Legislature(2017 - 2018)ADAMS ROOM 519
02/27/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB285 || HB286 | |
| Special Appropriations Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 286 | TELECONFERENCED | |
| += | HB 285 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 27, 2018
2:26 p.m.
2:26:48 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 2:26 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
David Teal, Director, Legislative Finance Division; Ken
Alper, Director, Tax Division, Department of Revenue; Lacey
Sanders, Analyst, Legislative Finance Division. Sheldon
Fisher, Commissioner, Department of Revenue.
PRESENT VIA TELECONFERENCE
None
HB 285 APPROP: MENTAL HEALTH BUDGET
HB 285 was HEARD and HELD in committee for
further consideration.
HB 286 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 286 was HEARD and HELD in committee for
further consideration.
SPECIAL APPROPRIATIONS AMENDMENTS
Co-Chair Foster reviewed the agenda for the meeting.
HOUSE BILL NO. 285
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
HOUSE BILL NO. 286
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
2:27:43 PM
^SPECIAL APPROPRIATIONS AMENDMENTS
2:27:44 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 1 (copy on
file):
Language Amendments
L H SAP 1 - Restores the annual Legislative Intent
language discouraging supplemental budget requests
Offered by Representative Seaton See 30-GH2564D1
This amends section 4 to make it a Legislative Intent
section, restores the annual language regarding
supplemental budget requests, and moves the existing
language regarding the costs of job reclassifications
to a new subsection (b).
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson made a comment about the department
paying attention to the language of the amendment. She
hoped the department took the language of the amendment to
heart. She thought certain things could have been avoided
and the department could have done a much better job.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 1 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 2 (copy on
file):
Language Amendments
L H SAP 2 - Revert to the Alaska Industrial
Development and Export Authority dividend language
used in FY18
Offered by Representative Seaton
See 30-GH2564D20
This amendment reverts the wording of section 7,
regarding the AIDEA dividend, back to the wording used
in the FY18 budget that deposited the dividend into
the general fund.
The AIDEA dividend spends as unrestricted general
fund.
The Governor's budget did not spend any AIDEA
dividend.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 2 was ADOPTED.
Co-Chair Seaton WITHDREW Amendment L H SAP 3 (copy on
file):
Language Amendments
L H SAP 3 - Reduce the ERA draw from 5.25 percent to
4.75 percent, transfer 67 percent to the GF and
transfer 33 percent directly to the PFD Fund
Offered by Representative Seaton
See 30-GH2564D52
This amends sec. 8(c) by changing to a 4.75 percent
ERA draw, a reduction from the Governor's 5.25 percent
draw, and transferring 67 percent of the draw to the
GF.
This is a GF revenue reduction of $260,150.7 from the
Governor's net transfer of $1,910,711.9 to the GF,
down to $1,650,561.2.
In 8(d), the percentage of the transfer to the PFD
Fund is changed from the Governor's 30 percent to 33
percent. The amount, however, decreases from the
Governor's $818,876.5 to $812,963.0, a reduction of
$5,913.5. This amendment transfers the 33 percent
directly from the ERA, instead of through the GF as
the Governor proposed. The Governor's PFD estimate was
$1216, while this amendment results in a PFD estimate
of $1,270.
Amendment L H SAP 3 was WITHDRAWN.
Co-Chair Seaton MOVED to ADOPT Amendment Replacement L H
SAP 3 (copy on file):
Language Amendments
Replacement L H SAP 3 - Reduce the ERA draw from 5.25
percent to 4.75 percent, transfer 67 percent to the GF
and transfer 33 percent directly to the PFD Fund
Offered by Representative Seaton
See 30-GH2564D52
This amends sec. 8(c) by changing to a 4.75 percent
ERA draw, a reduction from the Governor's 5.25 percent
draw, and transferring 67 percent of the draw to the
GF.
This is a GF revenue reduction of $260,150.7 from the
Governor's net transfer of $1,910,711.9 to the GF,
down to $1,650,561.2.
In 8(d), the percentage of the transfer to the PFD
Fund is changed from the Governor's 30 percent to 33
percent. The amount, however, decreases from the
Governor's $818,876.5 to $812,963.0, a reduction of
$5,913.5. This amendment transfers the 33 percent
directly from the ERA, instead of through the GF as
the Governor proposed. The Governor's PFD estimate was
$1216, while this amendment results in a PFD estimate
of $1,258.
Representative Wilson OBJECTED for discussion.
2:30:06 PM
At EASE
2:30:55 PM
RECONVENNED
Representative Pruitt wondered about the difference between
the original amendment and the new one. Chair Seaton
explained that in the replacement amendment the PFD
estimate was $1258. In the original version the amount was
$1270. The newer version used reported data provided by the
Alaska Permanent Fund Corporation (APFC) rather than an
estimate. He read Amendment Replacement H SAP 3 (see
above).
Vice-Chair Gara thought there would be additional
discussions on all of the aspects of the amendment. He
mentioned that the public had been clear that a dividend of
$1000 was not widely acceptable. He thought that $1000 was
the amount in the Senate's version of the bill. He believed
public support was necessary. He thought a PFD amount of
$1250 was a good starting place for a discussion. The
amount would not endanger the Permanent Fund (PF). He added
that there had been testimony regarding the draw between
4.75 percent (really closer to 4.25 percent) and 5.25
percent (really closer to 4.75 percent). He thought either
percentage would work for a couple of years but would have
to be reduced in the long-term to be more conservative.
2:34:17 PM
Representative Pruitt thought the amendment would result in
a long-term dialog because of its impacts. He understood
the reduction in the amount of a draw from the ERA. He was
concerned about the viability of the ERA into the future.
He thought the reasonableness of a higher percentage like
5.25 percent or 5.5 percent was appropriate. He explained
that it was possible the legislature would be taking
larger, unstructured draws in the future which would have a
long-term negative effect on the fund. He mentioned that a
large disagreement remained within the legislature about
instituting an income tax. He recognized that the $260
million being discussed was about the equivalent to the
governor's proposed payroll tax. He believed the governor
wanted to use the tax revenues for other items. He asked a
philosophical question about the use of funds from an
income tax. It was a question he felt would have to be
answered. He wondered what roll an income tax would play in
Alaska's future. He realized the fund would not remain at
the same level in the long run. However, he also believed
that proper policy and engagement in Alaska's economy would
place the state in a position of generating additional
revenues in the future, at which point, the draw on the ERA
could be reduced. He thought a higher draw was prudent in
order to stave off an income tax. He would be opposing the
amendment.
2:38:09 PM
Representative Wilson asked if the reduction of
$260,150,700 moved the draw from 5.25 percent down to 4.75
percent. She asked if she was correct. Co-Chair Seaton
responded affirmatively.
Representative Wilson asked where the figure came from. She
thought the conversation should have occurred first. She
was unclear what the gap was at 4.75 percent or at 5.25
percent. She asked for further clarification about how the
number was calculated and about the remaining revenue gap.
