Legislature(1995 - 1996)
10/01/1995 10:40 AM House LRP
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
LONG RANGE FINANCIAL PLANNING COMMISSION
October 1, 1995
10:40 a.m.
Anchorage Legislative Information Office
Anchorage, Alaska
BRIAN ROGERS: Mike.
MIKE O'CONNOR: It's a long way from where we are and it takes our
spending, next week as soon as they get this (indisc.) through, up
to $3 billion. So they take a half a billion out every year, you
guys replenish it every year. We haven't changed a thing, we're in
the same place we are right now, taking it out of the budget
reserve every year. That's why they sent us down here. They've
been taking a half a million out for three years now - half a
billion.
MR. ROGERS: I think the motion on the table is to require the
schilling deposit of the amount in excess of...
MELISSA FOUSE: No, the purpose is to maintain...
MR. ROGERS: Ya, well it puts the section in the purpose but that
has no impact on what happens. But in addition to saying it's part
of the purpose to put the amounts in excess of the prior year
general fund oil and gas revenues automatically jumps from the CBR
to the permanent fund. Are you ready to vote on that? All in
favor please raise your hands. One, two, three, four. All
opposed. One, two, three, four, five, six, seven, eight, nine.
O.K. motion fails.
JUDY BRADY: Bob Loescher, I followed your vote, you screwed up and
voted on the wrong side.
BOB LOESCHER: I did?
BRUCE LUDWIG: No, you voted on the right side, more people on the
wrong side.
MR. ROGERS: Can we find out whether -- can we try again on the
three-quarters verses one-half to the deposit or composite from the
CBR to the permanent fund?
MR. LUDWIG: Could we limit the question to when the balance is
less that? I guess I wouldn't have a problem with a simple
majority if the balance was $2 billion and they were gonna
appropriate a half a billion as I would if we were gonna
appropriate a billion when there is a billion and a billion and a
half.
LEE GORSUCH: We just lost that one, Bruce.
MR. ROGERS: All those -- we'll vote on a half versus three-
quarters and if we don't get a clear majority, then lets try
another version of this.
MR. GORSUCH: All I would say is that means a simple majority can
destroy the whole utility of the constitutional budget reserve.
MR. ROGERS: All those in favor of three-quarters to dump from the
CBR into the permanent fund please raise your hand. One, two,
three, four, five, six, seven, eight, ten. O.K., so were at three-
quarters.
ANNALEE MCCONNELL: It's all in the packaging.
CHAIRMAN ROGERS: O.K., is there further work on reserves that
needs to be made. Does anyone -- O.K., we're ready to move on too.
O.K., we've covered CBR, we've covered permanent fund earnings
reserve, we have permanent fund dividend was the next that I had
and then came income tax. Permanent fund dividend, we had the
straw vote a couple of nights ago that set a level but the issue on
permanent fund dividend is the choices that we've discussed are:
1. Cap; and 2. We use the formula based on earnings.
JUDY BRADY: And 3. To use the formula based on earnings with some
play -- so you can subsidize up to the cap, because if the earnings
give you $450 and you have $700 cap then you could subsidize that
if you could keep your spending.
MR. ROGERS: The third one is a formula based on earnings that the
legislature can adjust that number up or...
MS. BRADY: Up or to a cap. Maybe not to a cap (indisc.).
MR. ROGERS: And we have discussed that we're looking at a target
level, first (indisc.) looking at a target level of about $700
nominal in 99 and in 05 about $700 nominal was where the -- seemed
to be the set point for everybody earlier but that's not
necessarily part of our bow. I think we vote to cap, we'll have to
vote on a number and if we vote on a formula, we'll have to come up
with that formula and look at what it means. Are you ready to vote
on the cap formula or formula with adjustments?
MARY NORDALE: Before we take the vote I just want to make the
point that if you cap the individual dividends, you got a
population driven program.
MS. BRADY: Right, you want to cap that.
MS. NORDALE: And so if you cap the dividend fund as a formula of
earnings, you then have more certainty in the amount of -- the
total amount that is gonna go out in dividends but you don't
necessarily have a fixed individual dividend and you could fix your
cap in such a way that you're gonna arrive at your $700 nominal.
