01/23/2004 01:03 PM House JUD
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
January 23, 2004
1:03 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Holm
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 9
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit and a spending limit.
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 9
SHORT TITLE: CONST AM: APPROPRIATION/SPENDING LIMIT
REPRESENTATIVE(s): STOLTZE
01/31/03 (H) READ THE FIRST TIME - REFERRALS
01/31/03 (H) STA, JUD, FIN
02/11/03 (H) STA AT 8:00 AM CAPITOL 102
02/11/03 (H) Heard & Held
02/11/03 (H) MINUTE(STA)
04/04/03 (H) W&M REFERRAL ADDED BEFORE STA
04/09/03 (H) W&M AT 7:00 AM HOUSE FINANCE 519
04/09/03 (H) Heard & Held
04/09/03 (H) MINUTE(W&M)
04/17/03 (H) W&M AT 7:00 AM HOUSE FINANCE 519
04/17/03 (H) Heard & Held
04/17/03 (H) MINUTE(W&M)
04/24/03 (H) W&M AT 7:00 AM HOUSE FINANCE 519
04/24/03 (H) Heard & Held
04/24/03 (H) MINUTE(W&M)
04/29/03 (H) W&M AT 7:00 AM HOUSE FINANCE 519
04/29/03 (H) Heard & Held
04/29/03 (H) MINUTE(W&M)
04/30/03 (H) W&M AT 8:00 AM HOUSE FINANCE 519
04/30/03 (H) Heard & Held
04/30/03 (H) MINUTE(W&M)
05/02/03 (H) W&M AT 7:00 AM HOUSE FINANCE 519
05/02/03 (H) Moved CSHJR 9(W&M) Out of Committee
05/02/03 (H) MINUTE(W&M)
05/02/03 (H) W&M RPT CS(W&M) NT 3DP 2NR 2AM
05/02/03 (H) DP: HEINZE, WHITAKER, HAWKER;
05/02/03 (H) NR: MOSES, GRUENBERG; AM: KOHRING,
05/02/03 (H) WILSON
05/06/03 (H) STA AT 8:00 AM CAPITOL 102
05/06/03 (H) Scheduled But Not Heard
05/06/03 (H) JUD AT 5:30 PM CAPITOL 120
05/06/03 (H) -- Meeting Canceled --
05/06/03 (H) STA AT 5:30 PM CAPITOL 102
05/06/03 (H) -- Meeting Canceled --
05/07/03 (H) STA AT 8:00 AM CAPITOL 102
05/07/03 (H) Heard & Held
05/07/03 (H) MINUTE(STA)
05/07/03 (H) JUD AT 1:00 PM CAPITOL 120
05/07/03 (H) <Bill Hearing Postponed>
05/08/03 (H) STA AT 8:00 AM CAPITOL 102
05/08/03 (H) Moved CSHJR 9(STA) Out of Committee
05/08/03 (H) MINUTE(STA)
05/08/03 (H) STA RPT CS(STA) NT 3DP 3NR
05/08/03 (H) DP: SEATON, LYNN, DAHLSTROM;
05/08/03 (H) NR: GRUENBERG, HOLM, WEYHRAUCH
05/08/03 (H) JUD AT 3:30 PM CAPITOL 120
05/08/03 (H) <Bill Hearing Postponed>
05/09/03 (H) JUD AT 1:00 PM CAPITOL 120
05/09/03 (H) Heard & Held
05/09/03 (H) MINUTE(JUD)
05/12/03 (H) JUD AT 1:00 PM CAPITOL 120
05/12/03 (H) <Bill Hearing Postponed to Wed.
5/14/03>
05/14/03 (H) JUD AT 1:00 PM CAPITOL 120
05/14/03 (H) Heard & Held
05/14/03 (H) MINUTE(JUD)
05/15/03 (H) JUD AT 8:30 AM CAPITOL 120
05/15/03 (H) -- Meeting Canceled --
10/29/03 (H) JUD AT 5:00 PM Anch LIO Conf Rm
10/29/03 (H) Heard & Held
10/29/03 (H) MINUTE(JUD)
01/23/04 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HJR 9.
KELLY HUBER, Staff
to Representative Bill Stoltze
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Assisted with the presentation of HJR 9.
CHERYL FRASCA, Director
Office of Management & Budget (OMB)
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Discussed the administration's proposal in
relation to HJR 9, and responded to questions.