Co-Chair Seaton relayed that the amount of the draw was not
based on the state's budget deficit. The amount of a
Percent of Market Value (POMV) draw was based on the
economics of an endowment. In the previous year, both
bodies passed legislation containing a POMV draw of 5.25
for either 2 years or 3 years and reducing it down to 5
percent. A draw of 5.25 percent was not sustainable for a
long period. The draw would be heftier at the start while
waiting for revenues to come online, then it would be
reduced. The Alaska Permanent Fund Corporation (APFC) board
of directors adopted new actuarial reports that were .5
percent less. The average value return used to be 6.95
percent for the following 10 years. More recently, it was
6.5 percent for the same period. In subtracting .5 percent,
the percentage would equal 4.75 percent and considered
slightly aggressive. He could distribute the Legislative
Finance Division estimates, or he could bring Mr. Teal to
the table to provide testimony.
Co-Chair Seaton continued that a sustainable draw was being
discussed rather than overdrawing in the short-term in
anticipation of doing something in the long-term. Since the
legislature was not doing anything to address the long-term
problem, he suggested making a sustainable draw at present.
He was trying to determine whether the legislature should
make a sustainable draw. The amendment indicated that 4.75
was a sustainable draw percentage that should keep up with
inflation and should allow the PF to grow slowly. The basis
for the ERA draw was the endowment model and letting the PF
value grow with inflation. He wanted to ensure that the
legislature was not drawing down the total value in
relationship to inflation of the fund. He reported that
5.25 percent drew down the value of the Permanent Fund. He
felt that the legislature should be discussing the best
sustainable draw that would not reduce the inflation
adjusted value of the fund. He concluded that the 4.75
percent maintained the inflation adjusted value of the
fund.
Representative Wilson wondered what amount the state would
glean with the draw and anticipated revenues. Co-Chair
Seaton responded that if the legislature adopted the plan
the House sent over to the Senate on early funding of
education (including a draw from the Constitutional Budget
Reserve), and this amendment was included, the budget would
be fully balanced.
Representative Wilson asked about the bill Co-Chair Seaton
mentioned and whether the $1.2 billion was available. She
asked for clarity around which funding would fill the
state's fiscal gap. Co-Chair Seaton indicated that the bill
that was approved did not include the particular draw and
would require about $1.2 billion to fully balance the
budget and provide some headroom for future supplemental
requests.
Representative Wilson wanted to understand that the $1.1
billion included the $200 million for headroom. Otherwise,
the state's gap would be about $900 million based on the
draw from the earnings reserve. Co-Chair Seaton replied
that the number was about $1.1 billion which included an
estimate of $200 million from the CBR for headroom.
Representative Wilson would be maintaining her objection.
She thought the legislature should have had the amendment
at the beginning of the process rather than at the end. She
thought the legislature could have had a more targeted
amount. She understood the explanation between the 5.25 and
4.75 percentage and the Permanent Fund not making as much
as anticipated. She also understood the draw was not
sustainable for a long time. She thought it would have been
better to know that with the suggested draw there would be
a deficit of $900 million that would have to come out of
the CBR, about half of its value. She reiterated that she
wished the amendment would have been addressed sooner.
Representative Pruitt thought it was important to clarify
that the analysis presented to APFC indicated that there
was a 48 percent chance that over 10 years the value in the
ERA would dip a dollar or more below what it currently was,
adjusted for inflation. It did not mean the state would see
a devaluation, but there was a 48 percent chance it could.
The presentation included looking back at the previous 10
years with a 30 percent correction after the second year.
He thought to say that the 5.25 would automatically devalue
the fund was not true based on the presentation to APFC. He
wondered, if the legislature was so interested in
protecting the inflation value of the fund, why there would
be the following 2 amendments that remove the inflation-
proofing language. He suggested that the legislature did
not have to draw 5.25 percent for 10 years.
2:48:40 PM
Co-Chair Seaton responded that there was a 48 percent
chance of devaluing somewhat. However, there was a 30
percent chance of the entire ERA dropping to zero which
meant there would be no PFD and no POMV dollars to draw
from. He was concerned with the 30 percent chance of the
entire ERA disappearing.
Representative Pruitt suggested, then, that the legislature
should not be increasing the budget. He argued that in
every portion of the issue, there could be a 30 percent
chance of the permanent fund failing altogether. He
continued that the body had chosen not to reduce the
budget. He thought the legislature had failed at its duties
of controlling the size of government and failed at
recognizing 5.25 percent did not work. He continued to
argue that the legislature had not done its job. He
believed the budget displayed a growth in government which
would require more funds from the ERA or through taxes. He
would rather adjust appropriately and manage than look at
an income tax. He opined that the increase in the budget
provided the opportunity to bust open the permanent fund.
Vice-Chair Gara understood the frustration around the
table. He stated that the state had been rearranging the
furniture on the Titanic. He spoke to the dwindling of
savings over the previous 5 years. He thought balancing the
budget would mean depleting the savings without a fiscal
plan in place. He pointed out that the amendment did not
reflect a sustainable course. He disagreed with the comment
that there had not been reductions. There had been $3.5
billion in cuts, 40 percent of the budget since 2013. The
idea that cutting the budget would solve the deficit had
not worked; it had extended the recession. He believed
there were ways to shore up the economy and shore up the
state's finances outside of an income tax. He admitted
there was a vote the previous year to impose a small income
tax on higher earners that did not get enough support. He
believed there was an easier way. He advocated a simple 25
percent tax on all company profits (reflected in a bill the
House passed) which would have raised $550 million in the
current year. It would have raised $700 million that
occurred in oil prices. As long as there was resistance
from those with the greatest privilege chipping in, the
circumstances were what people were left with. He hoped
that by the end of the session the issue would not be the
only one being discussed.
Representative Thompson agreed with Vice-Chair Gara that a
few years back the state had $17 billion in savings which
included money from the CBR and the ERA added together. He
thought he was correct.
Vice-Chair Gara corrected Representative Thompson,
indicating the CBR and the Statutory Budget Reserve (SBR).
2:53:51 PM
Representative Pruitt reminded the committee that
previously $3 billion was placed in retirement to try to
manage overall costs. He spoke to having tried to initiate
reductions while being a member of the finance committee
and argued that everyone who had sat in the finance rooms
over the prior 10 years had played a role in where the
state was at presently. He suggested that the state was
moving in a different direction than where it had been
previously. He added that pointing fingers for what had
happened in the past was not constructive. The amendment
was an attempt to address the issue. He did not have a
problem with the disagreement on how to solve the issue.
Co-Chair Foster directed members to keep their comments
specific to the topic.
Representative Wilson mentioned that public testimony would
be heard on Thursday, Friday, and Saturday. The committee
had not yet addressed the amount of the PFD and the
splitting of funds. The amendment reflected a split of 66
percent going to the government and 33 percent going to
dividends. Currently the dividend sat at $1258. She thought
that the changes to the PFD would hit closer to home. The
governor's proposal included a 70/30 split. She wanted to
make sure the information was correct for the sake of the
public. She relayed that she was not frustrated. She ran a
private business and before she spent money she had to know
how much she was making. Before creating her budget at the
beginning of the year, she had to know how much money she
had. She thought the legislature had not looked at how much
money the state had before being well into the budget
process. She thought it would be better to know how much
could be spent before designing a budget and addressing a
fiscal gap. Co-Chair Seaton indicated that the question had
to do with what would be a sustainable draw amount.
2:58:53 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, was
unclear of what information he was to provide.
Co-Chair Seaton asked him to speak to the sustainability of
the proposed draw in the amendment in comparison to other
percentages.
