Legislature(2021 - 2022)ANCH LIO DENALI Rm
06/04/2021 01:00 PM House JUDICIARY
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| Start | |
| HJR7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
| += | HJR 7 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
Anchorage, Alaska
June 4, 2021
1:04 p.m.
MEMBERS PRESENT
Representative Matt Claman, Chair
Representative Liz Snyder, Vice Chair
Representative Harriet Drummond (via teleconference)
Representative Jonathan Kreiss-Tomkins (via teleconference)
Representative David Eastman (via teleconference)
Representative Christopher Kurka
Representative Sarah Vance (via teleconference)
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 7
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund, appropriations from the
permanent fund, and the permanent fund dividend.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 7
SHORT TITLE: CONST. AM: PERM FUND & PFDS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) STA, JUD, FIN
04/20/21 (H) STA AT 3:00 PM GRUENBERG 120
04/20/21 (H) Heard & Held
04/20/21 (H) MINUTE(STA)
05/04/21 (H) STA AT 3:00 PM GRUENBERG 120
05/04/21 (H) Heard & Held
05/04/21 (H) MINUTE(STA)
05/06/21 (H) STA AT 3:00 PM GRUENBERG 120
05/06/21 (H) Moved CSHJR 7(STA) Out of Committee
05/06/21 (H) MINUTE(STA)
05/10/21 (H) STA RPT CS(STA) 4DNP 2NR 1AM
05/10/21 (H) DNP: CLAMAN, EASTMAN, VANCE, TARR
05/10/21 (H) NR: STORY, KREISS-TOMKINS
05/10/21 (H) AM: KAUFMAN
05/14/21 (H) FIRST SPECIAL SESSION BILL
05/14/21 (S) FIRST SPECIAL SESSION BILL
05/24/21 (H) JUD AT 1:00 PM GRUENBERG 120
05/24/21 (H) Heard & Held
05/24/21 (H) MINUTE(JUD)
05/26/21 (H) JUD AT 1:00 PM GRUENBERG 120
05/26/21 (H) Heard & Held
05/26/21 (H) MINUTE(JUD)
06/02/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
06/02/21 (H) Heard & Held
06/02/21 (H) MINUTE(JUD)
06/04/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
WITNESS REGISTER
ANGELA RODELL, Chief Executive Officer
Alaska Permanent Fund Corporation
Juneau, Alaska
POSITION STATEMENT: During the hearing on CSHJR 7(STA),
provided a PowerPoint presentation, titled "The Alaska Permanent
Fund," dated 6/4/21.
CURTIS THAYER, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: During the hearing on CSHJR 7(STA),
provided a PowerPoint presentation, titled "Power Cost
Equalization," dated 6/4/21.
MIKE BARNHILL, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Provided testimony and answered questions
during the hearing on CSHJR 7(STA).
RICK HALFORD
Aleknagik, Alaska
POSITION STATEMENT: Provided invited testimony pertaining to
CSHJR 7(STA).
ACTION NARRATIVE
1:04:28 PM
CHAIR MATT CLAMAN called the House Judiciary Standing Committee
meeting to order at 1:04 p.m. Representatives Drummond (via
teleconference), Snyder, Kreiss-Tomkins (via teleconference),
Eastman (via teleconference), Vance (via teleconference), and
Claman were present at the call to order. Representative Kurka
arrived as the meeting was in progress.
HJR 7-CONST. AM: PERM FUND & PFDS
[Contains discussion of SJR 6.]
1:05:43 PM
CHAIR CLAMAN announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 7, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund, appropriations from the permanent fund, and the
permanent fund dividend. [Before the committee was CSHJR
7(STA).]
1:06:45 PM
[Due to technical difficulties, sound was lost briefly.]
1:08:24 PM
ANGELA RODELL, Chief Executive Officer, Alaska Permanent Fund
Corporation, provided a PowerPoint presentation, titled "The
Alaska Permanent Fund" [hard copy included in the committee
packet]. She recalled that in the late 1990s, the generally
accepted accounting principles changed to include the fair
market value concept into the definition of income, which meant
that the concept of unrealized gains and losses had to be
included as well. She said that created an "interesting
conundrum" for the permanent fund and how it was accounted for,
ultimately leading to the two-account structure that is used
today. She directed attention to slide 2, "two Account
Structure," which read as follows [original punctuation
provided]:
Principal
• is constitutionally established as the permanent
part of the Fund
• grows through royalty contributions, special
appropriations, and inflation proofing
• is to be used only for income-producing investments
Earnings Reserve Account
• is statutorily established to hold the net income
from the Fund's investment portfolio
• grows through the receipt of statutory net income -
monthly cash inflows from investments and net income
from asset sales
• is available for Legislative appropriation
MS. RODELL noted that the principal account cannot shrink
through changes in market value.
1:10:42 PM
MS. RODELL continued to slide 3, "Principal Contributions,"
which read as follows [original punctuation provided]:
$17.8 Billion Royalty Deposits - AS 37.13.010(a)(1)
and (a)(2)
The constitutionally minimum required 25% of royalty
proceeds, and the statutorily mandated deposits of 50%
for leases after 1979.
$18.0 Billion Inflation Proofing - AS 37.13.145(c)
The inflation proofing calculation is based on
deposits into the Principal of the Fund and the
inflation rate as calculated per statute.
$11.0 Billion Special Appropriations AS
37.13.010(a)(3)
Legislative Deposits from both the General Fund $2.7 B
and the ERA $8.3 B.
MS. RODELL stated that the principal has grown as a result of
the appropriation activity that has taken place around it. She
further noted that $4 billion of the $8.3 billion in special
appropriations was the appropriation that came through in fiscal
year 2020 (FY 20).
1:12:28 PM
MS. RODELL proceeded to slide 4, "ERA: Statutory Net Income,"
which read as follows [original punctuation provided]:
AS 37.13.140 (a) directs the net investment earnings
of the Fund to the ERA and excludes unrealized gains
and losses.
Statutory Net Income is the direct result of
investment activity, and includes:
•Monthly cash inflows from stock dividends, bond
interest, and real estate
•Realized Capital Gains/Losses: All the net income
(i.e., realized gains minus realized losses) generated
by the sale of investments.