CHAIRMAN ROGERS: If we have four we have a capping individual,
capping total formula, formula adjusted, and cap total (indisc.).
UNIDENTIFIED SPEAKER (Male): What is the formula?
MR. LUDWIG: That's what I'd want to know.
MR. ROGERS: Well if you vote for the formula based on earnings, we
would then -- if that's the -- if the majority wants a formula
based on earnings, we'll then have to develop that formula. If the
majority wants a cap, we'll have to develop that cap. If the
majority wants a cap on the total dividend pay out we'll have to
decide that dividend pay out. But which of the approaches we
follow, I think -- I believe it's more economical on time to decide
which approach then work out the approach then to work out all the
details on three approaches and then decide among them.
PAT POURCHOT: But Brian, now keep in mind the decisions already.
We've already gone to the payout so if you're talking about a
formula based on earnings, you know you're getting doubly
complicated here. The earnings scheme is just 4 percent. I mean
it's not based on earnings per se. It's based on...
MR. ROGERS: Four years worth the market values, ya.
MR. POURCHOT: Right, so -- I mean this looks different when you're
just talking about the Rieger plan.
MR. ROGERS: Yes.
MR. POURCHOT: But now...
MR. ROGERS: The formula based on earnings could be, for example,
1 percent of the 4 percent.
MR. LUDWIG: We could define it that way?
MR. ROGERS: Yes.
MS. NORDALE: Then that would be 25 percent of the total pay out
for the dividend.
MS. BRADY: Well O.K., could we just talk about the policy
implications a little bit. For one thing, I like the capping the
total dividend pay out somehow, and but you couldn't do that you
could -- if we do that formula -- I mean that you could involve a
formula based on earnings to do that.
MS. NORDALE: As Pat was saying, you don't want to do it on
earnings because you're getting your 4 percent total pay out from
the fund which would include the dividend amount. So what you want
is your formula based on a percentage of your pay out, not a
percentage of your earnings.
MS. BRADY: O.K., that's O.K. O.K. so that -- cause I want -- a
couple of things I want policy wise would like to see, if possible,
is that since we put some of the earnings into the revenue stream
anyway that the dividend be part of that whole package and that
things happen both as relates to how much comes in and how it
relates to house spending is done so -- and what gave me the idea
is Mike was talking about the fact that he had a percentage out
there and somebody said that would drop it down to - it's like $500
or something and -- but then what you would do because we've all
think that the cap be for like $700, the pool should be $700, how
we want to do that. But you'd subsidize that out of -- and you'd
give people, you know, cause you control your spending so you'd
subsidize the dividend if you wanted to. And in times when you
needed it for roads and schools and that kind of stuff, that would
be the formula.
MS. NORDALE: I disagree with that. We're not talking about
earnings.
MR. ROGERS: No what I'm saying it was one of our goals earlier on.
We're short by thirty or forty million if I remember right.
MS. BRADY: Then take more money out of the budget reserve fund.
MR. ROGERS: So we're gonna need to -- and that's where it comes
from. It automatically comes from there under the model but I
think we ought to look at -- just take another look at it and see
if we're comfortable or uncomfortable with where things are and how
things relate to each other. What I'd like to be able to report to
the governor and legislative leadership tomorrow is that we have a
super majority of the commission that favors a - that supports the
three year plan, and I believe that we're at in excess of 75
percent of the commission favoring the three year plan.
UNIDENTIFIED SPEAKER (Male): What, about 11 out of 15.
MR. ROGERS: Ya. I think there are 11 or 12 but I want to count
that to make sure that I'm able to say that and then speak to the -
- what's in that three year plan in terms of 40, 30, 30, what it
means - nominal and real, what the taxes are and what they mean,
the dividend change and the constitutional amendment with endowment
pay out revising the CBR sweep and the deposits from the earnings
reserve and the CBR into the fund. And then say at the end of the
three year plan, we're close to balance and we may be after we
finish today, and then that we would suggest to review in the
winter of 98 and 99. And at that point, we come to a fork in the
road where we can either cut spending further, cut dividends
further or impose the income tax and...
MS. BRADY: Or get more money from the permanent fund.