Mr. Teal suggested looking at the numbers. By taking 6.5
percent of earnings and subtracting 2.25 percent for
inflation, 4.25 percent would be left as a draw to be paid
out. He did not believe he had to review the 5-year moving
average concept. He continued that the rate at 4.25 percent
was essentially less if looking at the 5-year average. He
argued that a 5.5 percent nominal payout was still
conservative, and the state should be gaining on inflation
at a 4.5 percent payout. He suggested that a 4.75 percent
payout was slightly aggressive. The real value of the fund
should increase if the fund earned 6.5 percent. However,
part of that increase would be attributable to the royalty
money flowing into the fund. He conveyed that 5 percent was
aggressive but not out of line. He thought the commissioner
of revenue and Angela Rodell from APFC indicated a 5
percent payout would be okay - aggressive but doable. He
added that as long as there were deficits there was a
problem. It almost did not matter what payout rate the
legislature defined. The state had deficits that would
eliminate the CBR within 2 years (at a $900 million deficit
per year).
Mr. Teal continued to explain that if the state paid out
4.75 percent but left the state a $900 million deficit
without any other reserve account to draw from, the
legislature would likely end up drawing from the ERA.
Although the POMV payout might be 4.75, it would actually
be much higher if 4.75 plus another $1 billion was drawn
from the ERA making the rate substantially higher and
unsustainable. The real value of the Permanent Fund would
fall, and the ERA would begin to dwindle. He emphasized
that until the budget was balanced, whether through taxes
or additional reductions, it would not be possible to
determine a sustainable draw from the ERA. The deficit had
to be filled first. Currently, the committee was looking at
a 4.75 percent draw, which was sustainable and should keep
pace with inflation for the Permanent Fund. However, in
order to keep pace with inflation, the legislature could
not draw more than 4.75 percent in the form of unscheduled
draws.
3:04:31 PM
AT EASE
3:04:40 PM
RECONVENED
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Ortiz, Gara, Foster, Seaton
OPPOSED: Pruitt, Thompson, Tilton, Wilson
Representative Grenn was absent from the vote.
The MOTION PASSED (6/4). Amendment Replacement L H SAP 3
was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 4 and L H
SAP 5 together.
Representative Wilson OBJECTED to bundling the amendments.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 4 (copy on
file):
Language Amendments
L H SAP 4 - Delete FY16 - FY18 inflation-proofing of
the Alaska permanent fund
Offered by Representative Seaton
See 30-GH2564D11
This amendment deletes section 8(e) which would have
transferred an estimated $1,450,000,000 from the
earnings reserve account to the principal of the
Alaska permanent fund to offset the effects of
inflation on the principal of the fund during FY16 -
FY18.
Representative Pruitt OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Pruitt spoke to his objection. He believed
the legislature needed to inflation-proof the corpus of the
Permanent Fund. He had been arguing the point for 4 years.
He elaborated that the pressure would be on the legislature
to control the budget, and it was now seeking to use the
ERA. The one thing the legislature could not do was devalue
the corpus of the fund. The legislature had to protect it.
He would be removing his objection, not because he agreed
with the decision, but because he recognized that the
momentum, the decision, and the fight was in the past.
Representative Pruitt WITHDREW his OBJECTION.
Vice-Chair Gara OBJECTED for discussion.
Vice-Chair Gara spoke to his objection. He clarified that
the estimated $62 billion in the Permanent Fund was the
combination of the principle and the ERA. The amount would
remain the same whether or not the amendment passed. The
amendment recognized that the state had done a poor job
solving its fiscal gap. Without pointing any fingers there
was a huge fiscal gap of $27 billion or $2.5 billion. He
stated that with a real construction budget the deficit
would be closer to $3 billion. The legislature had to come
up with a solution to the fiscal problem. Before he was in
the House Majority there were 2 years of not inflation-
proofing the Permanent Fund. Now that he was in the
Majority the fiscal gap remained and would until the state
figured it out. The money ultimately remained in the
Permanent Fund in the ERA portion. He thought it would be
smart to start putting money in the principle once the
state figured out how to deal with the $2.7 billion budget
deficit which had not happened in 5 years.
3:09:17 PM
Representative Wilson wanted people to understand that it
was counted the same. However, she thought it [inflation-
proofing dollars] should be put back in as revenue grew.
She suggested inserting intent language that the money
should be paid back when the state had the money to do so.
If the money was moved now, the money would move from the
ERA into the Corpus of the fund. The corpus could not be
touched without a vote of the people. Although the money
was being utilized in terms of interest earnings, there was
a major difference as to whether it was in the corpus or
the ERA. She reminded members that the corpus was protected
in the constitution.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO OBJECTION, Amendment L H SAP 4 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 5 (copy on
file):
Language Amendments
L H SAP 5 - Delete FY19 inflation-proofing of the
Alaska permanent fund
Offered by Representative Seaton
See 30-GH2564D12
This deletes section 8(f) which would have transferred
an estimated $943 million from the earnings reserve
account to the principal of the permanent fund to
offset the effects of inflation in FY19.
Representative Pruitt OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Pruitt spoke to his objection. He explained
that there was an opportunity in the following year to
inflation proof the fund. He disagreed with continuing the
practice from the past three years of not putting inflation
monies into the corpus. He wanted to ensure the value of
the fund remained in the long-term. He reiterated his
position on protecting the value of the fund.
Representative Pruitt MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki, Thompson, Gara, Grenn, Guttenberg,
Seaton, Foster
OPPOSED: Ortiz, Pruitt, Tilton, Wilson
The MOTION PASSED (7/4). Amendment L H SAP 5 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 6 (copy on
file):
Language Amendments
L H SAP 6 - Amends sec. 9(f) and adds new sec. 9(g)
for legislative costs of actuarial analysis on bills
Offered by Representative Seaton
See 30-GH2564D41
This amends sec. 9(f) by adding the not to exceed
amount of $500.0 for retirement plan sponsor costs
instead of leaving an open-ended appropriation.
This also adds new sec. 9(g) restoring language used
in FY18 to appropriate the amount necessary to the
Department of Administration to cover actuarial costs
associated with bills introduced by the legislature.
This language should be considered standard, though it
may not actually be used each and every year.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 6 was ADOPTED.
3:14:13 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 7 and
Amendment L H SAP 8(copy on file):
Language Amendments
L H SAP 7 - Delete open-ended unrestricted general
fund appropriation for Medicaid Services
Offered by Representative Seaton
See 30-GH2564D3
This amendment deletes sec. 14(a), the open-ended
unrestricted general fund appropriation for Medicaid
Services that was requested by the Governor. Given the
budgetary implications of the Medicaid program, it
would be unwise for the Legislature to grant unlimited
UGF without program review.
Also see the related amendment to delete sec. 14(b),
the open-ended appropriation of federal receipts for
the Medicaid program.
Language Amendments
L H SAP 8 - Delete open-ended federal receipts
appropriation for Medicaid Services
Offered by Representative Seaton
See 30-GH2564D4
This amendment deletes subsection 14(b), the open-
ended federal receipts appropriation for Medicaid
Services that was requested by the Governor. If
additional federal receipts are anticipated, the
Department of Health and Social Services may request
expenditure approval by submitting a revised program
(RPL) to the Legislative Budget and Audit Committee
during the interim. Any such RPL provides forewarning
that a general fund supplemental will likely be
forthcoming during the next legislative session.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read both amendments (see above).
