of
public members.
Mr. Pourchot emphasized that the Commission is not a
substitute for the work of the Legislature or the Office of
Management and Budget. He cautioned against the review of
specific programs in state government. He suggested that
the Commission review and make overall recommendations on
targets. He urged that specific actions be recommended by
the Commission on each of the next five years.
Co-Chair Hanley recognized the challenge to be specific
enough without being too specific. He stressed that there
has to be some consideration of specifics. He noted that
HCR 1 directs that "if new taxes are recommended," the
Commission "investigate specific tax structures, review the
consequences of the structures, and prepare draft
legislation to implement the recommendations." He
accentuated that if specific revenues are considered
specific reductions should also be contemplated.
Representative Parnell echoed Co-Chair Hanley's remarks.
Representative Brown asked Mr. Pourchot what should be the
sustainable level for expenditures. Mr. Pourchot stressed
that overall expenditures should be in alignment with
overall recurring revenues.
Representative Kelly questioned if the Governor would
support the review of the traditional role of government in
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order to eliminate non-traditional services. Mr. Pourchot
noted that Governor Hickel's economic summit focused on the
identification of traditional services. He agreed that the
Commission should review services in regards to the role of
government.
Co-Chair Foster agreed that additional public members should
be added to the Commission. He suggested that non-public
members be non-voting members. Mr. Pourchot noted that ex-
official members could be voting or non-voting members. He
stated that the Governor is interested in having some
administrative representatives as full members. He
indicated that the Director of Office of Management and
Budget and the Commissioner of Department of Revenue should
be voting members. Other administrative members could be
non-voting.
NANCY SCHOEPHOESTER, ANCHORAGE CHAMBER OF COMMERCE, FISCAL
PLAN COMMITTEE "THE GROUP" testified via the teleconference
network from Anchorage. She noted that The Group is
comprised of 27 associations and other statewide
affiliations interested in the common goal of the
development and implementation of a long range financial
plan. She asserted that the State's level of spending is
seriously out of balance. She observed that revenues are no
longer sufficient to fund our state budget at current
spending levels.
Ms. Schoephoester stated that the Chamber of Commerce and
The Group support HCR 1 with the following exceptions:
* The 13 member Long-Range Financial Planning
Commission be less heavily weighted with technical
expertise. She suggested that 3 - 4 technical
individuals be included as voting members and
others be available and participating as non-
voting members; and
* the October 1, 1995 report date be adopted.
In addition, Ms. Schoephoester stated that the Anchorage
Chamber of Commerce and The Group would like to have the
opportunity to submit names for inclusion as Commission
members.
CHERYL FRASCA, ANCHORAGE testified via the teleconference
network from Anchorage. She suggested that the Commission
be charged with developing principles to guide the order in
which different fiscal tools are used. She suggested that
the Commission develop scenarios by which its
recommendations could be implemented. She noted the
approach taken by the federal Base Closure Commission. She
advised that implementation dates could be tied to voter
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approval. She observed that the real challenge will be the
implementation of the Commission's recommendations.
DAVID YOUNG, MERRILL LYNCH testified via the teleconference
network from Anchorage. He discussed investment
possibilities for state and municipal governments. He
expressed surprise that there is no state oil hedging
program.
Co-Chair Hanley noted that revenues are fluctuating. He
questioned how the State can stabilize the revenue stream.
Mr. Young noted that 1994 was the worse year in the bond
market history.
ROGER CREMO, ANCHORAGE testified via the teleconference
network from Anchorage. He asserted that the biggest
problem the State has is that it cannot sustain its
spending. He observed that the popular perception is that
the fiscal crisis was caused by the legislature. He
asserted that the finance system that the legislature
operates under is at fault. He stressed that state revenues
fluctuate and are unpredictable. He maintained that a long
range fiscal plan cannot be developed with fluctuating
revenues. He noted that succeeding legislatures cannot be
counted on to follow a fiscal plan.
Mr. Cremo stressed that the plan should:
* Define the sustainable level of spending;
* cause the legislature to reduce spending to a
sustainable level; and
* require the legislature to maintain spending at a
sustainable level.
Mr. Cremo noted that the Commission could draft a blueprint
for spending cuts and revenue enhancements for a period of a
few years.
ADJOURNMENT
The meeting adjourned at 11:50 a.m.
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