Legislature(2003 - 2004)
01/14/2004 01:43 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 14, 2003
1:43 PM
TAPE HFC 04 -03, Side A
CALL TO ORDER
Co-Chair Harris called the House Finance Committee meeting
to order at 1:43 PM
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Representative David Guttenberg; Representative Dan Ogg;
Representative Harry Crawford; Representative Beverly Masek;
Representative Ralph Samuels
PRESENT VIA TELECONFERENCE
None
GENERAL SUBJECT(S):
OVERVIEW: PERCENT OF MARKET VALUE SUBCOMMITTEE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
The following overview was taken in log note format. Tapes
and handouts will be on file with the House Finance
Committee through the 23rd Legislative Session, contact 465-
2156. After the 23rd Legislative Session they will be
available through the Legislative Library at 465-3808.
LOG SPEAKER DISCUSSION
TAPE HFC 04 -03
SIDE A
000 Co-Chair Harris Convened the House Finance Committee
meeting at 1:43 p.m.
158 Vice-Chair Meyer Explained that Co-Chair Williams asked
him to head up the Percent of Market
Value Subcommittee (POMV), at the end of
the last session, to discuss the concept
in different places around the state. The
Senate also has a POMV subcommittee
chaired by Senator Ralph Seekins, which
met in other communities. Representative
Hawker chairs the House Special Committee
on Ways & Means, which also met in
various towns. Vice-Chair Meyer
introduced the members of the POMV
committee and explained that
Representative Hawker replaced
Representative Whittaker.
439 Vice-Chair Meyer explained that the meetings were
informational presentations with the
Permanent Fund Board and were not an
attempt to gain public support. The
public was invited and encouraged to
testify. He observed that Kenai
testifiers expressed concern that if
there were more money, state spending
would increase.
531 Vice-Chair Meyer Encouraged consideration of
Representative Stoltze's bill, to require
a spending cap.
613 Vice-Chair Meyer Elaborated on the concerns and perceived
disadvantages of the POMV concept
including whether it is necessary, the
pressure to use some of the money as
state revenues become tighter, and
whether it will limit the legislature's
flexibility once it's in the state
Constitution.
737 Vice-Chair Meyer Maintained that the Permanent Fund Board
is comfortable with a 5% payout based on
an 8% return with 3% to protect the Fund.
Observed that concern has been expressed
that the principal would have to be used
for the 5% payout. Some years the Fund
will earn up to 12%; Vice-Chair Meyer
asserted he's in agreement with a 5%
payout and asserted that the Fund would
achieve 8% over the long term.
847 Vice-Chair Meyer Encouraged the Subcommittee to move HJR
26 [POMV legislation] when it's heard
January 20;
947 Vice-Chair Meyer In summary, he stated that HJR 26 helps
ensure a good dividend, protects the Fund
and lets all Alaskans vote. There are
minor differences between the House and
Senate versions.
1150 Representative Expressed that it's a subject the "grass
Chenault roots" citizens need to look at rather
than assembly or chamber of commerce
people whom he feels may have underlying
reasons for voting for the POMV. The
legislature needs to get the information
out so people can make an informed
decision. He concluded that the Percent
of Market Value Board came out with solid
information.
1457 Representative Joule Pointed out that this process has been
on-going for several years with efforts
to move a measure from the House, and
expressed his support of the process and
noted that the discussion is being
expanded outside the legislature.
1705 Co-Chair Harris Thanked Vice-Chair Meyer and referred to
Governor Murkowski's State of the State
Address that opened up the arena of
management of the Permanent Fund. He
observed that if the public doesn't want
to use the Permanent Fund to fund state
government, then Alaska's choice is
limited to taxation and natural resource
development. Co-Chair Harris stressed the
extreme importance of this issue.
1958 Representative Croft Noted that currently there is absolute
protection of the Fund's principal with
spending of its accumulated earnings.
Although he agreed there is cause to move
toward POMV, he stressed that the current
formulation is a safe one because the
state can't spend what it hasn't earned:
the danger of POMV lies in spending what
hasn't actually been earned and even
invading the principal of the Fund, which
has never been allowed. The trade-off or
benefit is automatic inflation-proofing.
2140 Representative Croft Continued to discuss rates of return and
average inflation.
2248 Representative Croft Emphasized the risk is asking Alaskans to
make permanent changes and stressed being
clear and honest with the people. He
questioned how to divide the earnings.
