Legislature(2023 - 2024)GRUENBERG 120
02/13/2023 01:30 PM House JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): the Benefits of Government Appropriation Limits | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 13, 2023
1:31 p.m.
MEMBERS PRESENT
Representative Sarah Vance, Chair
Representative Jamie Allard, Vice Chair
Representative Ben Carpenter
Representative Craig Johnson
Representative David Eastman
Representative Andrew Gray
Representative Cliff Groh
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): THE BENEFITS OF GOVERNMENT APPROPRIATION
LIMITS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
VANCE GINN, PhD, Policy Fellow
Alaska Policy Forum
Round Rock, Texas
POSITION STATEMENT: Provided a PowerPoint presentation and
discussion on the benefits of government appropriation limits.
ACTION NARRATIVE
1:31:11 PM
CHAIR SARAH VANCE called the House Judiciary Standing Committee
meeting to order at 1:31 p.m. Representatives C. Johnson,
Eastman, Gray, Groh, Allard, and Vance were present at the call
to order. Representative Carpenter arrived as the meeting was
in progress.
^PRESENTATION(S): The Benefits of Government Appropriation
Limits
PRESENTATION(S): The Benefits of Government Appropriation
Limits
1:31:40 PM
CHAIR VANCE announced that the only order of business would be a
presentation on the benefits of government appropriation limits.
1:32:25 PM
VANCE GINN, PhD, Policy Fellow, Alaska Policy Forum, led a
discussion concerning the PowerPoint Presentation, titled "Tax
and Expenditure Limits: A 50-State Comparison" [hard copy
included in the committee packet]. He introduced himself and
provided background on his professional career. He stated that
he has been working with the Alaska Policy Forum for three
years.
DR. GINN expressed the importance of tax and expenditure
spending limits (TELs) for governments. He expressed the
opinion that the "true burden of government is how much it
spends;" however, he stated that this is also the constitutional
role of governments. He continued that the government's role is
to create fiscal stability and solvency, while providing for a
thriving economy. He further discussed the importance of
considering government spending in a thriving economy.
DR. GINN, referencing Alaska's budget, observed that over the
past 20 years state spending has been up by 113 percent,
population has grown by about 10.8 percent, and inflation has
risen 55 percent. He stated that these are the factors to
consider regarding TEL. Concerning the state's spending limit,
he expressed the opinion that the most important aspect should
be to ensure economic growth, in conjunction with job creation
and domestic migration.
DR. GINN addressed figure 5 on slide 7 and stated that it shows
a comparison of states with TEL and those without TEL. He
pointed the measures used, which includes state gross domestic
product (GDP) growth, personal income growth, and population
growth. He pointed out that the chart shows that 30 out of the
50 states with TEL have higher measures, suggesting that
limiting government spending would create more economic
prosperity overall. He pointed out that Alaska's TEL was put in
place in 1982, and he explained why this is ineffective now. He
noted that the solution in the state would involve addressing
Alaska's GDP, pointing out how the state's GDP, or real private
economy, would be determined. He explained that this would
include looking at the state's historical GDP, the state's
average GDP over the last five years, and the priorities for the
state. He discussed the population growth measure, in relation
to the example of the state of Colorado, which includes TEL in
the state's bill of rights.
1:42:48 PM
The committee took an at-ease from 1:42 p.m. to 1:43 p.m.
1:43:17 PM
DR. GINN, in response to Chair Vance, confirmed that he was on
slide 7 and continued discussing the measures used on figure 5.
He explained the importance of having a broader base for
spending limits; otherwise, TEL would be weakened by the funds
outside of its range. He reiterated the example of Colorado's
system, as funds excluded from TEL has allowed the government's
spending to grow too fast. He expressed the opinion that the
ideal situation would be to use all funds that are generated in
the state, as this would make TEL as broad as possible.
1:46:16 PM
CHAIR VANCE requested that Dr. Ginn expand on having TEL as a
provision in a state constitution, as this has been a
consideration in the committee.