MR. ROGERS: Or get more money from the permanent fund and that a
bare majority favors the income tax at that point, but that will
really be a decision left to the next round of this and the five
year plan, if you make that choice, carries out the ten year plan
as well, but that there is not consensus or a super majority on the
longer term, but I think we're there on this first three years.
MS. NORDALE: When you say, "Get more money from the permanent
fund," what percentage are you using? I thought we were talking
about a 4 percent as a constitutional amendment.
MR. ROGERS: We're at 4 percent of the five years as a
constitutional amendment.
MS. NORDALE: Ya, so when you say get more money out of the
permanent fund then I presume what you're talking about is reduce
the dividend.
MS. BRADY: He said you could go up to 5 percent.
MS. NORDALE: Ya, but I mean you're gonna have some kind of a
constitutional limit on the amount you can draw otherwise you
haven't got Chinaman's chance (indisc.).
MS. BRADY: But I mean they could change it five years from now,
change it to 5 percent if they wanted to (indisc.) you know, and if
the legislature keeps on spending money the way it's spending right
now, the governor always says O.K. we're gonna, you know, give all
this money to education, education doesn't (indisc.) say we're out
of here (indisc.).
MR. ROGERS: I think that the dynamic that's set up in 98 and 99 is
an interesting one, some of us come to for this different reason
because the decision in 99 or 00 to impose an income tax or cut
spending, some of us have different ideas as to what ought to or
will happen then. And I think those of us that think that spending
has been cut far enough are taking a little bit of a risk with this
as are those who think that spending hasn't been cut far enough.
MS. BRADY: I think spending on agencies has been cut too far. I
think that pass through stuff to nonprofits cannot involve such
involute individuals and all that stuff. Way way way way way out
of line, but I think agencies have taken about as much cut as they
can take.
MR. ROGERS: I've seen for about 30 seconds on a screen is all,
there may be errors in it but the a -- the changes are first the --
are on about the fifth line. The permanent fund endowment earnings
is set at 4 percent of the previous five years market value.
Spending cuts are the same, taxes the same, CBR dumps down to $1.5
billion. I did not have time to get it into the formula that we
have agreed upon but that makes very little difference. We've
talked about the next year's oil and gas revenues.
MS. BRADY: You need to change your other resource tax increases
again with fisheries and bottom fisheries. You've gotta do that.
MR. ROGERS: That's right, I'm $10 million over here because it was
fishery and other tax. So not that -- that whole line comes out
and changes to fishery and other resource.
MS. BRADY: You know the other thing that we could do is not put
that 244, 259. Put that back in, that 50 percent, you know, remove
it to 50 percent.
MR. ROGERS: As you can see, this one is still unbalanced in FY 00
by about -- 99 and 00 by about $50 million.
MR. POURCHOT: Did you hear Judy's point? I mean that really is
a...
MR. ROGERS: That's a major point. That would be a major shift.
MR. POURCHOT: Well you want money to balance -- that 50 percent
deposit retroactively in the permanent fund, it shows up with the
second negative light is a big significance.
MS. BRADY: That's right and you don't know if you're gonna get all
these other taxes.
MR. ROGERS: On the other hand, if we don't make that deposit what
happens is the fund difference is very different in the out years.
MS. BRADY: Ya, but we're already shoving a lot of money into it.
MR. ROGERS: Is there discussion on the 25 versus 50 percent?
UNIDENTIFIED SPEAKER (Male): Where are we?
MR. ROGERS: Judy has suggested that on line 2, we drop out the
additional deposit to the permanent fund.
UNIDENTIFIED SPEAKER (Male): I vote "no," not only "no" but with
emphasis.
MR. GORSUCH: Leave it at 25.
SENATOR GEORGIANNA LINCOLN: Leave it at 50.
MR. ROGERS: Well no, Judy has proposed to drop it from 50 back
down to 25.
MS. MCCONNELL: And on the fishery and other - the combination, is
the combination gonna be 20 or...
MR. ROGERS: The combination is gonna be 20. I misunderstood the
direction from the group and so that'll drop $10 million a year out
of the line.
MS. MCCONNELL: Why does that drop 10?
MR. ROGERS: Because I thought it was 20 fishery and 10 other
resource, and what we had agreed on was 20 fisher and other
resource.