ACTION NARRATIVE
TAPE 04-2, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:03 p.m. Representatives
McGuire, Anderson, Ogg, Samuels, and Gara were present at the
call to order. Representative Gruenberg arrived as the meeting
was in progress.
HJR 9 - CONST AM: APPROPRIATION/SPENDING LIMIT
Number 0014
CHAIR McGUIRE announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 9, Proposing amendments to the
Constitution of the State of Alaska relating to an appropriation
limit and a spending limit. [Before the committee was CSHJR
9(STA).]
CHAIR McGUIRE noted that in members packets was a proposed
committee substitute (CS) for HJR 9, Version 23-LS0435\X, Cook,
1/22/04.
Number 0085
REPRESENTATIVE SAMUELS moved to adopt the proposed CS for HJR 9,
Version 23-LS0435\X, Cook, 1/22/04, as the work draft. There
being no objection, Version X was before the committee.
Number 0111
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, sponsor
of HJR 9, commented on the governor's recent press conference,
in which attention was turned to a spending limit, and listed
the resolution's past hearings. He relayed that the governor,
through his Office of Management & Budget (OMB) staff, has
offered some good suggestions regarding the issues of
controlling spending and associated economic factors. He noted
that one of the complaints he hears from those in his district
is, "I'm suffering economically; government sure doesn't feel
the pinch." He remarked:
It certainly brings a connectivity that a lot of us
can identify with. There's a lot of things that we're
going to have to consider in the process; it's a long
process of getting 27 and 14 votes, and bringing
something that the public can support - that they're
going to believe is going to be a meaningful spending
document. This committee has certainly had a
meaningful role in that process.
Number 0306
KELLY HUBER, Staff to Representative Bill Stoltze, Alaska State
Legislature, sponsor, relayed that Version X uses the base year
that was in the original resolution, "which is two years
preceding." She added that the governor's proposal was based on
the prior year - one year preceding. In addition, Version X
applies, to the base year, the following "economic/limiting
factors": 50 percent of the average annual percent change over
the last three of four years in personal income plus the average
percent change in population over the last three of four
calendar years. She noted that those economic/limiting factors
were in the governor's proposal as well.
MS. HUBER pointed out that appropriations exempted in Version X
no longer include the appropriations pertaining to the Alaska
Railroad Corporation (ARRC), but do include the Constitutional
Budget Reserve (CBR).
REPRESENTATIVE STOLTZE indicated that he'd never been convinced
that the ARRC ought to have been included in the exemption list
to begin with, and so had no problem with having it removed in
Version X.
CHAIR McGUIRE surmised that if sufficient argument is made in
favor of including, in the exemptions list, appropriations
pertaining to the ARRC, then those appropriations could be added
to the exemption list later [in the process].
REPRESENTATIVE STOLTZE relayed that he might have previously
testified, perhaps erroneously, that he thought that the ARRC
had been included for the purpose of allowing it to participate
in the gas [pipeline] bond proposal, but has since realized that
such a possibility is provided for through other mechanisms in
the [resolution].
REPRESENTATIVE GARA opined that the legislature would certainly
like to have the option of allowing the ARRC to participate in
the financing of a [gas] pipeline, and asked for clarification
on how such is provided for in Version X.
Number 0499
REPRESENTATIVE STOLTZE offered that the mechanism for such is
provided for via the language - located in Section 1 of the
resolution, that which pertains to altering Article IX,
specifically proposed Section 16(b)(5), of the Alaska State
Constitution - regarding revenue bonds.
CHAIR McGUIRE, in response to a question, offered her belief
that the language in proposed Section 16(b)(5) would apply to a
"railroad-financed bond."
MS. HUBER went on to relay that Version X requires a three-
quarter override vote in both houses of the legislature in order
to obtain up to an additional 2 percent increase in spending; in
contrast, the governor's proposal required a two-thirds majority
vote of the legislature in joint session. She mentioned that
Version X contains a provision regarding voter reauthorization
every six years, with the first reauthorization vote scheduled
for 2010. She concluded by noting that Version X includes
provisions from both the governor's proposal as well as from
prior versions of HJR 9.
REPRESENTATIVE OGG asked how the override provision would work.
REPRESENTATIVE STOLTZE offered that it would work in the same
fashion as the current [three-quarter vote] requirement
pertaining to the CBR, but would be for the purpose of approving
additional spending beyond any increase [provided for via
proposed Section 16(a)].