FY21 as of April 30, 2021
•Statutory Net Income = $5,995,200,000
MS. RODELL pointed out that the graph on slide 4 demonstrates
how statutory net income (SNI), which is how the earnings
reserve account (ERA) grows, moves differently than total
return. She explained that the total return reflects the
volatility in the market, as indicated by the yellow line, while
the SNI steadily increases after a withdrawal, as indicated by
the black line. She noted that as of April 30, 2021, the SNI is
almost on par with 2018 at nearly $6 billion. In 2018, the
increased SNI was due to a specific asset sale that generated a
large gain whereas the current SNI in FY 21 is due to a
rebalancing effort to manage risks appropriately.
1:13:55 PM
MS. RODELL advanced to slide 5, "Investment Management," which
read as follows [original punctuation provided]:
Constitutional and Statutory Mandates
•Principal provides permanent savings
•ERA holds the investment income for appropriation
•Prudent rules govern Saving, Spending, and Growth
APFC Stewardship
•Quasi-independent
•Long-term horizon Prudent Diversification
•Accountability
•Resources
MS. RODELL pointed out that the permanent fund is managed as if
it were one total fund; therefore, the investment management
strategy does not differ for the ERA versus the principal. She
related that investment allocation is looked at from a 10-plus-
year view rather than day-to-day or month-to-month. She added
that this strategy requires the Alaska Permanent Fund
Corporation (APFC) to be accountable and ensures that the
necessary resources are available to work effectively.
1:15:30 PM
MS. RODELL progressed to slide 6, "Asset Allocation." She
explained that in 1980, the [investments were comprised] almost
entirely of bonds. In 1983, APFC was allowed to invest in U.S.
real estate and stocks, which over time, expanded into
international markets. In 2005, statutes were passed that
allowed APFC to take more risks and to invest in private equity,
absolute return, and private income. She reported that today,
the FY 21 target allocation is 39 percent stocks and [21]
percent bonds. She added that the entirety of assets managed by
APFC, including the Alaska Mental Health Trust, ERA, and the
principal, are all invested in the asset allocation with each
pool of money owning a pro rata share of every investment. She
reported that reconciliation takes three to four weeks, as there
are over 700 accounts with multiple investments.
1:17:34 PM
MS. RODELL turned to slide 7, "Resolutions 03-05, 04-09," which
read as follows [original punctuation provided]
POMV
•Supporting a constitutional amendment to limit the
annual Fund payout to not more than a 5% POMV averaged
over a period of 5 years.
•Implementation of a constitutional POMV spending
limit for the Fund, has the accompanying benefit of
assuring permanent inflation proofing of the Fund.
MS. RODELL explained that the constitutional amendment under
current consideration [CSHJR 7(STA)] would transition the fund
from a two-account structure to a single account structure,
which has been a priority of the trustees since 2000. She
reminded the committee that the accounting rules changed in the
late 1990s, at which time, APFC realized the importance of
holding on to its gains; therefore, appropriations for inflation
would no longer be needed and spending would be limited
naturally as result of the percent of market value (POMV)
structure.
1:18:57 PM
MS. RODELL detailed the fund's current structure on slide 8.
She proceeded slide 9, which illustrated the proposed endowment
structure. She explained that under the endowment structure,
all of the funds that come in would be constitutionally
protected and remain that way while continuing to be invested
into income-producing investments. Furthermore, gains and
losses would stay with the fund while POMV and corporate
expenses would move out. She emphasized that the proposed
endowment structure is a simpler and more straightforward way to
manage the fund.
1:20:36 PM
REPRESENTATIVE KREISS-TOMKINS pointed out that Ms. Rodell had
mentioned the Alaska Mental Health Trust's pro rata ownership.
Further, he referenced an amendment to the operating budget that
pertained to other state assets that could be managed for return
by APFC. He questioned the pros and cons of placing additional
state accounts or public assets under management of the Alaska
Mental Health Trust under APFC management.
MS. RODELL said APFC is prepared to manage additional state
assets should it be necessary. She explained that depending on
what the assets are, they could be placed in the asset
allocation unless the money that comes in has different usage
requirements, such as statutory duration limits. She said APFC
could make it work, but it requires resources.
1:24:41 PM
REPRESENTATIVE EASTMAN inquired about the costs that are
withdrawn from the fund by APFC, as well as the POMV
withdrawals, and their associated timelines.
MS. RODELL responded that the APFC operation and investment
management moneys are taken in accordance with the adopted
budget documents, which serve as the cap/limitation. She added
that APFC withdraws them throughout the fiscal year as needed;
for example, for APFC's personal services, the required
distribution is taken out of the ERA every couple of weeks for
the purpose of payroll. Regarding the POMV withdrawal, she said
that those moneys are taken out in accordance with a memorandum
of understanding by the Treasury Division under the Department
of Revenue (DOR). She reported that each year since the POMV
statutes were adopted in 2018, APFC has worked with the Treasury
Division to set up the withdrawals based on the division's
expected cash needs. She noted that the division has the
ability to change those withdrawals.
1:27:20 PM
CHAIR CLAMAN asked if unrealized gains are included in the
calculation of the fund and the ERA's total value.
MS. RODELL answered yes. She noted that the next slide [slide
10] shows that figure. She added that calculation is based on
net market value, which includes unrealized gains/losses.
CHAIR CLAMAN asked whether the change to the definition of
earnings that occurred in the late 1990s impacted how the fund
looked at unrealized and realized gains for purposes of earnings
versus the principal.
MS. RODELL explained that it required the legislature to come up
with the definition of SNI to better understand what was
considered income and what would be moved into the ERA. She
said there were times when all of the gains/losses were
recognized in the ERA and a time when they were recognized in
the principal; however, for the past few years, they have been
shared pro rata between the two accounts until they're realized
due to the different interpretations that have been received
from the Department of Law (DOL). She relayed that investing
grew more sophisticated compared to what was contemplated when
the original constitutional amendment was passed, which became
part of the challenge. She emphasized the importance of the
POMV structure to the permanent fund because it recognizes all
the different asset classes that are currently invested.
CHAIR CLAMAN questioned whether the income account was
originally named the ERA or if it was given that name at a later
point in time.
MS. RODELL said as long as she has been aware of it, the account
has been named the ERA.
1:31:03 PM
CHAIR CLAMAN asked whether the deposit of $18 billion for
inflation proofing pursuant to AS 37.13.145(c) has been made
every year.
MS. RODELL noted that inflation was zero in 2010, so there was
no inflation proofing deposit. Additionally, there were no
inflation proofing appropriations in 2017, 2018, and 2019. In
FY 20, she said, the $4 billion that was moved from the ERA to
the principal had legislative intent language to forward fund
inflation proofing. Furthermore, she pointed out that there is
no inflation proofing in the FY 21 budget or either version of
the operating budget for FY 22, which is currently in conference
committee.