SENATOR LINCOLN: I guess I misunderstood too because I thought we
were going to put it all together as fisheries. We talked about it
I thought as fisheries 20 but combining it as fishery and other
resources. I didn't know that it was 20 for as the combination.
MR. LUDWIG: I thought it was 50 combination (indisc.).
MR. ROGERS: It sounds like we don't know how we voted so maybe we
ought to vote again.
MR. O'CONNOR: I thoughT it was 33.
MR. ROGERS: You thought it was -- that was two weeks ago that it
was 33, then it became 0. So on the issue of what should be the
fishery, it's now a single line - fishery and other taxes. And
actually in the spreadsheet, if we publish one, I'd like to try
combining the sin taxes, the consumption taxes and the business
taxes together so we can take up less space and make the number
bigger so people can read them.
MS. MCCONNELL: I thought you meant make it bigger.
MR. ROGERS: No, make the number physically bigger.
MR. LUDWIG: I though we were gonna step up the alcohol tax like we
did the tobacco.
MR. ROGERS: What's the feeling on that?
UNIDENTIFIED SPEAKER (Female): Yes.
UNIDENTIFIED SPEAKER (Male): Yes.
MR. ROGERS: How far and how fast and how often.
MR. MOTLEY: Double it every third year - 20, 40, 60, I mean not
24.
MR. ROGERS: And I also, on the alcohol taxes, I think that -- what
I'd like to do is take out of the spreadsheet references to
existing pieces of legislation.
REPRESENTATIVE PARNELL: Brian, which ones were you gonna combine?
MR. ROGERS: I was gonna -- what I had in mind was...
MELISSA FOUSE: Do you want to say, "Increase and index?"
MR. ROGERS: Combining the two fuel taxes, combining the tobacco
and alcohol taxes, combining the fishery and tourism taxes and
combining the user fee increases and motor vehicle license fees,
just to reduce the number of lines and allow this - allow us to
move this from about, 8 point up to 10 or 11.
MS. MCCONNELL: And then our narrative would describe some of the
breakdowns.
MR. ROGERS: I wasn't sure whether on expenditures if we want to
show any creative breakout or not.
MS. MCCONNELL: We should take out the on-current programs I think
because...
MR. ROGERS: Yes, that's right earlier...
MS. MCCONNELL: Change the format.
MS. MCCONNELL: I think I can do a vote then on the alcohol tax.
MS. NORDALE: Brian.
MR. ROGERS: Just a sec, we've had -- there are four motions on the
table at the moment and I'd like to try to take them one at a time.
MS. NORDALE: I didn't want to make a motion, I just wanted to ask
you, for clarification, under expenditure you've got PF dividends
$900 FY 97, $800 FY 98, $415 million thereafter.
MR. ROGERS: So the first two years it's the dividend amount and
the third year it's the...
MS. NORDALE Ya, but I think we need to clarify that so that there
is -- that they match up with the number that (indisc.) in the
extended columns.
CHAIRMAN ROGERS: They do.
MS. NORDALE: Well $900 in FY 97, it's just a little unclear and
900 and 565 are not the same numbers. So I think that...
MR. ROGERS: So if we were to say on the dividend cut $50 million
per year, three years.
MS. NORDALE: Can I ask you another question?
MR. ROGERS: I want to come back to this issue on fishery and other
resource taxes. Is it 20 or is it 30 to start with?
MR. GORSUCH: I thought there was an estimate of $33 million
getting back to...
MS. NORDALE: I thought it was 30.
MR. MOTLEY: We were talking around a 30 to 34. Carry the book
around and that was the amount. Did we change it? Well fisheries
will be hard to do that way. And I think it probably was 30 but it
was not a 20 in one place (indisc.) combination.
REPRESENTATIVE LINCOLN: And Mr. Chairman, I was looking back on my
notes that I had and it said fisheries 20, tourism 20, after we
discussed whether it should be 20, 30, 50, 20 or whatever, and then
add in timber mining, et cetera, here too. So I think it was a
(indisc.).
MS. NORDALE: That is such a high estimate for timber and mining.
MS. BRADY: Ya, it is.
MS. NORDALE: It concerns me.