CHAIR McGUIRE, in response to further questions, indicated that
the override provision in Version X is not related to overriding
the governor's vetoes; instead, it pertains solely to
authorizing additional spending beyond the proposed spending
cap.
REPRESENTATIVE GARA said he wanted to make sure that the
language in Version X would allow for the financing of an
unexpected expenditure such as a gas pipeline. He asked whether
the funds required to pay back bonds have to fit within the
spending cap.
REPRESENTATIVE STOLTZE indicated that such funds would have to
fall within the cap.
REPRESENTATIVE GARA surmised, then, that any such debt would
have to be funded at the expense of not funding something else.
Number 0887
REPRESENTATIVE STOLTZE offered that absent using the three-
quarter override provision in HJR 9, in such a situation the
legislature would have to prioritize where those funds would
come from. In response to a proffered hypothetical calculation
of such a situation, he surmised that any funds used to finance
a gas pipeline would then become part of a new base
[calculation], adding that the decision of whether to and how to
finance such a project would have be made by the legislature at
that time.
CHAIR McGUIRE noted that the "gas [pipeline] argument" is one
that continues to crop up during discussions of a spending cap.
She noted that being able to fund an unanticipated disaster is
now accounted for in Version X as one of the exemptions, and
asked Representative Stoltze whether he and his staff have given
thought to [including] a similar exemption regarding the
financing of a gas pipeline or other "positive infrastructure
investments." She pointed out that if such were included, the
override provision would not have to be used for that purpose.
REPRESENTATIVE STOLTZE replied that he has given a lot of
thought to the pros and cons regarding the necessity of
restraining funding. "Any time you make one choice it affects
another, and it's a considerable balancing act [and] an
imperfect process," he added, remarking that he is not sure what
the exact mechanism would be for allowing such spending without
blowing a hole in a spending cap.
CHAIR McGUIRE offered her belief that it is critical for any
spending cap to include a provision for going beyond that limit,
and predicted that there would probably be sufficient bipartisan
support for using the proposed override provision to finance
something like a gas pipeline.
REPRESENTATIVE SAMUELS turned attention to proposed Section
16(b)(6), located on page 2, and surmised - contrary to
Representative Stoltze's indication that the paying back of
bonds would have to fall within the spending cap - that that
language exempts the appropriations required to pay general
obligation (GO) bonds.
MS. HUBER said that is correct.
Number 1110
REPRESENTATIVE SAMUELS noted that Version X, unlike the
governor's proposal, does not explicitly state where excess
revenues will go. He asked whether this means that any excess
revenues will go into the general fund (GF) and thereby be
inaccessible without a three-quarter vote.
REPRESENTATIVE STOLTZE offered his belief that the absence of
any express provision regarding excess revenues means that each
individual legislature would determine where such revenues would
go. Thus the status quo would be maintained in that regard.
REPRESENTATIVE SAMUELS surmised, then, that any such excess
funds would not automatically be locked up in the CBR.
CHAIR McGUIRE offered her belief that that is correct.
MS. HUBER added that they'd predicted that the question of where
excess revenues would go would be an issue for discussion.
REPRESENTATIVE GARA noted that [proposed Section 16(a)]
determines how much spending can be increased over "last year's
amount," and that [proposed Section 16(c)] allows spending to go
beyond that cap should the legislature make that choice via a
three-quarter vote. He offered the point that "(c) is smaller
than [(a)] in many years."
[Following was some discussion wherein it was clarified that
proposed Section 16(b) is simply a list of those appropriations
that would be exempted from the calculations provided for in
proposed Sections 16(a).]
REPRESENTATIVE GARA indicated that according to his
understanding of the language currently in proposed Section
16(c), it appears that using the three-quarter vote to increase
spending would then preclude using the increase provided for in
proposed Section 16(a).
CHAIR McGUIRE said that that is not how she reads proposed
Section 16(c).
REPRESENTATIVE OGG turned attention to the language on page 2,
lines 20-22, which says, "(c) An appropriation that exceeds the
limit under (a) of this section may be made for any public
purpose upon affirmative vote of at least three-fourths of the
members of each house of the legislature." He opined that such
language is pretty straightforward.
CHAIR McGUIRE agreed.