DR. GINN stated that having a provision in a state constitution
would entail a two-thirds vote by the people, and he suggested
that having this would put a barrier in place for governments to
grow faster than the spending limit, as opposed to a statutory
spending limit. He added that having TEL in the constitution
creates a stricter spending limit that would be less likely to
change over time. He responded that in regard to benefiting the
state's residents, having TEL in the constitution would add
stability in government growth, giving residents a "peace of
mind" concerning government spending.
1:48:51 PM
DR. GINN, in response to a question from Representative Gray
concerning the average tax burden for an Alaskan resident,
stated that the information was not "in front" of him.
REPRESENTATIVE GRAY, in reference to the governor's 2024
proposed budget, expressed the understanding that the budget
would not fall under the spending cap. He questioned what the
governor should cut from the budget so that it would fall
underneath the spending cap.
CHAIR VANCE rerouted the question, explaining that Dr. Ginn is
not in the meeting to report on policy.
REPRESENTATIVE GRAY pointed out that $2.4 billion has been
included in the budget, and this has not been included in the
spending cap. He questioned whether this should be included
under the spending cap.
DR. GINN expressed the opinion that as much as possible should
be included under a spending cap, as these would be the dollars
flowing out.
CHAIR VANCE clarified that the presentation's purpose is not to
address specific policy.
1:51:07 PM
DR. GINN, in response to Representative Eastman, acknowledged
that there is not a clear definition of "[government] spending."
He expressed the understanding that the definition concerns the
dollars flowing out of government and what is being
appropriated; however, questions remain whether dividends or tax
relief, for example, would be considered government spending.
He explained this further, allowing that the definition could be
subjective; however, he expressed the understanding that
anything the government is spending money on would be
"government spending."
1:53:18 PM
REPRESENTATIVE GROH questioned whether Dr. Ginn was aware that
enforcing TEL in Alaska could make local taxes go up. He stated
that this is because the government in Alaska spends more on
education than other states.
CHAIR VANCE reiterated that the presentation does not concern
the line items in the state's budget, rather the broader
benefits of spending caps on states.
REPRESENTATIVE GROH argued that it would be useful to note the
differences in Alaska. He questioned whether Dr. Ginn would be
willing to work with the Institute of Social and Economic
Research (ISER), University of Alaska Anchorage.
DR. GINN expressed interest in understanding how limiting TEL
along with increasing more resources in the private sector would
effect economic growth.
CHAIR VANCE expressed the understanding that a constitutional
limit would be a framework, while a statute would create a more
detailed limit. She questioned a general guideline concerning
having an appropriation limit in the constitution.
DR. GINN recommended that the state provide as much of a base in
the constitution as possible; however, each state is different,
and he advised that this needs to be considered and best
practices should be used.
1:57:49 PM
DR. GINN, in response to Representative Allard, stated that a
constitutional cap is better than a statutory cap because it
would allow for clarity and a higher hurdle for [legislative
changes]; thus, creating security for the residents, while
adding more stability and consistency to the economy.
DR. GINN, in response to Representative Gray, expressed the
opinion that government spending would not necessarily hurt the
private sector, but resources would have to come out of the
private sector to fund government, so there are tradeoffs. In
response to a follow-up question concerning Alaska's economy not
being based on taxpayers, but rather resources, he stated that
government spending overall comes from taxes. He noted that
this could be taxes on resources. He continued that government
spending is not "free," and every dollar is coming out of the
private sector. He reiterated that there would be tradeoffs, no
matter the state, and he advised that spending needs to remain
under control, while providing more economic growth. He pointed
out that it is concerning for Alaska how much contraction has
happened in its economy.
2:02:22 PM
DR. GINN, in response to Representative Eastman, said he had not
considered whether states with counties are different than
states without counties, and how this would make a difference in
the state's economy.
REPRESENTATIVE GROH questioned the impacts of heavy snow on
educational funding. He asked whether a poorly designed TEL
could lead to worse roads, worse schools, and worse public
spending.
DR. GINN responded that he has not worked on singling out
factors specifically. He stated that the Alaska Policy Forum
has recommended government spending stay under control as far as
growth is concerned. He discussed the variabilities in the
specifics of the budget, explaining that this is why the forum
takes a "hands off approach." He stated that the "top line
number" is more important than the specifics of education or
roads, for example.