MR. POURCHOT: We get $400,000 now from mining.
CHAIRMAN ROGERS: Ninety-eight percent of whatever this number is
fishery.
SENATOR LINCOLN: If you combine that, it would be 30.
MS. BRADY: For fisheries?
SENATOR LINCOLN: Ya, with fisheries and that's what we were
talking about doing.
MS. BRADY: Ya.
MR. ROGERS: The motion has been made to make fishery and other
resource taxes 30 in FY 98.
UNIDENTIFIED SPEAKER (Male): And with the full understanding that
the vast be 98 percent of those fisheries.
MR. ROGERS: Between 20 and 30, how many favor 30? One, two,
three, four, five, six, seven, eight. And how many favor 20? One,
two, three. Thirty it is.
MS. NORDALE: Can I ask you a question down on - under the
constitutional budget reserve on the fourth line down, it's drawn
for general fund spending, parenthesis, drawn from general fund
surplus. Can you tell me what that line means?
MR. ROGERS: If it's a positive number, it's the amount that's
drawn out of the CBR for general fund spending. If it's a negative
number, it's deposited from the surplus into the CBR.
MS. MCCONNELL: Why don't we say "deposit" instead of "drawn" in
parentheses.
MS. NORDALE: Ya, right.
MCCONNELL: And maybe instead of CBR...
MR. ROGERS: Let me do one at a time. Deposited from GF surplus.
O.K., and then there is a suggestion that the GF spending take out
on current programs.
MS. BRADY: What are we doing with the surplus monies on the - from
the year end.
MR. ROGERS: Under this spreadsheet, if there is a surplus year end
balance, it goes into the CBR, and in most of those cases it then
goes immediately out of the CBR into the permanent fund because
we...
MS. BRADY: One thing that Steve Rieger said struck me (indisc.)
but we want this to pass and if there is no -- and we know there is
gonna be just an enormous amount of pressure on the spending side
and we continue to take everything off the table. It seems to me
that maybe the extra stuff that we save through spending could go -
- I mean there has got to be some reward for doing good.
MS. NORDALE: I cannot believe we're gonna wind up with surplus.
MS. BRADY: Well I can't either, I mean...
NOTE: Indiscernible, everybody talking at once.
MS. BRADY: Oh alright, not to worry.
MR. POURCHOT: These are not big numbers here.
MS. NORDALE: Ya, (indisc.)
MR. ROGERS: So we should show any surpluses instead of depositing
it in a CBR surpluses get spent for capital projects?
MS. NORDALE: No, why don't we just leave it as is.
CHAIRMAN ROGERS: That's the way deal with village safe water and
deferred maintenance.
SENATOR LINCOLN: But it won't get there.
ANNALEE MCCONNELL: It seems to me that people are gonna recognize
that it's unlikely that this many years out we're gonna be to the
penny, and that in a way we almost make it seem more artificial if
we deposit it and make it a line of zeros whereas we show -- I
think we should be very clear that it's our expectation, our hope,
that any time we can build up a surplus we should be dropping it in
unless there has been clear policy choice to do otherwise. But it
doesn't bother me to see surpluses in this amount on a budget of
$2.6 billion here.
MR. ROGERS: So probably if we have a positive number, if we're
positive, I shouldn't show it as being deposited into the CBR but
rather surplus.
MS. NORDALE: I would leave it as is. You know if you turn over to
your real dollars scenario or spreadsheet, under the CBR where it
says, "CBR transferred to permanent fund principal, you've got some
weird numbers in there. I don't know whether those are factors or
what.
CHAIRMAN ROGERS: Where's that?
UNIDENTIFIED SPEAKER (Male): This is decimal point here. For some
reason Excel is adding decimal points in some places that it
shouldn't on this spreadsheet, you know. Take those out again, I
have to keep telling it I don't want decimal points and then it
takes them out. Microsoft Excel.
MS. MCCONNELL: Brian, as an alternative, what if we were right
under the gap box where it says, "Draw from deposit into CBR," if
we do leave the number there I would suggest we could put something
in like, "Draw from CBR," and then in that blank line underneath in
parentheses say, "Recommend depositing any surplus into CBR," or
something like that to indicate that that we haven't identified the
place to which it would go. Would that be....