Vice-Chair Gara had some issues with the amendments but
would be supporting them. He thought that until the state
solved its budget crisis, which it had not, in a small way
some of the hospitals and providers would have to chip in.
He argued that when there was not enough Medicaid funding
the state still had to pay its bills. If there was
inadequate money at the end of the fiscal year, and the
state did not pass a fast track supplemental during the
session, hospitals and medical providers would have to wait
for their payments. Alaska statute required the state to
make their payments, the only question had to do with when
they paid them. If the department ran out of money in April
or May and a budget was not passed, payment would likely
occur in July or August. He understood the aspect of
accountability and why the amendment was being proposed.
Representative Wilson thought the amendments helped with
the accountability aspect of the issue. She believed
certain adjustments could be made by the department
depending on the number of people and the costs. She
maintained that the amendments offered some clarity. She
appreciated the co-chair for the amendments.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 7 and Amendment
L H SAP 8 were ADOPTED.
3:18:02 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 9 (copy on
file):
Language Amendments
L H SAP 9 - Relocate DOTPF debt, school construction
debt and REAA School Fund from sec. 30 and change fund
source
Offered by Representative Seaton
See 30-GH2564D5
This amendment makes several changes:
1) It amends sec. 22(e) by relocating and using
general funds for DOTPF debt provisions that the
Governor had funded from the Constitutional Budget
Reserve Fund (CBR) in sec. 30(b) (Amendment page 1,
line 5 -page 2, line 3).
2) It amends sec. 22(m) by relocating and using
general funds for the school construction debt
provision that the Governor had funded from the CBR in
sec. 30(d) (Amendment page 2, lines 7 - 14).
3) It adds sec. 24(k) by relocating and using general
funds for the capitalization of the REAA School Fund
appropriation that the Governor had funded from the
CBR in sec. 30(e) (Amendment page 2, lines 16 - 20).
4) Deletes sec. 30(b) DOTPF debt, (d) school
construction debt and (e) REAA School Fund
capitalization (Amendment page 3, lines 1 - 7).
All of the other items in the amendment are just
updating section reference numbers.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson spoke to her objection. She asked
about funding if the amendment did not to pass. Co-Chair
Seaton replied that if amendment did not pass, the funding
would come from the CBR.
Representative Wilson believed the way the bill read
[without the amendment] was the governor's way of showing
that the state's unrestricted general funds had gone down,
which they had not. The amendment would better reflect an
accurate picture of the state's spending, especially since
they were ongoing appropriations. Co-Chair Seaton
responded, "That's correct."
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 9 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 10 (copy
on file):
Language Amendments
L H SAP 10 - Capitalize the Oil and Gas Tax Credit
Fund Offered by Representative Seaton
See 30-GH2564D33
This amends the Fund Capitalization section 24 by
adding a new subsection (f) capitalizing the oil and
gas tax credit fund with $49 million.
Another amendment deletes the $27 million
appropriation the Governor submitted for the interest
payment per the proposed bond financing legislation.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
3:21:23 PM
Representative Wilson spoke to her objection. She heard the
$206,000 figure. She wondered if the state was calculating
the number differently than previously.
Co-Chair Seaton responded that the calculation was based on
the money received, which was in the transmittal letter
from Governor Parnell when he transmitted the bill to the
legislature. It stated that money received 10 percent above
a $60 projected price or 15 percent below a $60 price would
go into the fund. The way it was calculated on 10 percent
or 15 percent of the tax liability calculation before
subtracting the credits. The state did not receive the
money from the oil companies. The amount the state received
was the tax from the oil companies minus their tax credits.
The calculation was 15 percent of the money received by the
state from production tax credits. He was referring to the
tax calculation for $49 million. He noted that the oil
companies' tax calculation, before they subtracted their
credits, was the $206 million figure Representative Wilson
had mentioned.
Representative Wilson remembered having a conversation with
Mr. Alper from the Tax Division about one design of the
calculation when there was significant discussion about the
tax bill and whether Alaska could afford the tax credits.
She mentioned a memo from the Department of Revenue (DOA)
that stated they had been doing the calculation
incorrectly. She was concerned about the oil companies
having to wait because of the department knowing that after
certain things were completed the companies would have to
be paid. She thought the state was not calculating in the
same way it had been a few years prior. She asked for
clarification.
Co-Chair Seaton replied that Representative Pruitt had
asked a question about a year prior regarding the meaning.
He had responded to his question that there were 2 ways of
interpreting the statute. One way would currently generate
$206 million and the other way would generate $49 million.
He had asked Legislative Legal Services to research the
intention of the statute. There was no legislative history
of intent other than the transmittal letter sent by the
governor with his bill which stated, "Money received by the
oil companies". The state did not receive what would make
the $206 million calculation. The state received the money
that made the $49 million calculation.
Representative Wilson understood Co-Chair Seaton's point.
She reported that when she was speaking with oil companies
about what to do with the backlog of tax credits, there was
a significant amount of pressure about paying the companies
in the same year. She had responded to them in the
negative. The statute stated that the state made payments
based on the formula. She was hearing Co-Chair Seaton say
that recently after the discussions took place with the oil
companies, someone decided the statute was not clear on how
the number should be calculated. She thought the new
decision regarding the calculation impeded trust. She was
questioning the change.
Representative Pruitt wanted to hear from Commissioner
Fisher. He asked Co-Chair Seaton which calculation was used
for the previous year's budget. Co-Chair Seaton responded
that in the prior year the calculation was reduced by 50
percent. [Inaudible section] They compromised at $77
million.
Representative Pruitt noted that it was the minimum amount
based on the statute as it had been read for several years
prior. He asked if he was correct. Co-Chair Seaton
responded, "That's correct."
Representative Pruitt asked Commissioner Fisher to comment
on the desire of the administration. He asked how the
legislature should handle the issue, recognizing that the
legislature was removing language initially requested by
DOR as a result of the bill not being passed. The state was
acting under current law. He asked how the current law was
defined and recognized by DOR.
3:28:27 PM
SHELDON FISHER, COMMISSIONER, DEPARTMENT OF REVENUE,
responded that the department had issued a revenue sources
book for the previous number of years. The revenue sources
book issued in the Fall had $206 million listed as the
estimated minimum statutory tax credit liability under
current statute. The administration's position was that
there was a method before the legislature that had not
passed to-date that they thought was prudent and
appropriate. However, it was founded on the notion that it
would be discounted based on a stream of payments that
recognized the higher (gross) amount. The administration
had communicated what they thought should be applied in the
current year.
Representative Pruitt mentioned the governor having vetoed
some tax credit funds. He asked what the amounts were after
applying the veto. Commissioner Fisher responded that the
state and the administration had always paid at an amount
equivalent to the gross amount of the liability, the higher
number being discussed presently. It was consistent with
that formula.
Representative Pruitt noted that in the prior year the
legislature, without the need of a veto pen, calculated the
payout in the same manner. He asked if he was correct.
Commissioner Fisher responded affirmatively. He thought the
discussion described presently was accurate - a portion of
it was in the operating budget and another portion was
added in the capital budget. The sum of those two
appropriations equated to the higher formula.