CHAIR CLAMAN sought to clarify that in 2017, 2018, and 2019,
there was inflation; however, the legislature did not make the
deposit pursuant to AS 37.13.145(c).
MS. RODELL confirmed [that the legislature did not make that
deposit in 2017, 2018, and 2019.]
CHAIR CLAMAN asked for verification that the ERA, because it
needs to be available for appropriation, consists of more liquid
appropriations and may not realize the same gains as the
principal.
MS. RODELL said that is incorrect. She explained that every
single asset is owned on a proportional pro rata share by the
principal, the ERA, and the Alaska Mental Health Trust. She
said the ERA has a long-time horizon on its asset allocation
based on statutory directive.
CHAIR CLAMAN questioned whether sales are made consistent with
the asset allocation or if the liquid assets are sold when cash
is needed for state operations.
MS. RODELL stated that the POMV structure allows for the surety
of knowing what the cash calls by the state are going to be, so
APFC can plan ahead. She remarked:
If we know, for example, we are going to make a $480
million payment at the end of June, as we're receiving
cash this month, we'll hold on to it rather than
investing it in the asset allocation in order to make
that payment, so that we don't have to sell something
at a gain or a loss in order to make those payments.
MS. RODELL noted that 60 percent of the fund is invested in
highly liquid stocks and bonds that could be liquidated within
three days.
1:35:06 PM
CHAIR CLAMAN referred to slide 6 and asked how [APFC] has the
authority to change the asset allocation and what legislative
action allowed that.
MS. RODELL explained that in APFC's enabling statutes, the
legislature included a specific list of allowable investments.
She expounded that in 1980, the statutes specified that APFC was
only allowed to invest the fund in bonds. The list was amended
over the years to include investments in U.S. stocks and U.S.
real estate, for example. In 2005, she said, the statute was
completely revised, and the allowable list of investments was
repealed and replaced by the prudent investor rule, meaning that
APFC could invest in anything a prude investor of similar size
and scope would invest in. Subsequently, that revision required
APFC to adopt regulations outlining the types of allowable
investments. She stated that now, APFC has regulations
outlining and defining their investments; additionally, the
corporation continues to follow the prudent investor rule, which
led to the change in asset classes that appears in FY 21.
CHAIR CLAMAN concluded that in 1980, [investments were
comprised] entirely of bonds, which changed over the years.
Going forward, the legislature would periodically change the
statute giving APFC the authority to invest in other types of
investments. Finally, in 2005, APFC changed to the prudent
investor rule, which gave APFC's board the authority to
establish regulations that established how investments were
made.
MS. RODELL confirmed.
CHAIR CLAMAN surmised that APFC has not been back to the
legislature to change that authority since 2005.
MS. RODELL said that's correct. She said APFC does not require
additional authority.
1:37:41 PM
MS. RODELL resumed the presentation on slide 10, which read as
follows [original punctuation provided]:
Percent of Market Value -AS 37.13.140 (b)
•Based on market value, rather than realized income
•Subject to annual appropriation
•Predictable
•average market value of the Fund for the first
five of the preceding six fiscal years
5.25% -July 1, 2018, FY19; Effective Rate
•FY19 POMV $2.72 billion; 4.13%
•FY20 POMV $2.93 billion; 4.52%
•FY21 POMV $3.09 billion; ~4.68%
5.0% -July 1, 2021, FY22; Effective Rate
•FY22 POMV$3.07 billion; ~4.55%
•FY23 POMV~$3.21billion; ~4.66%
•FY24 POMV~$3.29billion; ~4.68%
MS. RODELL explained that as the fund grows or has flat growth,
such as in FY 21 to FY 22, the POMV structure prevents "wild
swings" in revenue for the state.
1:38:59 PM
MS. RODELL continued to slide 11, which highlighted the fund's
growth from FY 16 to FY 21. She pointed out that the principal
is unable to grow without support of the special appropriations.
She added that once unrealized gains in the principal become
realized, they move into the ERA. She advanced to slide 13,
"Callan's Capital Market Projections," noting that Callan is the
board's general consultant. She related that Callan's 10-year
projection indicates that the total fund is expected to generate
6.75 percent, which will decrease to 6.2 percent. She stated
that the forecast suggests that the fund will enter a 10-year
period of much slower growth, adding that the bulk of the
earnings will come from private equity and public equity. She
said in order to run a diversified portfolio with a balance of
risks, there needs to be (indisc.) absolute returns and fixed
income. She added that at 2.25 percent, bonds are not going to
generate much income in return over the next 10 years.
1:42:19 PM
MS. RODELL proceeded to detail the fund's performance as of
April 30, 2021, on slide 14. She informed the committee that to
date, the total fund is at 25.02 percent, which is a big
difference in performance from 2 percent in FY 20. She stated
that for the most part, the fund is meeting all its performance
benchmarks. She highlighted that the board's long-term
objective is to generate 5 percent real return plus inflation,
which at 2.05 percent versus 5.65 percent, was not met last
year.
1:43:41 PM
REPRESENTATIVE SNYDER asked how the fund's performance compares
to similar funds in other locations. She questioned whether
there are any lessons the state could learn from similar funds
and how Alaska's fund performance benchmarks an objective
matchup with other funds across the nation.
MS. RODELL offered to follow up with the requested information.
She noted that Callan conducts reviews of funds across the
country such as endowments, foundations, and pension funds.
1:45:00 PM
REPRESENTATIVE EASTMAN inquired about the 5 percent POMV. He
recalled that he had heard the perception that 5 percent is too
high, and that 4.25 percent would be more sustainable. He
acknowledged that the state could go forward with the 5 percent
POMV and discover that it is not sustainable. He noted that Ms.
Rodell had provided the committee a letter surrounding the
"loyalties issue" and the legislature not meeting the statutory
obligations regarding loyalty and asked whether she has another
letter surrounding the inflation proofing to which the 5 percent
might be eroding the corpus.