MR. ROGERS: So if we said draw from CBR as gap, paren recommend a
deposit to CBR as surplus.
MS. MCCONNELL: Although I have to say I don't feel strongly about
one way or the other about making them zeros and showing the
deposit. I don't feel it's a make or break.
MS. BRADY: On the cumulative spending cut total - how we say that.
Everybody who looks at that, including all of us, maybe get
confused about that.
MR. ROGERS: How do you want to do it?
MS. BRADY: Well I think you might say, "Annual spending cuts," and
then put the total...
MS. FOUSE: On the line.
MS. BRADY: On the description line.
MS. MCCONNELL: Make it 40, 30, 30.
MS. BRADY: Ya, because we -- everybody gets confused about that.
Now what are we doing differently than the -- somebody explain to
me because I'm gonna get asked - we're all gonna get asked. When
we say market, is that different than how we do now? Somebody
explain to me how we're just getting this 4 percent thing.
MS. NORDALE: No, market. This 4 percent of market - a rolling
five year average.
MS. MCCONNELL: There is no withdrawal now in that same sense.
MR. LUDWIG: But they say everybody else that has these kind of
funds does that.
MS. BRADY: So is somebody is gonna write these little cheat notes
so when we talk about this?
MS. NORDALE: One of the things that bothers me is that it's hard
to, you know, if we're saying that the payout is at 4 percent and
we've got these market numbers down there that are not included,
shouldn't they be -- shouldn't we reverse the lines of the two
ending balances so that we've got the market ending balance - the
one that is larger-easier to see so that people will apply that 4
percent? RollING.
MS. MCCONNELL: Maybe add in the word, "Ending book balance," to
clarify the...
MS. NORDALE: Right.
UNIDENTIFIED SPEAKER (Male): (Indisc.) puts that down.
MS. NORDALE: Because that's the way the accounting is done now.
The statute -- ya but for reference purposes, that's why I was
asking for the things to be reversed so that...
MS. MCCONNELL: But we never get into the principal.
UNIDENTIFIED SPEAKER (Male): Right.
MR. GORSUCH: And Judy, one of the issues that is going to convert
you -- one of the reasons for converting the market is, you know
Byron was giving us a diplomatic heads up, but if we don't got to
the market system we could have a huge spike in dividends when they
realize the gains that has been accumulated over the years because
they haven't been taking market valuation into account. So
(indisc.) million dollar realization of "gains" and bang to
(indisc.). It's hard to (indisc.) huge amounts of money and this
moves that out by using the market basis once you bought your
stocks for. So it takes out the spikes and troughs of earnings as
result in using other way marketing (indisc.)
MR. LUDWIG: We're gonna get away from the formula base, do it that
right. We're gonna (indisc.).
UNIDENTIFIED SPEAKER (Male): Which is another program over the
system.
MR. LUDWIG: Ya, but that kinda takes away the argument (indisc.)
open market, right?
MR. MOTLEY: It takes the requirement of making transactions that
otherwise might not be necessary just to balance income or level
income. It does change the investment scenario considerably.
MS. MCCONNELL: On this one, are we at 4 percent 98 straight
through same rate every year?
CHAIRMAN ROGERS: From 98 on, we're at 4 percent forever.
MR. O'CONNOR: Four percent of what number?
MR. ROGERS: Four percent of the five year rolling average of
market value, and this spreadsheet doesn't show -- to do 98, you're
doing 97, 96 and then three other years that aren't printed here
but that are off budget.
MS. MCCONNELL: Don't use that word please.
MS. NORDALE: Off screen.
MR. ROGERS: Off screen, that's good.
MS. BRADY: O.K., now what does this -- how does this give us room
to move - how gives us room to move is that if you make more money,
buy more feels, this income line goes up. I mean you got to have
some room to move.
MS. NORDALE: That's what the endowment does for you. It doesn't
give you much (indisc.) room.
MR. LUDWIG: We also have the other half of the income tax. We
only put in like half.
MS. BRADY: Ya, but that's $200 million. I mean that's nothing
what...
MR. LUDWIG: I'll take it.
MS. BRADY: Out here, what allows this available revenues from
existing funding general fund sources to move up because we've
gotta move up.