REPRESENTATIVE GARA offered, however, that it is the remainder
of the language in proposed Section 16(c) which causes him the
concern that the increase provided for in Section 16(a) will be
precluded. That remaining language says in part, "The total
amount of appropriations under this subsection made for a fiscal
year may not exceed two percent of the amount appropriated for
the fiscal year two years preceding the fiscal year for which
the appropriations are made".
Number 1455
REPRESENTATIVE SAMUELS offered his understanding that the
increase provided for via proposed Section 16(c) would be in
addition to - or on top of - the spending increase allowed via
proposed Section 16(a).
REPRESENTATIVE STOLTZE indicated that Representative Samuels's
interpretation is correct.
REPRESENTATIVE GARA opined that although such an interpretation
may reflect the sponsor's intention, the language currently in
proposed Section 16(c) does not do so; rather, he reiterated,
the current language in proposed Section 16(c) will preclude the
increase provided for in proposed Section 16(a).
REPRESENTATIVE OGG offered his understanding that the language,
"this subsection" clarifies that the increase provided for in
proposed Section 16(c) will be in addition to the increase
provided for in proposed Section 16(a).
CHAIR McGUIRE remarked that the language [in proposed Section
16(c)] could be drafted better. Noting that the current
language becomes clear if read over and over again, she added
that perhaps the language could be redrafted for further
clarity.
REPRESENTATIVE SAMUELS indicated agreement with Representative
Ogg's summation.
CHAIR McGUIRE offered, however, that it is the reference to
proposed Section 16(a) that creates confusion regarding whether
the limit applies to both (a) and (c).
REPRESENTATIVE STOLTZE remarked that concerns regarding the
clarity of the language are probably well founded, given how the
[Alaska] Supreme Court has interpreted the CBR and spending
limits [in the past].
REPRESENTATIVE GARA relayed that that is why he would prefer the
language to be clearer.
CHAIR McGUIRE agreed, and asked Representative Gara to assist in
drafting clearer language.
REPRESENTATIVE GARA acknowledged that Representatives Ogg and
Samuels are correct and have the better interpretation of
proposed Section 16(c).
Number 1705
REPRESENTATIVE GRUENBERG offered that according to his
interpretation of proposed Section 16(c), it refers to an amount
that exceeds the limit provided for in proposed Section 16(a).
Therefore, a clarifying change could be to simply say, "The
total amount of appropriations that exceeds the limit under (a)
of this section". On the issue of the resolution, he relayed
that his concern revolves around the fact that the [spending
cap] is going to involve all appropriations by the legislature
for a year and therefore "one person in the legislature could
hold the whole state hostage," adding, "somebody who has a pet
project could absolutely hold the state government to a very
unreasonable position, and I simply raise that as a horrible
hypothetical without having an answer to it." He said that this
point troubles him constitutionally.
REPRESENTATIVE SAMUELS calculated that under proposed Section
16(c), the legislature could vote to spend roughly an extra $50
million.
REPRESENTATIVE OGG asked whether, if additional funds are
appropriated via use of proposed Section 16(c), those funds will
then be included in a future base year's calculations.
REPRESENTATIVE STOLTZE said he recalled that there had been
discussion of that issue in prior committees, but could not
recall what the answer was.
REPRESENTATIVE OGG suggested that that issue should be
clarified.
REPRESENTATIVE GRUENBERG offered his belief that those
additional funds would change a base year's calculations because
they would then be included in the amount appropriated for that
year.
CHAIR McGUIRE agreed with Representative Gruenberg because the
limit would be based on the two years immediately preceding the
[current] fiscal year (FY). She pointed out that the original
concept from the governor used FY 04 [as the base year], whereas
the proposal by Representative Stoltze specifies that it would
be two years prior.
REPRESENTATIVE STOLTZE clarified that the two-year requirement
was because [the legislature] doesn't know what the actual
budget is [for any particular year] until [two years] have
elapsed. It's necessary to have a clear picture of the budget
as a starting point. He pointed out that the original version
of HJR 9 was more of a flat budget, but that was changed in a
prior committee.
Number 2057
REPRESENTATIVE GARA relayed his belief that [the legislature]
has done poorly with the school budget over the last few years.
In fact, if one were to measure school funding in real dollars,
he added, one would find that it has been decreased by over 7
percent in the last six years, with the result being teacher
layoffs and increasing class sizes. He asked how that trend
could be reversed under this resolution. Turning to proposed
Section 16(a), he said that spending has to decrease on a per
person basis every year from now on, and highlighted that
Anchorage has already laid off over 100 teachers in anticipation
of this year's budget.