MS. RODELL responded that the concepts of having a corpus and
the need for inflation-proofing would have to be eliminated in
order to implement a constitutional amendment. She noted that
these concepts are in place due to the two-account structure and
a requirement for an appropriation to put money back into the
principal. She explained that the only way the principal can
grow today is through the action of the legislature. Under the
endowment structure contemplated by HJR 7, she said that there
would be no need for these concepts. She identified that the
importance of the endowment structure in HJR 7 is that it
eliminates the need for these concepts and there will be no need
for legislative action to grow the fund. She emphasized that,
regarding inflation-proofing, it's important to respect the
legislative intent language. She acknowledged the concerns that
"inflation will get away from us" [if inflation-proofing is not
present].
REPRESENTATIVE EASTMAN asked whether Ms. Rodell has a number
readily available as far as what the legislature could do under
the current system to (indisc.) inflation-proofing obligations
already in place.
MS. RODELL responded that she doesn't have the number in front
of her at the moment but that she will follow up and provide
that information to the committee.
REPRESENTATIVE EASTMAN asked Ms. Rodell whether it can be
expected that, if the 5 percent figure passes and is revealed to
be too high, the corporations will argue for a lower threshold.
He asked what she thinks would occur in this situation.
MS. RODELL explained that the 5 percent is supported by the data
on slide 14 [entitled, "Performance"] and the projections
depicted therein show that it is a realistic number. The idea
is that the growth of the fund smooths out over time and creates
more stability for the fund. She noted that APFC has supported
the 5 percent number for over 20 years.
REPRESENTATIVE EASTMAN asked Ms. Rodell whether the asset
allocation currently includes future contracts and derivatives,
and if so, how the assets would be classified.
MS. RODELL responded that derivates and future contracts are
included and usually happen within the same portfolio. She
offered the example of currency exposure, which would be done
through futures contracts. She noted that all of the exposures
listed can be found in APFC's annual report.
1:52:31 PM
MS. RODELL resumed the presentation on slide 16, "Evolving Role
of the Fund," which read as follows [original punctuation
provided]:
Successful SWFs operate within a rules-based system
that allows them to perform a combination of saving,
stabilization, and income-generation functions.
In Alaska, the latter function has come into sharper
focus, as the Fund income supports the State budget in
an era of lower oil revenues.
This paper proposes a number of reforms that will
strengthen the stability and sustainability of
Alaska's Permanent fund:
LESSON # 1: MISSION CLARITY
LESSON #2: THE IMPORTANCE OF RULES
LESSON #3: SUCCESSFUL ENFORCEMENT OF SAVING RULES
LESSON #4: DESIGNING A POMV SPENDING RULE
LESSON #5: REFORMING THE ERA
1:53:14 PM
MS. RODELL advanced to slide 17, "Revenue Generation," and
acknowledged that this type of revenue generation [referenced on
the slide] is a different concept "culturally" for everyone and
it is not common to think of the permanent fund as the primary
source of revenue for the state. The slide read as follows
[original punctuation provided]:
Now, more than ever, the State is dependent upon
APFC's effective management and investment of the
Alaska permanent fund, one of Alaska's primary sources
of renewable revenue.
The POMV draw from the Earnings Reserve Account now
supports ~70% of Alaska's undesignated general fund
budget.
APFC's stewardship fulfills dual roles
Protecting the Principal of the Fund for the benefit
of current and future generations of Alaskans.
Providing a predictable revenue stream to help balance
the State's budget.
1:54:32 PM
REPRESENTATIVE KREISS-TOMKINS asked Ms. Rodell if she could
restate the historic figure of the real return of the permanent
fund [seen on slide 14, "Performance"], and how that number
compares to the projections done by Callan.
MS. RODELL responded that the Callan's projections are looking
at a 4.2 percent real return for the next 10 years. She stated
that the intention of the APFC Board of Trustees is to be able
to meet Callan's forecasts. She acknowledged that it is going
to be a challenge to meet the 5 percent real return in a low
growth and slow return environment, and there is concern about
that, but APFC is not recommending any changes to the 5 percent
number.
1:58:08 PM
REPRESENTATIVE VANCE asked Ms. Rodell what trustees would
consider when evaluating whether a one-time unstructured draw
can be taken without undermining the health of the growth of the
fund.
MS. RODELL answered that the trustees are adamant in the
recommendation that there be no unstructured draws on the fund
at all, no matter the size or the reason. She said that part of
the concern is that every year, if there are unstructured draws,
the POMV would lose all of its effectiveness.
1:59:16 PM
REPRESENTATIVE SNYDER, regarding the proposed $3 billion bridge
draw that's referred to in HJR 7, asked Ms. Rodell to specify
the particular losses that would be incurred with a draw of that
size.
MS. RODELL responded that it is important to recognize that the
role of the APFC is to manage the assets it has. She noted that
the withdrawal would have a cost impact on the fund. She shared
that the Legislative Finance Division has run various scenarios
on potential losses to give a sense of their magnitude. These
are the decisions that are beyond APFC, she said.
CHAIR CLAMAN announced that the committee would proceed to a
presentation on power cost equalization (PCE) from the Alaska
Energy Authority (AEA).
2:01:18 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority,
provided a PowerPoint presentation, titled "Power Cost
Equalization" [hard copy included in the committee packet]. He
began on slide 2, "Who We Are," which read as follows [original
punctuation provided]:
Created in 1976 by the Alaska Legislature, the Alaska
Energy Authority (AEA) is a public corporation of the
State of Alaska governed by a board of directors with
the mission to "reduce the cost of energy in Alaska."
AEA is the state's energy office and lead agency for
statewide energy policy and program development.
MR. THAYER advanced to slide 3, "Power Cost Equalization," which
read as follows [original punctuation provided]:
The PCE Program was established in 1985 as one of the
components of a statewide energy plan to help
"equalize" the high cost of electricity in rural
communities with the lower costs in more urban areas.
MR. THAYER advanced to slide 4, "What is PCE?" which read as
follows [original punctuation provided]:
• PCE helps ~82,000 Alaskans in ~200 rural
communities with their high energy costs.
• The program seeks to reduce the high costs of
electricity paid by rural consumers to a level
comparable to an average of rates paid in
Anchorage, Fairbanks, and Juneau.
• PCE ensures the financial viability of rural
communities.
• Reliable lower-cost energy enhances the quality
of life, the standard of living, and the economic
strength of the communities.