UNIDENTIFIED SPEAKER (Male): You dig (indisc.) down road
(indisc.).
MS. BRADY: So you get 50 percent of new money, remove this line
out, right? Cause you're gonna get 50 percent of all...
MS. MCCONNELL: The formula now shows 50 percent of all oil and gas
revenues regardless of when it came into production. Right?
MR. LUDWIG: Fifty percent of royalty.
UNIDENTIFIED SPEAKER (Female): Of what, I'm sorry, ya.
MR. MOTLEY: The other part, the income tax, severance tax, you get
all that so you discover you will.
MS. BRADY: Add to that line. So that kinda move up in a normal
way. I mean you gotta have some normal movement up.
MR. MOTLEY: Here's talking about 12 1/2 percent royalty if you're
changing.
MS. BRADY: So it's the royalty that we're increasing. We're
increasing it to 50 percent that goes into the permanent fund.
We're increasing it from 25 to 50 percent.
MR. MOTLEY: Ya, you're...
MS. MCCONNELL: And actually only making a change on the old stuff.
The new stuff is currently covered by statute at 50 percent.
Prudhoe and what are the other biggies that are...
MS. NORDALE: Kaparuk.
MR. MOTLEY: Where right now you're putting 3 1/4 percent of gross
oil revenues in the permanent fund. (Indisc.), you'll putting 6
1/4 percent of the gross oil revenues and the other 6 1/4 percent
royalty will stay in the general fund and the severance taxes and
all the income taxes, which is why I have a problem with this
system, but that's my own private (indisc.).
MS. MCCONNELL: Is the flat number of 20 for the export ban. I
don't remember. I know the 20, you know, but 20 -- we'd agreed on
the 20, you know, there have been variations of what the
projections were and how much difference would it make. But will
it be pretty much flat line? Would that...
MR. MOTLEY: Probably you've got -- would have increasing oil
prices but decreasing the production. Who knows how to calculate?
MR. LUDWIG: If that jumps up like 3 percent, where would that
money go? I mean if it's 50 instead of 20. Does that go in the
general fund?
MR. MOTLEY: If what is?
MR. LUDWIG: If we realized $50 million instead of $20 million.
MS. NORDALE: If it's $50 million in royalties.
MR. LUDWIG: Where is the export ban at?
MS. BRADY: It would go into the general fund and it should. I
mean you've gotta have some...
MS. MCCONNELL: You know what? Wouldn't 10 of this 20 be going
into the permanent fund and...
MS. NORDALE: This has already been factored, so I think this 20 is
just the money that would go into the general fund. That's my
understanding from what Will Condon said.
MS. MCCONNELL: But we get the $20 million figure as what we
thought the total increase in revenues to the state would be.
MS. NORDALE: That it would be $20 million to the general fund as
I understood it.
MS. MCCONNELL: Right.
MS. NORDALE: Not $20 million total revenues.
MS. MCCONNELL: But one thing is we've adjust -- we've now said
we're moving from 25 to 50 percent. So if that portion is 20,
under our endowment scenario, would go into the permanent fund. A
higher amount would go into the permanent fund. So we should
probably say something like 15 and 5. Maybe that's just rounded.
MR. MOTLEY: The paper said yesterday some huge number and I'm not
sure I understood it.
MS. NORDALE: Ya, way over a billion and I couldn't figure that
one.
MR. O'CONNOR: Here it is, I left it here so (indisc.).
MR. LUDWIG: Is that money royalty money? Is that tax money?
MR. POURCHOT: Everything has it's price.
NOTE: Indiscernible, everybody talking at once.
MS. NORDALE: I don't know whether that would be totals increase in
value for the total amount (indisc.) company is as well as royalty
or what.
MR. MOTLEY: That guess is so general, I don't know that you could
move it around very much and know where it goes. Some will be
royalties, some will be income tax, some will be severance taxes,
all melted together so...
MR. LUDWIG: The large severance money, does that go straight to
the general fund, severance tax?
MS. NORDALE: (Answered in the affirmative).
MS. BRADY: Well listen, we need a better one of these. Do we have
some more of these?
MS. FOUSE: The scenario?