DR. GINN, in response to Representative Allard, stated that he
had not considered borough and property taxes in his study;
however, he suggested that this would need to be investigated.
DR. GINN, in response to Chair Vance, noted that there is
important information in the slides; however, he expressed the
opinion that the committee discussion and questions are just as
important. He continued by discussing the importance of federal
funds. He stated that TEL would focus on a state's general
revenue, but he noted that there would be a cost to receiving
federal funds. He explained that federal funds are not
important for TEL, but these funds are important in the overall
budgeting for the state.
DR. GINN stated that this is the third iteration of the
analysis, and he suggested that the measures of population
growth, the state's GDP, the private sector's GDP, and the real
inflation amount should all be considered. He further discussed
the consideration of these measures.
CHAIR VANCE thanked Dr. Ginn and asked him to expound on the
variability of federal funding.
DR. GINN responded that no states have included federal funds in
their TEL as of yet. He pointed out that since 2020 more
federal funds have been going out to the states; however, these
funds are a one-time source and should be kept separate. He
provided an example of how Texas has avoided a "fiscal cliff"
with federal pandemic relief funding. He highlighted concerns
about federal funding becoming too much of an overall part in
states' budgets. He advised that the state keep track of where
the federal funds are flowing, and which funds are one-time
only. He expressed the opinion that federal funds need to be
reined in, or the federal government would have budget problems.
DR. GINN, in response to a follow-up question on the capital
budget, reiterated that the funds going out in the economy need
to be tracked. He argued that an effective spending cap would
allow for greater transparency and accountability of this
funding. With TEL, he suggested starting over with a look at
zero-based spending to help determine where the funding would be
flowing. He gave examples of this, highlighting the importance
of micro-level restraints in order to get "the best bang for the
buck" for where the dollars are going. He suggested that, for
example, this would create more jobs and have long term effects.
In response to a follow-up question, he expressed the
understanding that states with constitutional appropriation
limits have stronger economies.
CHAIR VANCE noted that the cap of Alaska's constitutional limit
is high, and the state has not come close to it. She inquired
about the effective key markers of constitutional TELs in other
states.
DR. GINN reiterated that TEL should have a broad base for the
spending limit, a restrictive or effective growth rate, and a
supermajority vote to change it.
2:21:47 PM
REPRESENTATIVE GROH asked whether an improperly designed TEL
could shrink the economy and lead to outmigration in the state.
He clarified that he is asking whether too much of a limit on
government spending could contract the economy.
DR. GINN responded that given the data this has not been the
case. Referencing figure 5 from slide 7, he pointed out that
within the 10 years shown, the only outmigration occurred in
states without TELs. He explained that when there is
incentivized growth in the private sector, there would be an in
migration to these areas.
REPRESENTATIVE GROH suggested that an improperly designed
spending limit would create low quality roads and a poor
education system, which would encourage people to leave the
state.
DR. GINN responded that the argument is theoretical; therefore,
he has not seen this to be the case. He reiterated that
spending limits would help states prioritize dollars. He argued
that additional spending would not necessarily lead to better
outcomes.
REPRESENTATIVE GROH pointed out that Dr. Ginn's study on
Alaska's economy has used 2004 as the base year, which was the
historically lowest government spending year in Alaska since the
beginning of the oil boom. He pointed out that because it was
thought the spending was too low, the legislature raised the
budget.
CHAIR VANCE reiterated that Dr. Ginn is not presenting on
Alaska's policies.
REPRESENTATIVE GROH asked whether Dr. Ginn was aware that 2004
was the lowest spending year for Alaska since the oil boom.
DR. GINN responded that the data he looked at went back to 2001.
REPRESENTATIVE GROH stated that he is looking at real capital in
unrestricted funds.
DR. GINN expressed uncertainty concerning this data.
2:27:09 PM
REPRESENTATIVE EASTMAN asked about spending caps that would
create a limit without accounting for government revenue in the
formula.