Representative Pruitt indicated that DOR had a fall and
spring forecast. Numbers could be different from the fall
forecast to the spring forecast. Over each of the previous
2 years, he wondered if the state had adjusted the initial
amount proposed by the administration based on the fall
forecast. He asked if the state concluded, after a veto pen
or the previous year's agreements, its gross calculation
based on the spring numbers. Commissioner Fisher differed
to Mr. Alper from the tax division.
3:31:21 PM
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
responded that in the prior year the Fall 2016 Revenue
Sources Book number would have been $74 million based on
the gross calculation, the percentage of the tax
calculation before the application of credits. It was based
on the $74 million that Co-Chair Seaton's earlier comment
about the prior year's finance committee budget of $37
million was half of that number. He continued that by the
time the spring forecast came out the $74 million was
adjusted upward to $77 million, ultimately the amount
appropriated by the legislature between the operating
budget bill and the capital budget bill. For fiscal year 17
the number discussed during the regular session in 2016 was
about $50 million. The number went down to $30 million.
That was the year there was an actual veto. The legislature
passed a $30 million appropriation in one place and a
subsequent $430 million in another place linked with the
CBR, which was the portion Governor Walker vetoed. The
result of that veto was a $30 million appropriation. He
indicated that the $30 million would have been the larger
number. The same calculation was used for FY 17 equaling
$30 million and for FY 19 totaling $206 million.
Mr. Alper continued that for the FY 16 budget, although
there was some discussion in session and a number of $91
million was kicked around as a statutory language, $500
million was ultimately appropriated. The governor did a
partial veto. He relayed that what had been passed by the
legislature had been open-ended language that stated the
amount requested was appropriated and estimated to be $700
million. The governor struck out that language and replaced
it with $500 million.
Representative Pruitt thought it was fair to say that over
the previous 3 years the state had set a precedent of using
the gross numbers as its minimum tax for calculation from
which the state paid. He asked if he was correct.
Mr. Alper replied that what he described had been the
state's practice and analysis. He could not say the
administration contemplated the alternative, but simply
went forward on the assumption that that was the
calculation. The issue of their possibly being another way
of calculating it was not something the state was
considering prior to the current year. He pointed out that
the difference between the two numbers in previous years
would have been relatively low, $10 million to $20 million.
There were a couple of idiosyncrasies in the FY 19 revenue
calculation in the relatively higher oil price/relatively
lower oil company spending range. The delta between the two
calculation methods was somewhat larger by about $150
million.
3:34:47 PM
Representative Pruitt asked how a change in the
interpretation of the statute would be construed by other
parties including companies, investors, and lenders.
Commissioner Fisher responded regarding the impact on the
industry. The tax credit being discussed went to the
smaller producers rather than the larger ones in the
industry. Part of the motivation of instituting the tax
credits initially was to attract small producers in Alaska
to provide additional competition for the development and
exploration of oil, particularly on the North Slope. As
smaller companies they did not necessarily have deep
sources of capital. The major oil companies had more assets
and could withstand variation and changes. The smaller
companies struggled. He thought a financial hardship could
occur for some of the smaller companies. They might have to
curtail or shut down operations for a time without the
issue being cleaned up.
Commissioner Fisher furthered that part of the issue was
that they had borrowed money from other sources based on
the assumption that the state would be paying on a certain
schedule. The department had been in discussion with a
couple of banks that had been very active in Alaska lending
to the smaller companies. They indicated that because the
debt instruments were in forbearance or in default, they
were not currently in a position to continue lending. One
of the benefits of the bill the administration proposed was
that it would clean the slate and allow the companies to be
able to access capitol in a way they had before. He
believed it would continue to be a financial hardship on
the smaller companies and reduce their economic activities
in the state.
Representative Pruitt asked the commissioner about how he
saw redefining a statute after a precedent had been
established. He suggested that trust had been broken for
other groups the state might associate with.
Commissioner Fisher responded that there needed to be a
concern about the issue. He had shared that the department
went out and marketed aggressively to try to attract the
small companies and made representations about how the
state would behave in terms of paying these credits. He
noted a somewhat famous picture of a moose holding a large
wad of cash stating that if a person came to Alaska the
state would make it available. He shared the sentiments of
several legislators that the companies relied on the
statements by the state. However, he argued that it was
their responsibility to make sure they understood the
statute and its framework. He thought making certain
declarations about paying tax credits as they were issued
and behaving in a certain way to attract companies then
moving to making payments based on the statutory formula
redefining how they were paid, created a credibility issue
generally harmful to the state.
3:40:39 PM
Mr. Alper added that the fact that the topic was subject to
debate from year-to-year was a source of uncertainty in the
industry. It was an obligation the state would eventually
have to clear, whether it paid $200 million for a period of
5 years or $50 million for a period of 20 years. The time
factor made a significant difference to the people on the
other side of the transaction. The administration's
position did not favor one number over the other. He
suggested getting past the current era by passing
legislation that was not in the current committee and he
noted he probably should not be speaking to it. Should the
legislation happen, all of the issues being discussed could
be set aside, the decks cleared at no loss to the state.
The legislature would not have to worry about how much to
appropriate other than interest payments in future years.
Representative Pruitt recognized that the bill Mr. Alper
referred to had not passed yet. He suggested that what was
currently before the committee was to try to get the
credits paid off. He thought the point had been made that
the debate could happen over the following 5 years or the
next 20 years. Either way, the legislature was changing the
interpretation of a statute of which a precedent had
already been set. Both the governor and the legislature had
decided on a settlement amount. The legislature did not
just settle on the number that was estimated from the fall.
The number was adjusted so that it fit the gross number. He
believed that what had passed out of the legislature in the
past year was essentially a sanctioning, a concurrence by
the legislature agreeing with the way the governor had read
the statute and defined it at the gross number. Hence,
there was a concern with the $49 million amount versus $206
million. He was interested in continuing the conversation.
3:42:52 PM
AT EASE
3:47:10 PM
RECONVENED
Representative Pruitt moved conceptual amendment 1 to L H
SAP 10.
Representative Pruitt relayed the amendment details. The
amendment would change the amount of $49 million to $206
million.
Co-Chair Seaton OBJECTED.
Co-Chair Seaton spoke to his objection. He believed the
committee should take the statute as it came to the
legislature. As the legislature understood it, the state
was paying either 10 percent or 15 percent of the money it
received from the production tax into the tax credit fund.
In the current calculation the state paid over 50 percent
of what the state would receive in total production taxes
in the tax credit fund. The state was supposed to receive,
based on the minimum tax calculations, a minimum of about
$302 million and would pay out about $206 million to the
tax credit fund. He did not think anyone in the legislature
anticipated that when the state had a provision to pay 10
percent to 15 percent, it would pay 60 to 70 percent of all
the money received in production taxes to the tax credit
fund. He would be opposing the amendment.
Representative Wilson agreed with the conceptual amendment.
She thought it was unfair that the interpretation was
changed midstream because the legislature had already set a
precedent. She was concerned it would kill the industry to
change in midstream. She thought the state's word was
important. She argued against changing the game.
3:51:11 PM
Vice-Chair Gara did not think the state had the money to
pay 4 times the amount in oil company tax credits as
proposed by the amendment. He argued that the state was 2
years away from running out of savings and being able to
keep the state afloat. He did not see spending an extra
$150 million in oil tax credit payments as wise budgeting.