REPRESENTATIVE STOLTZE answered that the passage of this
resolution will force the legislature to prioritize and thus
there may areas in the budget that may not continue to be
funded. He recalled the mid to late 1980s, what he
characterized as one of the most extreme [fiscal] times for the
state, when oil prices were down to single-digit and low double-
digit prices. The aforementioned, he remarked, was one of the
last times he recalled that education was fully funded. He
relayed his belief that last year more money was put in the
education budget, and that he believes education will be a
priority for the legislature.
REPRESENTATIVE GARA distributed a Legislative Research report,
which he said specifies that less was spent on schools last year
than the year prior. Furthermore, this reports specifies that
approximately 7 percent less has been spent on schools over the
past five years and, thus, he disagrees with the argument that
the legislature has being doing it right.
REPRESENTATIVE GRUENBERG suggested that to really see how this
resolution would work it would be necessary to produce a
computer model that uses various rates of inflation and other
variables. For any spending cap to work, it requires model
language and various factual hypothetical scenarios. He posited
that for something to work in the constitution, it must work
[well] under as many scenarios as possible.
CHAIR McGUIRE said Representative Gruenberg's suggestion is a
good one.
REPRESENTATIVE STOLTZE remarked that that process has been
started.
The committee took an at-ease from 1:37 p.m. to 1:38 p.m.
Number 2301
CHERYL FRASCA, Director, Office of Management & Budget (OMB),
Office of the Governor, thanked Representative Stoltze for his
work on this issue. Ms. Frasca relayed [the administration's]
view that HJR 9 is a way to control the growth of government
regardless of the fund source, and is therefore "not just a
general fund limit." She noted that any time an exemption from
the limit is established, there is an incentive to categorize or
define spending. However, regardless of what the limit is,
there still needs to be revenues to match that level of
spending.
TAPE 04-2, SIDE B
MS. FRASCA pointed out that revenue bonds and revenue proceeds
would be excluded from the limit because something external
would pay those. Furthermore, proposed or suggested general
obligation (GO) bond proceeds would be excluded, although GO
debt wasn't excluded because it has to be paid.
REPRESENTATIVE SAMUELS relayed his understanding that under the
governor's proposal, the proposed Section 16(b)(6) was not
included and, thus, the appropriations required to pay the
obligations under GO bonds were not excluded from the governor's
proposed spending limit calculation.
MS. FRASCA agreed and reiterated, "except for revenue bonds ...
and also certificates of participation [COPs]." She explained
that the administration doesn't want to establish a system that
encourages the state to incur debt rather than pay cash when in
a position to do so. Ms. Frasca informed the committee that the
administration had discussed excluding trust funds because those
are monies that won't be used to pay for something else.
Furthermore, there are some constitutionally dedicated fund
sources [that the administration would suggest excluding].
REPRESENTATIVE GRUENBERG turned attention to page 2, line 11.
He recalled Ms. Frasca's indication that the legislature could
float a series of GO bonds and the monies to pay those back in
subsequent years would be totally outside the proposed spending
limit calculation. However, GO bonds are capital bonds and thus
a lot of the capital budget would be thrown out. Therefore, he
suggested that there would be two different systems under this
language [on page 2, line 11]. One system would be for the
operating budget, which would be under the cap, while the other
system would be for bonded capital expenditures, which are
outside the cap. He then turned attention to page 2, line 13,
and pointed out that when the federal funds are no longer
available, the [system] will be "out of whack" because the
program in place is dependent upon federal funds. Therefore, it
will automatically be over the cap because the large chunk [of
funds] for the existing program is now under the cap.
MS. FRASCA agreed, but explained that it meant that [the
legislature] would have to prioritize [spending].
REPRESENTATIVE GRUENBERG said that Ms. Frasca's answer is one
that could be given to any question and doesn't address how the
legislature is going to run state government.
Number 2186
MS. FRASCA moved on to the three-fourths vote requirement. She
informed the committee that 29 states have an appropriation or
spending limit. Twelve of those states have a two-thirds
requirement to override the limit, two states have a three-fifth
requirement, seven states have a majority requirement, and six
states have no provision to waive. No state has a three-fourths
requirement.
REPRESENTATIVE GARA indicated his understanding that those 29
states had a tax cap rather than a spending cap.