2421 Representative Croft Percent of Market Value can't be
innocuous and affect dividends and at the
same time, be the cornerstone of a fiscal
plan diverting that money to state
government. Representative Croft rejected
the idea that it is a choice between
taking a substantial portion of the
people's dividend or facing financial
collapse when, in fact, Alaska contains
North America's largest deposit of
natural gas.
2632 Representative Croft Asserted there are significant
alternatives that involve resource
development rather than taxation.
2710 Co-Chair Williams Noted there will be more time to debate
this issue later this session.
2811 Representative Acknowledged that Representative Croft
Hawker raised legitimate concerns and his debate
was well framed.
2912 Vice-Chair Meyer Said the [PF] Board will answer the
concerns voiced by Representative Croft.
3015 Representative Framing the discussion in broader
Hawker perspective, Representative Hawker
discussed the evolution of the House
Special Committee on Ways and Means
(HSCWM) membership and its targets and
objectives. HSCWM started with the widest
possible breadth of fiscal philosophy
with legitimate divergence of opinion
among the members.
3413 Representative Discussed the five components of the
Hawker committee's Comprehensive Fiscal Plan
provided in a handout (copy on file.)
These are not new points and have been
brought before the body in previous
years.
3714 Representative Observed the interim was spent
Hawker researching the background of the
Permanent Fund and meeting with elected
officials and school boards in
communities including Unalaska,
Fairbanks, Nome, Anchorage, Kenai,
Soldotna, Palmer and Wasilla.
3918 Representative Continued that all meetings were open and
Hawker the meeting format included explanation
of HR 6 and the three missions of the
Committee.
4033 Representative Stated he discovered a lot of
Hawker misunderstanding even among elected
officials about the budget deficit and
budget situation.
4234 Representative Referred to "Alaska's Fiscal Toolbox" in
Hawker the handout.
4319 Representative Explained the town meetings addressed
Hawker cutting the budget to deal with the $650
million deficit but said it would involve
deleting essential state services that
comprise 65% of the budget [see handout,
Budget Cuts in Perspective].
4514 Representative Referred to the graph provided by the
Hawker Legislative Finance Division. He argued
that today, on an inflation-adjusted per
capita basis, we have cut the budget to
pre-Pipeline levels. He asserted that
fiscal discipline comes with
consequences.
4625 Representative Stated that because less than one-third
Hawker of audiences at the community meetings
had lived in Alaska when the Permanent
Fund was created in 1976, the meetings
needed to address the Fund's intent.
TAPE HFC 04 -03
SIDE B
4447 Representative Representative Hawker read excerpts from
Hawker the Permanent Fund "Statement in Favor of
Proposition No. 2" and concluded that we
need to ask where the state funds will
originate when the resources of oil and
gas are depleted. The Permanent Fund
will not replace the people's collective
responsibility.
4358 Representative Discussed the 5% POMV payout concept,
Hawker with a 50-50 split to dividends and
public services.
4227 Representative Quoted from the handout, Alaska's
Hawker Dilemma: we only need to tax ourselves to
the extent we are unwilling to use part
of the Permanent Fund's earnings. Briefly
discussed points in Governor Murkowski's
State of the State Address including
frugality, adopting a constitutional
spending limit, the gas pipeline project,
adopting endowment management for the
Fund, the POMV, and structuring general
revenue system components.
4044 Representative Referred to a fiscal policy letter to
Hawker Representative Hawker, dated October 29,
2003 and signed by numerous employers,
nonprofits and other business
representatives (copy on file.)
3957 Representative Indicated articles appearing in
Hawker newspapers across the state show emerging
public consensus is in favor of these
proposals.
3821 Representative Asserted that the people voiced a lack of
Hawker support for taxes.
3532 Representative Stressed that Alaskans called for
Hawker legislative leadership and solutions
during the HSCWM committee meetings.
3357 Representative Expressed hope of bridging these
Hawker legitimate issues in the Administration
and with the Minority.
3236 Vice-Chair Meyer Asked Representative Hawker if there were
"a central theme" people supported, such
as sales or income tax, or use of the
Permanent Fund earnings.
3143 Representative The meetings skipped over taxes but he
Hawker has concluded that a geographic
difference exists with small, rural
communities located off the Railbelt
adamantly opposed to sales taxes and
those on the Railbelt in favor of them.
The public appears accepting of taxes as
long as the budget is reduced to the
"right level," with divergent opinion on
what that might be.
2932 Vice-Chair Meyer Concluded by stating that support or
opposition for sales versus income tax
depends on where you live.
2817 ADJOURNMENT The meeting was adjourned at 2:51 PM
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