In terms of staying consistent with the statute, the law
had always been clear that, depending on the price of oil,
the state collected either 10 percent or 15 percent of the
production taxes. It was not 10 percent or 15 percent of
the production taxes the state wished it collected. It was
not 10 percent or 15 percent of a mythical 35 percent tax
rate that did not apply. At $60 per barrel of oil the tax
rate was close to 10 percent. The state paid 10 percent or
15 percent of the money the state received in production
taxes. The goal of the statute was to make sure the state
did not have to pay money it did not have. He did not
support the amendment to the amendment.
Representative Pruitt thought it was important to make a
clarification about a gross or net amount. He thought it
was important to discuss legislative history. He explained
that in the discussion on HB 111 [Legislation passed in
2017 - Short Title: Oil and Gas Production Tax; Payments;
Credits] there was a committee substitute brought up in the
Senate Resources Committee. The committee removed the
language in statute that maintained the oil and gas fund.
An argument was made that the legislature should not remove
the fund because in the statute there was a definition of
the minimum that was to be paid. The reason the argument
was made was because the legislature needed to ensure that
the certainty of having the minimum tax remained for those
that would be receiving. The legislative intent in
discussions from the previous year in a different bill
maintained wanting a minimum tax. In the same year the
legislature decided to set a precedent of utilizing the
gross number for evaluation. He continued that in the
previous year in two separate actions taken by the
legislature, members re-affirmed using the gross numbers as
had been done for several years. Although he did not like
the idea of spending a significantly larger amount in the
current year, the state had the debt which had to be paid.
He argued that it was important to stick to the precedent
that had already been set. He asked members for their
support.
Co-Chair Seaton MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Pruitt, Thompson, Tilton, Wilson, Grenn
OPPOSED: GARA, Guttenberg, Kawasaki, Ortiz, Seaton, Foster
The MOTION FAILED (5/6). Conceptual Amendment 1 to amend
Amendment L H SAP 10 FAILED.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion to ADOPT L H SAP
10.
IN FAVOR: Gara, Guttenberg, Kawasaki, Ortiz, Foster, Seaton
OPPOSED: Thompson, Tilton, Wilson, Grenn, Pruitt
The MOTION PASSED (6/5). Amendment L H SAP 10 was ADOPTED.
3:57:29 PM
Representative Thompson asked for reconsideration of a vote
on Amendment L H SAP 5.
There being NO OBJECTION, it was so ordered. The motion was
RECINDED.
3:57:56 PM
AT EASE
3:58:29 PM
RECONVENNED
Co-Chair Foster asked the committee secretary to call the
roll for a reconsideration vote for L H SAP 5.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Foster, Seaton
OPPOSED: Ortiz, Pruitt, Thompson, Tilton, Wilson
The MOTION PASSED (6/5). Amendment l H SAP 5 was ADOPTED
upon reconsideration.
3:59:24 PM
AT EASE
4:08:14 PM
RECONVENED
Co-Chair Foster called the meeting back to order. He asked
Co-Chair Seaton to move the next amendment.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 11 (copy
on file):
Language Amendments
L H SAP 11 - Deposit into the Public Education Fund
for state aid for K-12 Foundation and Student
Transportation Offered by Representative Seaton
See 30-GH2564D28
This amendment does three things:
1) It consolidates sec. 24(g) and (h) into new (g) and
adds contingency language so that state aid for K-12
education is not double funded if another education
appropriation bill is passed.
2) It consolidates sec. 24(i) and (j) into new (h) for
the appropriation of general funds into the Public
Education Fund for student transportation and adds
contingency language so that student transportation is
not double funded if another education appropriation
bill is passed.
3) It also adds a separate contingency provision for
the three other education appropriations made in
another education funding bill, so that if the other
bill is passed, there is no double funding.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 11 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 12 (copy
on file):
Language Amendments
L H SAP 12 - Add provision for the civil legal
services fund
Offered by Representative Seaton
See 30-GH2564D27
Amend section 25, Fund Transfers, by adding a new
subsection with the same language used in the FY18
budget for the civil legal services fund.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
There being NO OBJECTION, Amendment L H SAP 12 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 13 (copy
on file):
Language Amendments
L H SAP 13 - Fund source change of CBR to GF for
retirement appropriations, delete savings, and add
intent
Offered by Representative Seaton
See 30-GH2564D39
The Governor funded the state assistance to retirement
program appropriations from the Constitutional Budget
Reserve Fund in sec. 30 (f)-(l).
This amendment changes the fund source back to the
unrestricted general fund and restores a separate bill
section for these appropriations.
The amendment deletes the $25.5 million savings
appropriation, what had been sec. 30(h), as the Alaska
Retirement Management Board did not approve the
application of the anticipated savings to the PERS (-
$22.15 million) and TRS (-$3.35 million) state
assistance deposits.
The amendment also adds intent language directing the
ARM Board to consider the funding ratio of the Alaska
National Guard and Alaska Naval Militia retirement
system when recommending a retirement system deposit.
This system has a funding ratio at 123 percent, but
the ARM Board approved a resolution setting the
deposit at $851,686.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson spoke to her objection. She
understood that the Alaska Retirement Management (ARM)
Board did not approve the $25.5 million. She asked whether
it was savings.
Co-Chair Seaton indicated that it was anticipated savings.
He did not know whether the savings would occur because the
timeframe in which they anticipated the savings might fall
in the following year. It had to do with taking the savings
at the anticipated time or when it actually occurred. It
was unknow if it would perform as anticipated. The state
generally looked at the actuarial and the retirement fund
resolutions and what was adopted adopting those rather than
generating them.
4:13:28 PM
Representative Wilson asked if the state was still behind
on payments into the retirement fund. She was trying to
understand how the state could have savings. She thought it
would be better to leave any excess amount in savings. She
asked if an amount normally came out. Co-Chair Seaton
responded that it had to deal with determining the
functionality of the program. He did not want to get into
details of how the program was supposed to work. However,
the state would not realize savings until the program had
at least a year to demonstrate itself.
Representative Wilson understood why the money was back in
place. She expressed concerns about the use of the term,
savings since there were outstanding payments to the
retirement fund. Co-Chair Seaton thought they were talking
about a calculated amount that was to be put in and a new
program that was supposed to cost less.
Mr. Teal thought the confusion was around the word,
savings. He suggested the governor meant he was reducing
the contribution by $25 million over what the actuaries had
stated. The language removed the reduction and deposited
$25.5 million into the state's retirement fund.
Representative Wilson thought Mr. Teal's explanation made
more sense. She wanted to clarify that the state was making
a smaller payment. It would be another yearly payment on a
retirement account that the state owed. Also, in the
state's normal practice the state has used whatever was in
the general fund. If the amount was not enough, it came out
of the CBR. She asked if Co-Chair Seaton was putting
payments back together that had been split up. She asked if
she was accurate. Co-Chair Seaton responded, "That's
correct."
Representative Ortiz asked if the impact of the amendment
was to restore a deposit of $25.5 million into the
retirement system that the administration proposed not to
make in its budget. Co-Chair Seaton concurred.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 13 was ADOPTED.
4:18:11 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 14 (copy
on file):
Language Amendments
L H SAP 14 - Delete use of Statutory Budget Reserve
Fund Offered by Representative Seaton
See 30-GH2564D30
The amendment deletes sec. 29 which used the Statutory
Budget Reserve Fund to help fill the deficit.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson asked for the balance of the CBR.