MS. FRASCA agreed that some of those appropriation limits apply
to revenues. As an example she pointed out that Anchorage's cap
is related to how much taxes can increase from one year to the
next.
REPRESENTATIVE GARA asked for confirmation that in those 29
states, the caps are related to how much people can be taxed.
MS. FRASCA answered, "Not all of them." She pointed out that
some of the caps in those 29 states do touch on revenue sources
while others touch on spending regardless of revenue sources.
She explained that those states had caps of some sort, and
reviewed how those states could exceed that limit.
REPRESENTATIVE GARA asked which of the 29 states were tax cap
states and which were spending cap states.
MS. FRASCA said she didn't know, but offered to share with the
committee the report from which she took the information. She
then informed the committee that the ARRC isn't subject to the
Executive Budget Act, and that the governor had at one time
proposed tying enactment [of a spending limit] to passage of the
"POMV legislation" but he is no longer promoting such a
provision. She went on to explain that when using the
calculation in proposed Section 16(a), one takes 50 percent of
the personal income growth and population, which would result in
approximately a 3.15 percent increase; this exceeds the rate of
inflation, which has been 1-2 percent since 1993.
Number 2048
CHAIR McGUIRE asked about any increase in spending that has
occurred in the past.
MS. FRASCA answered that "it" has been going in the opposite
direction in the last two [years]. Although the state hasn't
been in a position to come close to this proposed spending
limit, the administration's approach is, should there be an
influx of revenues, regardless of the source, Alaskans will be
assured that [state government] won't go on a spending spree.
REPRESENTATIVE GARA commented that it seems that under a
responsible budget, the spending would increase based on
population growth and inflation. He asked why spending should
go along with personal income growth as opposed to inflation.
MS. FRASCA responded that she wasn't convinced that all spending
has to automatically increase because of inflation or population
increases. She pointed out that sometimes there are economies
of scale that can be gained in terms of the management of
programs. Furthermore, competition in the marketplace drives
costs down. She highlighted that one of the challenges is that
revenues don't increase with regard to population and inflation.
The reason the administration used personal income growth is
because it includes an element reflecting inflation; as salaries
increase, personal income increases and thus state spending can
increase. In contrast, if a situation arises in which the
economy isn't doing well and personal income is decreasing, the
administration doesn't believe state [spending] should increase.
REPRESENTATIVE GARA asked Ms. Frasca if she had a long-term
average of the difference between inflation and income growth.
MS. FRASCA said she could provide the committee with that data.
In further response to Representative Gara, she said she didn't
know the difference between inflation and income growth over the
last 20 years, but could find out.
REPRESENTATIVE GARA asked if his understanding is correct that
the state is spending less now, when adjusted for inflation and
population growth, than it was before the pipeline boom.
MS. FRASCA offered to provide that information. She informed
the committee that the state is spending $6,600 per capita,
including general funds and other state funds, and that many of
the analyses put forward for comparison purposes merely include
general funds.
Number 1833
MS. FRASCA turned to the 1982 constitutional spending limit and
pointed out that if it were actually being followed, the state
could spend $6.6 billion [in general funds]. The aforementioned
occurred because the limit kept increasing rather than returning
to what was actually spent.
REPRESENTATIVE GARA questioned whether that was because spending
has fallen behind population growth and inflation.
MS. FRASCA replied that it was an artificial [number] each time.
REPRESENTATIVE OGG noted that the university has receipt
authority, which he imagined would be covered under federal
funds. He asked what would happen to tuition, which is
independent and which has increased 10 percent each of the past
two years.
MS. FRASCA clarified that under Version X, tuition would be
included in the [spending] limit. Just as with the Division of
Occupational Licensing, if one obtains a license, it would be
included in the limit. The university is a governmental
institution and the administration's philosophy is that a
student at the university would want to recognize that there is
a limit on how much the university can grow each year.
Therefore, the university would be subject to the [spending]
limit.
Number 1765
REPRESENTATIVE OGG turned to the language in Version X
pertaining to income and population growth. How does Version X
deal with boom and hyperinflation situations, he asked.
MS. FRASCA answered that one way would be to exceed the limits.
However, under Version X there is a 2 percent limit after an
upward adjustment. The administration didn't have a limit as to
how much it could be exceeded. She emphasized that
hyperinflation doesn't mean that revenues are also inflated;
hence there will be added spending pressures, which will lead to
[prioritization]. She reiterated that there isn't more money
just because the cost for something increases. This is faced at
all levels, from individuals to municipalities.