2:03:29 PM
MR. THAYER proceeded to slide 5, "PCE Eligible-Communities,"
which depicted a map of Alaska showing eligible PCE communities,
and read as follows [original punctuation provided]:
Residential and community facility customers in
approximately 200 communities are eligible for PCE
Credits
2:03:57 PM
MR. THAYER continued to slide 6, "PCE Program in Fiscal Year
2020," which read as follows [original punctuation provided]:
81,700
Alaskans benefited from PCE Credits
192
Communities were eligible for PCE Credits
$29.6
In Fiscal Year 2020, $29.6 million was disbursed
2:04:27 PM
MR. THAYER advanced to slide 7, "PCE Endowment Fund," which read
as follows [original punctuation provided]:
• PCE disbursements are funded from the PCE
Endowment Fund.
• Created and capitalized in Fiscal Year 2001, the
• PCE Endowment Fund is managed by the Department
of Revenue.
• Alaska Statute 42.45.085 provides that five
percent of the PCE Endowment Fund three-year
average market value may be appropriated to the
program.
MR. THAYER moved to slide 8, "PCE Endowment History
(Thousands)," which included a table that tracked the history of
PCE from 2016 through 2020. He noted that the fund is currently
close to $1.1 billion and has remained fairly consistent during
the last five years.
2:05:59 PM
MR. THAYER stated that it is important to note that when one
looks at the PCE endowment and sees $1.1 billion [PCE fund
balance for 2020], it is not evident that there has been a large
amount of money invested by the state into urban infrastructure,
which helps to lower the rates for everyone on the Railbelt
[region in Alaska]. He added that AEA owns and operates the
large "hydro" project in Alaska, which provides 10 percent of
the Railbelt energy needs. He added that it was the result of
an investment from the state of $300 million. He noted this
investment saves the Fairbanks consumers about $40 million
annually on energy costs. He reiterated that the $1.1 billion
figure is misleading due to the multitude of investments
included in that number, which also include tax credits.
2:07:39 PM
CHAIR CLAMAN asked Mr. Thayer if he could speak about the
governor's proposal to put these PCE funds into the permanent
fund and manage it from the permanent fund.
MR. THAYER responded that this is something a subsequent
testifier plans to address, but that inserting the PCE endowment
into the corpus of the permanent fund is something that the
Board of Directors of AEA has unanimously endorsed. He noted
that when legislators decided not to reverse the sweep around
three years ago and the PCE endowment got swept into the
constitutional budget reserve, it caused concern in rural Alaska
regarding energy costs. By putting the endowment into a "safe
place," he shared his understanding that those concerns would be
alleviated.
CHAIR CLAMAN invited questions from the committee.
2:09:54 PM
REPRESENTATIVE DRUMMOND shared her understanding that nearly
82,000 Alaskans benefit from PCE credits through residential
energy costs. She asked about the cost of energy for
institutions, such as schools, and whether these institutions
benefit from a reduction in energy costs.
MR. THAYER asked for clarification on Representative Drummond's
question.
CHAIR CLAMAN restated the question and asked whether community
groups or organizations, such as schools, benefit from PCE
credits.
MR. THAYER stated that strictly residential customers benefit
from the PCE credits.
REPRESENTATIVE DRUMMOND pointed out that energy costs are so
high in schools that staff members are being laid off. She
asked Mr. Thayer what it would take to extend energy benefits to
organizations, such as schools, that must function in the same
high-cost environments as the residential energy consumers that
benefit from the PCE credits.
MR. THAYER replied that it would take a statutory change and
would possibly "double if not triple" the costs of the PCE
program in Alaska.
2:13:04 PM
REPRESENTATIVE EASTMAN asked whether there is an available list
of communities that are currently benefitting from the PCE
credits, and what percentage of people residing in those
communities are receiving the subsidies.
MR. THAYER answered that the list of currently benefiting
communities is public information, along with other relevant
statistics about these communities, and he would be happy to
provide this information to Representative Eastman's office.
2:13:58 PM
REPRESENTATIVE SNYDER explained that she reviewed AEA's PCE
program guide, updated in 2019, and pointed out that it states
that 7 percent of the 3-year monthly average market value could
be appropriated. She asked Mr. Thayer whether this has been
updated in statute, as that that number is 5 percent now.
MR. THAYER said the information that he has also identifies the
5 percent standard.
REPRESENTATIVE SNYDER referred to slide 8 of Mr. Thayer's
presentation [titled, "PCE Endowment History (Thousands)"] and
asked if he could speak about 2019 and 2020 "transfers and
appropriations to other funds."
MR. THAYER replied that in FY 19, under statute, the first
(indisc.) is May 1, and then up to $30 million in community
assistance is provided. He added that if there is additional
revenue generated from that, it would be (indisc.), or it would
go into the powerhouse upgrades. In this example, two years
later, $30 million was available. In 2020, there was $14
million allocated by the legislature for non-rural investments,
he explained, with around $7 million to $8 million of that
investment going to the Department of Corrections (DOC). He
offered to provide a breakdown of the FY20 statistics to the
committee.
2:17:23 PM
REPRESENTATIVE VANCE asked for a description of AEA's past and
future plans for energy solutions, specifically the original
purpose of the endowment, and if there are any plans for energy
solutions beyond subsidies in the future.
MR. THAYER replied that the endowment was originally established
to help lower the cost of power in rural Alaska through the PCE
program. The AEA as an entity intends to continue to look for
ways to lower the cost of power in rural Alaska with renewable
energy. He noted that these rural communities are often far
apart, not connected by a grid, and lack the ability to receive
energy via hydro power. For these reasons, the "backbone" of
rural Alaska continues to be diesel, which requires powerhouses
in order to have the most efficient diesel program as possible.
He reiterated that the PCE program was established to help lower
those costs, and the endowment intends to help rural Alaska to
offset the costs of higher energy.
CHAIR CLAMAN noted that the committee would now hear invited
testimony from Mike Barnhill of the Department of Revenue.
2:20:47 PM
MIKE BARNHILL, Deputy Commissioner, Department of Revenue (DOR),
noted that for the purpose of his testimony, he would be
referring to CSSJR 6(JUD), which proposed that the balance of
the PCE endowment fund on June 30, 2023, would be transferred to
the principal of the permanent fund and would be co-mingled with
the assets of the permanent fund. It also proposes a
constitutional dedication of revenue from (indisc.) to the
purposes of power cost equalization in the state. He directed
attention to language on page 2 [lines 7-11] of CSSJR 6(JUD),
which read as follows:
(d) Each year, the legislature shall appropriate a
portion of the amount appropriated under (b) of this
section for power cost equalization. The amount
appropriated shall be the amount necessary to equalize
the cost of power in the State, according to State
law, but may not exceed fifty percent of the amount
appropriated under (b) of this section.