Co-Chair Seaton responded $170 million to $172 million. He
noted that the bill that was sent over to the other body
included using $78 million for pupil transportation. The
balance would be $68 million if the rest was funded from
the CBR. It was only $68 million that was used but it was
the amount "not to exceed."
Representative Wilson asked if the number was $78 million
or $68 million. Co-Chair Seaton responded that as it passed
the House a set amount of $1.2 billion would be withdrawn
from the CBR, and the amount needed, $67.8 million at the
time, would come from the SBR. He furthered that of the
$1.2 billion, about $10 million was appropriated to pupil
transportation. He suggested that when the CBR vote failed
and since it was the amount necessary for pupil
transportation, it went up to the full amount of $78
million.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 14 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 15 (copy
on file):
Language Amendments
L H SAP 15 - Delete the $27 million for interest on a
financing mechanism to retire oil and gas tax credits
Offered by Representative Seaton
See 30-GH2564D14
This deletes section 30(c), the Governor's request for
an estimated $27 million appropriation from the CBR to
pay interest on a financing mechanism to retire oil
and gas tax credits. The appropriation should be made
via a fiscal note to the legislation creating the
financing mechanism.
There's another amendment that will capitalize the oil
and gas tax credit fund at $49 million.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 15 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 16 (copy
on file):
Language Amendments
L H SAP 16 - Add the necessary CBR cash-flow borrowing
language
Offered by Representative Seaton
See 30-GH2564D15
This amends section 30 by adding the necessary
Constitutional Budget Reserve Fund cash-flow borrowing
language.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 16 was ADOPTED.
4:22:07 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 17 (copy
on file):
Language Amendments
L H SAP 17 - CBR used to balance budget and provide
for $200 million headroom for FY19 supplementals
Offered by Representative Seaton
See 30-GH2564D34
This amendment adds two subsections to section 30, the
Constitutional Budget Reserve (CBR) Fund section.
New subsection (m) uses the CBR to balance the FY19
budget after the draw from the ERA.
New subsection (n) allows for $200 million of CBR
"headroom" for potential FY19 supplementals as was
done for FY18 supplementals.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Pruitt asked how the $200 million amount was
derived. Co-Chair Seaton responded that the $200 million
was an approximate number used in the past. Last year the
amount was placed in the budget in case of large fires or
storms. The money would be used for supplementals.
Representative Pruitt asked what the number was prior to
last year at $200 million. He wondered if the number had
been consistent. Co-Chair Seaton thought it had been as
high as $500 million and as low as $100 million.
Representative Pruitt mentioned that the first amendment
addressed by the committee outlined not having any
supplementals. The current amendment would provide $200
million for that purpose. He thought the issue was
addressed in the meeting regarding intent language about
avoiding supplemental budget requests. He wondered if $200
million was still necessary. He suggested a lower number
might be more appropriate. He asked for people's thoughts
on the issue.
Vice-Chair Gara relayed that when he was in the minority he
had had concerns because there was unlimited headroom,
which he thought was a blank check. The legislature ended
up putting a number of $500 million to recognize that the
CBR vote was a protection and required time out of the
legislative session for a vote. He suggested that to allow
headroom, he wanted to ensure that there was only one
wrangling CBR battle during the year rather than multiple
ones. He had caught the element of unlimited headroom and
contested it. The legislature then settled on $500 million.
He thought $200 million was within the range of
conservative numbers.
Co-Chair Seaton noted that supplemental appropriations
still had to be approved. The headroom provided a funding
source through which funds were available.
Representative Wilson wondered if the committee wanted to
send a true message. She had heard around the table that
the state did not have the money or a plan. She believed
that leaving $200 million in place made it seem as though
the legislature was not really serious about what had been
stated in a previous amendment about not wanting a
supplemental.
4:27:54 PM
Representative Thompson recalled that when the legislature
allowed for $500 million in headroom it was because the
Alaska Gasline Development Corporation (AGDC) expected
certain expenses in order to move forward with the gasline
project. The corporation did not use all of the money.
Representative Pruitt appreciated Representative Thompson's
comments. He suggested that it would be easier to get a
supplemental through if it was within a preapproved range
to be funded through the CBR. He remarked that when people
budgeted, they liked to manage within that budget. A person
might not focus on the intent language with a headroom of
$200 million. He wanted to offer a conceptual amendment.
Representative Pruitt MOVED to ADOPT Conceptual Amendment 1
to Amendment L H SAP 17. The amendment would delete $200
million and insert $100 million.
Co-Chair Seaton OBJECTED. He explained that in the past
year there was $200 million in headroom funding and $170
million in supplemental requests. He remarked that the
supplemental amounts were carefully considered for
necessity and legitimacy. He thought $200 million was a
reasonable amount.
Representative Pruitt replied that the $92 million in
Medicaid was higher than expected because the goal was to
try to clean up past years. The money was given to Medicaid
to shore everything up. He reported that the $92 million
was part of the $170 million. He thought the state was in a
different situation going into the next year than in the
current year.
Co-Chair Seaton MAINTAINED his OBJECTION.
A roll call vote was taken on the amendment to amend L H
SAP 17.
IN FAVOR: Tilton, Wilson, Grenn, Ortiz, Pruitt, Thompson
OPPOSED: Gara, Guttenberg, Kawasaki, Seaton, Foster
The MOTION PASSED (6/5). Conceptual Amendment 1 to
Amendment L H SAP 17 was ADOPTED.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 17 as amended
was ADOPTED.
4:33:24 PM
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 18 (copy
on file):
Language Amendments
L H SAP 18 - Delete the contingency language regarding
the funding for the senior benefits program
Offered by Representative Seaton
The Governor's budget included $20 million for the
senior benefits program though legislation is required
to extend the program into FY19 and added contingency
language in section 33.
This amendment deletes section 33, the contingency
provision regarding the senior benefits program
funding as the Department of Health and Social
Services budget subcommittee recommends that the
funding be removed from section 1 of the bill. Funding
for the extension of the senior benefits program
should be reflected on a fiscal note, rather than
retained in the budget bill.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 18 was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 19 and L H
SAP 20 (copies on file):
Language Amendments
L H SAP 19 - Technical wording correction in section
26 that changes "reduced" to "adjusted" as the
Governor submitted.
Offered by Representative Seaton
See 30-GH2564D16
This is a technical correction to wording in section
26, Salary and Benefit Adjustments, changing the word
"reduced" back to "adjusted" as the Governor
submitted.
There is an identical amendment submitted for HB 285,
the mental health budget bill.
Language Amendments
L H SAP 20 - MH: Technical wording correction in
section 9 that changes "reduced" to "adjusted" as the
Governor submitted.
Offered by Representative Seaton
See 30-GH2566J1
This is a technical correction to wording in section
9, Salary and Benefit Adjustments, changing the word
"reduced" back to "adjusted" as the Governor
submitted.
There is an identical amendment for HB 286.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 19 and L H SAP
20 were ADOPTED.
4:35:55 PM
AT EASE
4:36:09 PM
RECONVENED
Co-Chair Seaton WITHDREW Amendment L H SAP 21 (copy on
file).
L H SAP 21 - Cut supplemental requests and change eff
dates for the Comm Assist, Renewable Energy Grant, and
AKLNG Funds Offered by Representative Seaton
See 30-GH2564D46
This amendment deletes all supplemental items from HB
286. The supplementals will be considered in
conjunction with other budget bills.