REPRESENTATIVE OGG agreed that such will result in tough
choices. However, [the state] has a fairly large reserve and
some of the [state's] assets have been turned into liquidity.
[The state] has the ability to provide the same services
regardless of inflation, except for the fact that Version X
won't allow such. Therefore, this may not be a path which [the
state] may want to go. "You're tying your ability to respond to
issues, and the timeline to correct that would be at least two
years out because you'd have to correct the constitution," he
pointed out.
CHAIR McGUIRE asked if any of the 29 states that Ms. Frasca
spoke of earlier restricted spending by specifying a certain
percentage such as that in Version X.
MS. FRASCA replied that some of those states did have some
maximums, while others went to the voters for approval of
exceeding the limit.
CHAIR McGUIRE said she believes that Representatives Ogg, Gara,
and Gruenberg all touch on a good point. Even for those who
want a spending limit, there is a real concern that there may be
something to which [the legislature] can't effectively respond.
CHAIR MCGUIRE announced that her staff would work on a committee
substitute, and therefore those with ideas or suggestions should
approach the committee staff with those.
REPRESENTATIVE OGG asked that the university tuition issue be
reviewed.
MS. FRASCA suggested that the [committee substitute] be very
specific because she would expect that there would be all kinds
of things referred to as university receipts. "If you really
mean tuition, say tuition," she said.
Number 1488
REPRESENTATIVE SAMUELS turned to excess revenues and noted that
his knee-jerk reaction would be to leave it in the GF, even with
the three-fourth vote, because that excess revenue may be
necessary just to match last year's limit. He asked why the
administration's proposal places excess revenue in the CBR.
MS. FRASCA responded that the administration wanted to create an
incentive to save money by placing it in the permanent fund or
the CBR.
REPRESENTATIVE SAMUELS turned attention to proposed Section
16(b)(3) and asked about the definition of a "state of
disaster." He asked whether the governor could call
hyperinflation a disaster and whether funds for such would have
to go to a three-quarter vote of the legislature.
MS. FRASCA answered that there are statutory definitions that
must be followed in order to declare a natural disaster.
Number 1399
REPRESENTATIVE GARA pointed out that this year in Anchorage over
100 teachers are being lost and the governor has proposed a
budget similar to last year's education budget. He asked
whether the administration has a view with regard to whether
class sizes should be reduced in certain areas of the state and
whether that could be done under [Version X].
MS. FRASCA pointed out that the spending limit suggests an
increase each year if the revenues are there to support it.
Therefore, a legislature or governor would have the choice of
adding funding to education. However, she pointed out that last
year the legislature passed a statute that prescribed how much
money the state would give to school districts, which is what
was followed when the administration introduced its education
budget. She highlighted that there was a decrease in the number
of students in Anchorage as well as throughout the state, and
therefore there was less of a requirement to provide that level
of funding to the school districts.
MS. FRASCA noted that some communities have self-imposed
limitations, which is the case in Anchorage where there is tax
cap that limits how much the municipality is willing to pay for
schools. A couple of years ago, legislation was passed which
specified that when communities with a property tax, such as
Anchorage, experience an increase in the assessed valuation,
local school districts are supposed to increase to "4 mils."
However, what has happened in recent years in Anchorage is that
it pays "3.5 mils" and the state provides the additional ".5
mils." Therefore, some of the local level decisions may want to
be revisited in order to determine whether additional dollars
could be added to schools. She highlighted that this year,
there will be the burden of the PERS [Public Employees'
Retirement System] and TRS [Teachers' Retirement System]
increase, which is something that the state, school districts,
and local governments will have to bear the costs of.
MS. FRASCA reiterated that this is a challenging time during
which everyone has to balance many competing demands. She
emphasized that education is a priority for the governor.
Number 1245
CHAIR McGUIRE mentioned the workers' compensation situation and
questioned how one could have predicted that as a result of
major companies going bankrupt, the state would be put in the
position of picking up the pieces. Sometimes the [state] bears
costs that are the result of someone else's fiscal mistakes.
CHAIR McGUIRE, upon polling the committee with regard to its
wishes, announced that HJR 9 would be held over.
ADJOURNMENT
Number 1177
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:20 p.m.
| Document Name | Date/Time | Subjects |
|---|