DR. GINN acknowledged that the conversation has been more about
spending limits and not the revenue side. He expressed the
importance of state revenue, remarking that for a balanced
budget, this would give the upper boundary of what could be
spent. He argued that the spending portion is more important
because this is the ultimate cost of government. He discussed
the roll that income tax plays in considering this, and he
suggested that there should be the least burdensome form of
taxation on the residents. He reiterated that to do this would
be to make sure government spending does not go out of control.
In response to a follow-up question, he expressed the opinion
that the state's GDP could stand in for revenue.
2:31:54 PM
DR. GINN, in response to a question from Representative Allard,
expressed the importance of looking at how government dollars
are being spent, such as for education. He suggested that there
should be a broad range of school choice, and funding the
students as opposed to funding the system would allow for more
economic growth. He noted that this would come down to
priorities set by the legislature. He further discussed how
less burdensome taxation could bring forth more opportunities.
DR. GINN, in response to a follow-up question, expounded on his
educational background and work experience. He discussed his
career and recounted his work at the White House from June 2019
to May 2020. He said that his goal would be to help people
prosper. In doing this, he stated that he relies on research.
DR. GINN, in response to a question from Chair Vance, expressed
the opinion that Alaska's inefficiencies come down to the
constitutional spending limit, which is higher than the funds
covered under the limit; therefore, a limitation is not being
provided. He stated that the revenue is the limit, suggesting
that an effective spending limit should go along with this.
Additionally, he suggested reconfiguring the spending limit to
reflect Alaska's current economy, as this would allow for
private sector growth and job creation.
2:39:55 PM
REPRESENTATIVE C. JOHNSON sought to clarify whether matching
federal and state funds should be inside or outside TEL.
DR. GINN responded that this would be outside of the cap.
REPRESENTATIVE C. JOHNSON questioned the reliability using the
state's GDP, especially considering the low population of the
state.
DR. GINN expressed the importance of looking at the output of
the private sector GDP, as this is where jobs are provided. He
expressed the opinion that the size is important; however,
looking at the total amounts considering government spending,
the size would not matter.
REPRESENTATIVE C. JOHNSON gave a scenario where the state
contracted a private sector entity to build a road. He asked
how this would affect the state's GDP. He also questioned
whether the spending would be included under the tax cap.
DR. GINN responded that this would still count as government
spending with general funds; however, GDP would cover most of
this and government spending would be negated. He suggested
that this could lead to private sector growth, but he cautioned
that double accounting should be avoided. He further discussed
the accounting aspect. He expressed the understanding that
since this would be government spending, it would fall under
this. He continued that under TEL, this would be excluded.
2:44:22 PM
REPRESENTATIVE GRAY redirected after Chair Vance recommended
that a question concerning Dr. Ginn's social media account did
not fall under the subject of the presentation. He pointed out
the 2021 presidential budget process which proposed a trillion-
dollar cut to Medicaid. He asked how Alaska would have been
impacted if this had been enacted, as the state would have had
to pay for Medicaid funding. He questioned any advice to states
if this had happened.
DR. GINN responded that he had not specifically worked on this
area. He pointed out that the trillion dollars was over a 10-
year timeframe. He expressed the understanding that this was
about reducing the growth rate of Medicaid over the decade. He
expounded, explaining that slowing the growth rates would impact
the trajectory of programs, which ultimately, he stated was the
goal.
REPRESENTATIVE GRAY asked whether any of the other states
studies have unique needs like Alaska, such as villages without
running water, reliable internet, and high deferred maintenance.
DR. GINN expressed uncertainty.
CHAIR VANCE reiterated that the conversation concerns TEL;
however, she acknowledged how different factors could effect
this.
2:50:10 PM
DR. GINN thanked the committee and welcomed any follow-up
discussion.
2:51:35 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:51 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Tax & Expenditure Limits in Other States.pdf |
HJUD 2/13/2023 1:30:00 PM |
|
| APF-Brief-TELs-50-State-Comparison-02-28-2020.pdf |
HJUD 2/13/2023 1:30:00 PM |
|
| APF Responsible Alaska Budget - Fiscal Year 2024.pdf |
HJUD 2/13/2023 1:30:00 PM |