The line numbers refer to the line numbers of the
amendment document:
Lines 1 and 2 make a conforming title change.
Lines 4 and 5 delete section 9(g), the Public Defender
Agency supplemental.
Lines 7 and 8 delete section 11, the Department of
Corrections supplementals and section 12, the
Department of Education and Early Development
supplementals.
Lines 12 - 14 update a section number reference.
Lines 16 and 17 deletes the Department of Health and
Social Services supplementals in section 14(c)-(f).
Lines 19 and 20 delete section 16, the Department of
Law supplementals.
Page 2 of the amendment:
Lines 1 - 5 delete the Department of Military and
Veterans' Affairs supplementals in section 17(b) and
(c). Lines 7 and 8 delete section 19, the Department
of Transportation and Public Facilities supplemental.
Lines 12 - 13 delete section 24(l), the open-ended
SDPR appropriation for FY18 and FY19 to the Alaska
Gasline Development Corporation.
Lines 17 - 19 update a section reference number
Lines 21 - 23 update a section reference number
Lines 25 - 26 delete section 25(f), the supplemental
for the Alaska marine highway system.
The remainder of the amendment updates section
reference numbers.
There are, however, three substantive effective date
changes from June 30, 2018 to July 1, 2018 (from FY18
to FY19) for the following appropriations:
1. the deposit of PCE Endowment Funds into the
Community Assistance Fund (original section 24(f))
2. the deposit of PCE Endowment Funds into the
Renewable Energy Grant Fund (original section 25(e))
3. the transfer of the balance of the in-state natural
gas pipeline fund to the AK LNG project fund (original
section 24(m))
Amendment L H SAP 21 was WITHDRAWN.
Co-Chair Seaton MOVED to ADOPT Amendment Replacement L H
SAP 21 (copy on file):
Language Amendments
Replacement L H SAP 21 - Cut supplemental requests and
change eff dates for the Comm Assist, Renewable Energy
Grant, and AKLNG Funds
Offered by Representative Seaton
See 30-GH2564D56
This amendment deletes all supplemental items from HB
286 except the Alaska Gasline Development Corporation
multi-year Statutory Designated Program Receipt
authority request. The deleted supplementals will be
considered in conjunction with other budget bills.
The line numbers refer to the line numbers of the
amendment document:
Lines 1 and 2 make a conforming title change.
Lines 4 and 5 delete section 9(g), the Public Defender
Agency supplemental.
Lines 7 and 8 delete section 11, the Department of
Corrections supplementals and section 12, the
Department of Education and Early Development
supplementals.
Lines 12 - 14 deletes the Department of Health and
Social Services supplementals in section 14(c)-(f).
Lines 15 and 16 delete section 16, the Department of
Law supplementals.
Lines 20 - 23 delete the Department of Military and
Veterans' Affairs supplementals in section 17(b) and
(c).
Page 2 of the amendment
Lines 3 and 4 delete section 19, the Department of
Transportation and Public Facilities supplemental.
Lines 8 - 10 update a section reference number.
Lines 12 - 13 delete section 25(f), the supplemental
for the Alaska marine highway system.
The remainder of the amendment updates section
reference numbers.
There are, however, three substantive effective date
changes from June 30, 2018 to July 1, 2018 (from FY18
to FY19) for the following appropriations:
1. the deposit of PCE Endowment Funds into the
Community Assistance Fund (original section 24(f))
2. the deposit of PCE Endowment Funds into the
Renewable Energy Grant Fund (original section 25(e))
3. the transfer of the balance of the in-state natural
gas pipeline fund to the AK LNG project fund (original
section 24(m))
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson turned to page 2 of 2. She referred
to number 3, the transfer of the balance of the in-state
natural gas pipeline fund to the AKLNG project fund. She
asked if the amount was currently in the fast-track
supplemental or if it was something new.
4:37:49 PM
AT EASE
4:38:47 PM
RECONVENED
Co-Chair Seaton responded that the date changes would
change them from FY 18 supplemental items to FY 19
operating budget items.
Representative Pruitt did not see the open-ended statutory
designated program receipt appropriation for FY 18 - FY 19.
He suggested that the legislature would be leaving the
language as it was in the bill. Co-Chair Seaton responded
affirmatively.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Replacement Amendment L H SAP 21
was ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment L H SAP 22 (copy
on file):
Language Amendments
L H SAP 22 - Remove capital project for MH Essential
Program Equipment
Offered by Representative Seaton
This deletes a mental health capital project in the
Department of Health and Social Services. The project
is "MH Essential Program Equipment" and it is funded
with $250.0 of AHFC Dividend Fund (UGF) and $250.0 of
MHTAAR.
The amendment shows zero, rather than -$500.0, because
the project appears in the capital budget system and
reports track only operating budget amendments.
The House always deletes one mental health capital
project and the other body deletes all other mental
health capital projects, thus making all of the mental
health capital projects subject to conference
committee action.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read the amendment (see above).
Representative Wilson asked why there was a distinction on
the $250,000 as the Alaska Housing Finance Corporation
(AHFC) dividend fund if it was truly just UGF. She wondered
if it was for accounting reasons. Co-Chair Seaton did not
know. He deferred to Ms. Sanders.
4:41:45 PM
LACEY SANDERS, ANALYST, LEGISLATIVE FINANCE DIVISION,
responded that it was a tracking code to be able to keep
track of how much the state was spending of the dividend to
make sure it was not being over-appropriated.
Representative Wilson asked if the legislature received a
report on how the dividend was spent. Ms. Sanders offered
that the Legislative Finance Division could run a report
for the system using that specific fund code.
Representative Wilson WITHDREW her OBJECTION.
There being NO OBJECTION, Amendment L H SAP 22 was ADOPTED.
4:42:37 PM
AT EASE
4:42:58 PM
RECONVENED
Co-Chair Seaton reported that the committee had gone
through all of the amendments. The Legislative Finance
Division and Legislative Legal Services would develop new
committee substitutes for HB 285 and HB 286.
Co-Chair Foster moved to give the Legislative Finance
Division and Legislative Legal Services the ability to make
technical and conforming changes when developing the new
committee substitute for HB 285 (FIN).
There being NO OBJECTION, it was so ordered.
Co-Chair Foster moved to give the Legislative Finance
Division and Legislative Legal Services the ability to make
technical and conforming changes when developing the new
committee substitute for HB 286 (FIN).
There being NO OBJECTION, it was so ordered.
Co-Chair Seaton reviewed the agenda for the following day.
The committed would plan to adopt the new committee
substitutes for HB 285 and HB 286 incorporating the
amendments the committee had review for the past few days.
The bills would then be posted on basis and made available
to the public for public testimony which would begin on
Thursday afternoon [March 1, 2018].
ADJOURNMENT
4:44:27 PM
The meeting was adjourned at 4:44 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 286 HB 285 Subc Reports Language Amendments SAP-Packet.pdf |
HFIN 2/27/2018 1:30:00 PM |
HB 285 HB 286 |
| HB 286 HB 285 Language Replacement H SAP3.pdf |
HFIN 2/27/2018 1:30:00 PM |
HB 285 HB 286 |
| HB 286 & HB 285 Language Replacement H SAP21.pdf |
HFIN 2/27/2018 1:30:00 PM |
HB 285 HB 286 |