MR. BARNHILL explained that this is a mandatory representation
of PCE, the details of which are intended to be provided by
legislators through statute.
CHAIR CLAMAN invited questions from the committee.
2:23:09 PM
REPRESENTATIVE KURKA shared his understanding that PCE funds are
used for the purpose of infrastructure projects to lower the
cost of energy. He stated that it seems to him that this
proposal would preclude [the energy cost saving measure] from
happening by "locking up" the fund in the constitution. He
whether this is correct.
MR. BARNHILL explained that the details of the implementation
process would be specified by the legislature in statute. He
shared his understanding that (indisc.) wouldn't "offend the
language" in the constitution as proposed.
REPRESENTAIVE KURKA noted Mr. Barnhill's earlier comment that
the PCE fund would be co-mingled with the permanent fund. He
asked what the long-term consequences of that might be in terms
of contributions to future dividends, and what would be
preventing the endowment from pulling from the (indisc.) fund at
large.
MR. BARNHILL offered clarification that if the PCE endowment
fund balance were to be deposited and co-mingled with the
permanent fund balance, there would no longer be a separate way
to track the balance of each fund; it would simply be the
permanent fund. In exchange, an important change is proposed
for the constitution, and that is (indisc.) dedication. He
noted that currently, the only revenue dedicated that is
proposed in the constitution is 25 percent (indisc.) that is
dedicated to the principal of the permanent fund. He explained
that this would be a new dedication for which the legislature
would specify the details, and the revenue would be dedicated
from the permanent fund for the purpose of power cost
equalization. He reiterated that the two accounts would become
one and would no longer be separately trackable.
REPRESENTATIVE KURKA stated that it seemed to him that would
make the PCE appropriation an unstructured draw. He argued that
[the legislature] does not know what the dollar amount would be
if (indisc.) could grow (indisc.).
MR. BARNHILL said the revenue dedication happens within the
context of the POMV distribution. In other words, he continued,
it is a portion of that, so it is entirely within the structured
draw that is established, and CSSJR 6(JUD) indicates that 5
percent (indisc.) of the permanent fund.
2:27:54 PM
REPRESENTATIVE KURKA pointed out that when one looks at the
Constitution [of the State of Alaska], the rights, benefits, and
privileges are for all Alaskans. He recognized the original
purpose of the PCE endowment in the fund is to bring a balance
towards government investment for infrastructure for rural
communities. He opined that this would be a dramatic change in
the nature of the constitution because [the legislature would
be] enshrining a subsidy program that is selective for certain
regions of the state, for select Alaskans, not for all Alaskans.
He expressed concern about going down the road of segregating
people and treating them differently and having that major
departure from current (indisc.)
MR. BARNHILL replied that the governor has suggested that the
legislature consider the policy, and if the legislature supports
it by a super-majority, it would be placed before the people for
consideration in amending the constitution. Ultimately, he
said, the constitution reflects the will of the people and, if
the people decided to achieve equality or equalization in power
costs throughout the state, that is a fair topic to take up in
the constitution.
2:30:27 PM
REPRESENTATIVE EASTMAN said currently, the PCE is addressed in
statute (indisc.) reference to in the constitution. He asked if
CSSJR 6(JUD) were to pass, which would add this dedicated
appropriation to the constitution, would that create an
entitlement to the constitution.
MR. BARNHILL expressed that his preference is to use the word
dedication, because that is what it creates. He said he would
leave it to others to decide if it also falls under the
characterization of an entitlement. But, he said, as a
constitutional dedication of revenues to a purpose, it has the
force of constitutional law, which presumably could be enforced
by the courts. He noted that the language as drafted, said
"shall appropriate"; therefore, it cannot be circumvented by the
legislature.
REPRESENTATIVE EASTMAN sought to clarify whether the intention
of the governor, through CSSJR 6(JUD), was to create an
expectation of a subsidy. He asked if the legislature were to
maintain or update the statutes, what is to stop a person from
coming in and saying that the expectation is bigger in the
future than [what is] currently under statute. He maintained
that [the current] language in CSSJR 6(JUD) is very broad. He
stated his understanding that the language in CSSJR 6(JUD)
indicates that the law is going to explain how the cost of
energy is balanced throughout the state. He noted that there
are only 191 communities that are currently in that program;
nonetheless, he said he could see someone going to court because
his/her costs are higher than the community next door, so he/she
might want to be part of the program.
MR. BARNHILL suggested that Representative Eastman was
proceeding into legal areas to which the DOL could speak. He
offered his belief that in this particular case, the court would
draw from the fact that PCE has been in statute for some
decades. He said the court would probably interpret the
constitutional provision from the statutory history to the
extent that it appears the people sought to constitutionalize a
particular program.
REPRESENTATIVE EASTMAN surmised that the governor's intent was
to add what [is currently in statute] into the constitution;
therefore, he stated his belief that the language in [SJR 6]
would not be so broad. He suggested discussing that with DOL.
He questioned what would happen to the community assistance
program, asking if that would go away under this new
constitutional plan.
MR. BARNHILL clarified that the community assistance program is
separate from the constitutional resolution. He explained that
currently, it is funded by PCE. He added that funding the
program in the future would remain a prerogative of the
legislature's appropriation power. It is the administration's
expectation, he answered, that the community assistance program
would continue in its current form and continue to be funded.
2:35:46 PM
REPRESENTATIVE SNYDER asked if the legislature were to do the
POMV draw with a 50/50 split between the dividend and the
government, which would require satisfying the PCE payment,
would that result in a lower amount of money being available for
government services if [the PCE fund and the permanent fund]
were combined as opposed to separate.
MR. BARNHILL replied that the amount that would (indisc.) be for
PCE would essentially be what the legislature decided through
statute and appropriations. He explained that the constitution
requires amounts sufficient to equalize power. He added that
the legislature decides what that amount is, so it could be
greater or less than the amount today. He reiterated that it is
committed to legislative discretion, and the balance of funding
available to provide funding for PCE is the same before and
after. In other words, he stated, there is money in the
permanent fund that distributes POMV that would be added to the
balance of the PCE fund, which is $1 billion. He said it is up
to the legislature to decide whether to do it formulaically,
like it does now. He concluded that it would be up to the
legislature to implement that through statute.
REPRESENTATIVE SNYDER pointed out that now, [the legislature] is
in a situation where it is drawing from the same funds and doing
a 50/50 split; further, it is funding both government and PCE
from that split. She added, "Had the calculations been done to
compare if there is any difference, however small, the
distribution would be, if PCE maintained its own fund.
MR. BARNHILL said if he understood her correctly, in order to do
that, [the legislature] would have to maintain some internal
separate balance for the PCE fund once it's shifted into the
permanent fund, because right now, the PCE endowment fund has a
POMV structure similar to what is being proposed for the
permanent fund in the constitution. He explained that [the
formula] is 5 percent of a three-year market value average of
the fund. In order to maintain that formula, he said, [the
legislature] would have to maintain some internal balance for
the PCE fund once it was deposited into the permanent fund.
Alternatively, he offered, [the legislature] could come up with
a formulaic approach that would divide the POMV distribution
every year, which is intended to equate to what is currently
[being calculated by] the statutory formula. He suggested that
there are mathematical ways of achieving a similar number before
and after the deposit.
2:40:04 PM
CHAIR CLAMAN recalled earlier testimony from Ms. Rodell about
APFC managing the Alaska Mental Health Trust funds and how
essentially, they are mixed, but they are also segregated. He
said APFC knows how much is allocated towards the Alaska Mental
Health Trust. He then asked if [the governor] is proposing a
similar proposal for the PCE. He suggested using similar
structure in which [APFC] manages the money in the same way as
the Alaska Mental Health Trust with certain percentage
allocation of the total value of the permanent fund, which is
managed by the PCE. He added that big dollars are managed by
the fund but still kept separate from both the permanent fund
monies and the Alaska Mental Health Trust monies.
MR. BARNHILL said he has not speculated why the proposal does
not do that. He stated that perhaps, [there are] reasons that
[the legislature] could spend more or less than (indisc.) today.
He relayed that by not continuing the statutory formula in its
current form, it provides greater legislative flexibility with
respect to appropriation for PCE. He noted that the flexibility
is governed by the "shall" language in this measure, which could
result in a greater or smaller amount of money available for
PCE, as long as it complied with the "shall" amount necessary.
CHAIR CLAMAN considered a scenario in which the legislature
wanted to treat the PCE fund like other funds, such as the
Alaska Mental Health Trust funds, and let [APFC] manage those
funds, but also keep them on their own in the same way the
Alaska Mental Health Trust funds are on their own. He
questioned whether [the legislature] would need a constitutional
change to do that by statute today.
MR. BARNHILL confirmed that the legislature could do that by
statute today. He remarked that the benefit of [APFC's] method
is that it's not maintaining separate massive allocations for
the three accounts.
CHAIR CLAMAN interjected, concluding that essentially, the
legislature would be creating a fourth account.
MR. BARNHILL continued by noting that as more accounts are added
to the permanent fund, a potential issue would arise wherein
[the accounts] may need different asset allocations because they
have different risk preferences and different investment
horizons. He posited that if the decision were that the risk
preferences, risk tolerances, and investment horizons amongst
the permanent fund, the Alaska Mental Health Trust, and the PCE
fund are the same, [the legislature] could co-mingle it as it
did today.
2:44:28 PM
RICK HALFORD, former Senate President in the Alaska State
Legislature, informed the committee of his background and
provided a history of the permanent fund and the dividend. He
stated that he came to Alaska in the mid-1960s and graduated
from Alaska Methodist University (AMU) in 1968. Subsequently,
he went into the National Guard and became the owner/operator in
an air-taxi business, as well as a guide. He shared that he was
originally elected to the [Alaska House of Representatives] in
1978 and was the House Majority Leader when the final dividend
passed in 1981. He was elected to the Alaska State Senate in
1982, where he was the Senate Minority Leader for one term, the
Senate Majority Leader for four or five terms, Senate president,
and a Senate Finance Committee Co-Chair.
MR. HALFORD opined that some people who advocate for the history
of the permanent fund think [the legislators who first
implemented the fund] are smarter than [the current
legislators]; however, he claimed that that it is the opposite.
He pointed out that [the current legislature] has forty years of
information and history and the ability to carry the Library of
Congress in [its pocket]. He declared that he is very grateful
that [past legislatures] were able to pass on some of the
largess.
MR. HALFORD said [the permanent fund] is a very important asset.
He recalled that Alaska had a fairly aggressive state income
tax. He said [the state] was behind on a lot of things, but
Alaska was getting the income tax and about one-third of the
value of the oil. Today, he declared, [Alaska] is in a very
different situation.
2:47:05 PM
MR. HALFORD mentioned that former Governor Jay Hammond is given
a lot of credit for [the establishment of] the permanent fund,
adding that he certainly deserves it "in the political push."
Nonetheless, he noted, Elmer Rasmuson was a huge factor in how
it was organized and how it worked. He said Mr. Rasmuson went
around the state trying to get people to decide what it was for
and there was never agreement. It is written in the permanent
fund papers, he cited, that the only agreement was to have a
savings account. He stated that people have added a lot of
intent that really wasn't there.
MR. HALFORD said that initially, people who opposed the creation
of the permanent fund were very quick to say that it was a loan
fund, or they meant it was a subsidy to the government, or a
dividend fund, [amongst other suggestions]. He reiterated that
there was no agreement on what it was for. He then deferred to
Chair Claman for questions.
2:48:42 PM
CHAIR CLAMAN inquired about the history of dividend formula. He
asked Mr. Halford to divulge more about the original dividend
formula and what changes the legislature made, both while the
Zobel lawsuit was pending and before the decision, as well as
what happened after that decision.
MR. HALFORD said the original formula gave [Alaskans] a share
for every year since statehood using a differential residency
formula that was struck down in the Supreme Court. He offered
his belief that in 1981, the legislature passed what Governor
Hammond considered "the backup formula," which was equal
dividends for everyone.
MR. HALFORD said there were parts [of the dividend negotiations]
that were contentious, such as the inclusion of minors, welfare,
hold harmless, and inflation-proofing. He explained that
looking back, the repeal of the state income tax probably
represented a dividend of $100,000 per year to the top one
thousand taxpayers in the state of Alaska. He recalled that the
first dividend was $1,000, which was intended to make up for
three years that [the legislature] was in court. After that,
the dividend went down to $300-$400. Today, that dividend would
be somewhere over $3,000, he suggested, if factored for
inflation. He explained that it wasn't easy to make decisions,
with regard to minors and the hold harmless aspect. He added
that it had to be looked at in the context of everything else
going on. He noted that [the state] was spending huge amounts
of money on housing subsidies that, in some cases, were as much
as $15,000 to $20,000 a year to people that could afford to
build very expensive houses.
2:51:41 PM
CHAIR CLAMAN stated his understanding that after the passage of
the first permanent fund constitutional amendment, there were
some efforts to pass other constitutional amendments in the
early 1980s to provide more structure in the constitution for
the permanent fund. He asked Mr. Halford to discuss those
efforts.
MR. HALFORD said in the late 1980s, there was a serious bump in
the price of oil and the state's income. Jay Hammond was still
alive, he noted, and the Senate put together a package that was
sent to the House. He explained that the package included a
constitutional spending limit update, the creation of the
constitutional budget reserve [CBR], and a permanent fund
allocation amendment, which the Senate called "40/30/30." He
indicated that the plan specified that 40 percent of the income
went to dividends, which matched what the actual amount going to
dividends was at that time. He noted that because the balance
was going up rapidly, it was based on a five-year average.
MR. HALFORD said the package passed the Senate and went to the
House, but the House passed the CBR with a floor amendment that
increased the required two-thirds majority to a three-fourths
majority and did not pass either the spending limit or the
constitutional amendment with regard to the permanent fund. So,
he said, it has been a continuous debate. At that time,
Governor Bill Sheffield had been elected after Governor Hammond.
He recalled that the first place Governor Sheffield wanted to go
for shortages was the permanent fund system; however, because
that was so unpopular, he didn't do it. Mr. Halford then said
that Governor Steve Cowper offered an education endowment to
sideline some of the permanent fund's income. He said that if
that had happened, the permanent fund would be worth about half
of what it is worth today. Governor Hickel, he continued, said
that he would go to the ballot before he did anything, as well
as Governor Tony Knowles.
2:55:00 PM
CHAIR CLAMAN inquired about the "40/30/30" plan.
MR. HALFORD replied that the legislature had maintained the
realized income formula. He said it was 30 percent for
inflation proofing, 30 percent for government appropriations,
and 40 percent for dividends.
2:55:40 PM
CHAIR CLAMAN inquired as to the role of the dividend in the
structure of Alaska's government today.
MR. HALFORD replied it is a huge benefit. He stated that Alaska
has become very fortunate with all the oil value, adding that if
Alaska is an owner-state, the shares of that ownership should be
equal. One of the things that is not pointed out enough, he
argued, is that there is not significant tax money in any of the
permanent fund system; it is ownership money. If Alaska is an
owner-state with owner-individuals, he continued, then the
ownership should be just as important to somebody who holds a
sign standing by Northern Lights Boulevard as somebody else. He
stated that it is not tax money, and it never has been in any
significant amount; furthermore, it is not taking from one
person to give to another person. He explained that it is
sharing the common property resources of an owner-state. He
opined that when dealing with non-renewable resources, it is
important to make a serious effort to look out for not just
oneself, but [future generations].
2:57:16 PM
CHAIR CLAMAN questioned how to balance protecting the principal
of the fund with paying a dividend.
MR. HALFORD opined that eventually, the statutory POMV will
become unconstitutional when the reserve is gone, because one
cannot reduce the value of the principal. He said that is at
stake in this equation. He offered his belief that the solution
must be a constitutional solution, which would bring the people
into a final decision.
MR. HALFORD said the permanent fund must be permanent, which
means whatever percentage or mechanism the legislature uses
should never reduce the real value of the fund. Further, he
stated his belief that it must be connected to the people. He
recalled that when an elementary student used to announce the
[annual] amount of the PFD on television, people did not argue
if it went down because they recognized it was following the
market. He said they felt included in the process. He went on
to state that power, position, age, and longevity all help the
rich get richer and the poor get poorer. He declared that [the
legislature] tried to circumvent that as much as it could with
the PFD, the hold harmless provision, and the minors' provision
- and it worked. He said according to data, the difference
between the rich and the poor in Alaska did not grow as
astronomically as it did in the rest of the country.
CHAIR CLAMAN invited questions from the committee.
3:00:29 PM
REPRESENTATIVE SNYDER pointed out that Mr. Halford had
acknowledged the utility and importance of constitutionalizing
the permanent fund and putting it before the people as a way to
finalize this ongoing conversation. She asked if that would
include specifying within the constitution how it would be
divided between the dividend and government services.
MR. HALFORD noted that the governor proposed the 50/50 [plan]
and the 5 percent [POMV draw limit]. He said the 50/50 plan
sounds good but expressed concern about the 5 percent. He
suggested wording the 50/50 plan as follows: "No more may be
appropriated for government than is appropriated to individuals
through an equal dividend." He said that would give the
legislature a defense against an entitlement argument. He went
on to state that Alaska is "spoiled." He said there has been a
complete generation [that didn't have to pay for government]
because the cost was going somewhere else. Now, he said,
[Alaskans] must recognize that they should have to pay for part
of it; furthermore, they should make certain they are getting a
fair share of resources. He said Alaska will have to look to
its savings. He then argued that everyone has their own budget
priorities and will defend the dividend until they are
personally going to see a cut. He noted that those in high tax
brackets believe that the dividend is their tax money going
somewhere else. Alaska must face all these issues, he said, but
it never will until the PFD and the fund itself are off the
table. He offered his belief that people could go backwards
over time with court participation and destroy the entire
system.
3:04:40 PM
CHAIR CLAMAN said he didn't know about the 40/30/30 plan and
asked if there is merit to including inflation-proofing in the
calculation.
MR. HALFORD offered his belief that [the legislature] should
include inflation-proofing, particularly with a realized income
formula. He suggested that [the legislature] could include a
provision that said, "Every 'X' year, the inflation rate shall
be adjusted to whatever the real inflation rate is." He stated
that the term "permanent," which went before the voters, means
just what it says. He argued that it is a lie to tell people
they have a permanent fund if inflation "eats" it.
CHAIR CLAMAN thanked Mr. Halford for taking the time to testify
before the committee.
3:06:39 PM
CHAIR CLAMAN announced that CSHJR 7(STA) was held over.
3:07:09 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:07 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 7 Additional Document - APFC PowerPoint Presentation 6.4.2021.pdf |
HJUD 6/4/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - APFC POMV Statement 6.4.2021.pdf |
HJUD 6/4/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - AEA PCE PowerPoint Presentation 6.4.2021.pdf |
HJUD 6/4/2021 1:00:00 PM |
HJR 7 |