MS. BRADY: Ya. Probably gonna need several more.
NOTE: Indiscernible, everybody talking at once.
MR. ROGERS: Annalee.
MS. MCCONNELL: We still haven't solved alcohol tax.
MR. ROGERS: Can we call the group back to order and (indisc.) the
alcohol -- I'm trying to do the comparison so we can run Judy's --
and I've got a spreadsheet over here somewhere. Mary, you've got
the floor
MS. NORDALE: I was trying to explain to her what (indisc.).
MR. ROGERS: Annalee.
MS. NORDALE: Are you trying to prevent me from talking?
MR. ROGERS: From the table, during the meeting, yes. Annalee.
MS. MCCONNELL: Alcohol tax.
MR. ROGERS: Alcohol tax - regarding the alcohol tax go ahead.
MS. MCCONNELL: I would like to propose that we do something, a
similar method to what we did with tobacco tax which is that every
three years we - every third year we jack it up rather than just
indexing straight on through. We make a more dramatic -- pardon?
MR. LUDWIG: Five million every third year - 25 percent (indisc.)
tobacco.
MS. NORDALE: You mean jump it from 10 cents a drink to 20 cents a
drink or something like that.
MR. LUDWIG: Over 12 years.
UNIDENTIFIED SPEAKER (Female): Fifteen cents.
MS. MCCONNELL: Ya, I mean I would have to work out the specifics
but I would like to see us make a healthier increase rather than
letting people adjust slowly to slight increases. I'd rather see
a more dramatic (indisc.)
MS. BRADY: You know, why don't we just do it all at once?
UNIDENTIFIED SPEAKER (Male): 20, 40.
MS. MCCONNELL: 60, 80.
MS. BRADY: Why don't we just do it all at once? Thinking there is
-- because having been involved in some political things, we did
indexing. All you do is you get lobbied to death when it's gonna
get ready to go up again.
MS. MCCONNELL: I would propose -- actually this is a clarification
we should probably do. I thought on the tobacco taxes, we would
actually try to fight the whole thing out at once now and say the
bill would include an increase in year one and year three, or
whatever we decide, so that you're only doing battle once. I agree
with you we should not try to (indisc.).
MS. BRADY: But they'll come in every time and try to change the
bill, because the whole thing, it's like doing a sales tax,
everybody comes in. Every Assembly tries to get their thing
(indisc.).
MR. MOTLEY: That's their constitutional right.
MS. BRADY: Ya, but not if we did it right away. I think an
alcohol and cigarette plan, we could sock it to em and get on with
life.
MR. O'CONNOR: How come it hasn't worked for six or eight years?
Kay Brown has been trying supposedly since 89. Isn't that what you
said?
SENATOR LINCOLN: Because there is some reality check here.
MR. O'CONNOR: That's why I'm saying is I'm giving a reality check
too.
UNIDENTIFIED SPEAKER (Female): That's even when she was in the
majority.
MS. BRADY: But the other thing is, see this is a package again and
part of the package is guys, our corrections thing is out of sight
and 80 percent of that is alcohol related and we're gonna do a
bunch of things. This is one of them is - is to try to beat this.
SENATOR LINCOLN: That's not going to be the answer, just putting
taxes in. I mean we don't -- we're cutting all the programs that's
preventative measures and in corrections and social services and
all of that, just by adding taxes isn't going to cure the problem.
MS. BRADY: And the programs are double counting everyone anyway.
I mean somebody needs to go in and wipe that whole thing out and
start all over again. My little addition to social justice.
MS. MCCONNELL: I guess to put something on the floor I would
propose $20 million in 98, $30 million in 00, $35 million in 02.
MS. NORDALE: Is that your alcohol tax?
MS. MCCONNELL: Ya.
MS. NORDALE: God, she's such a reporter. We're gonna start
calling you Carry Nation.
MR. POURCHOT: So on a $8 drink at the Cook, how much would that
add?
UNIDENTIFIED SPEAKER (Male): Almost nothing.
MR. LUDWIG: We might have only had one (indisc.)
UNIDENTIFIED SPEAKER (Male): Ya, it was $8.10 (indisc.).
MS. BRADY: It was, it was.
MR. LUDWIG: That was for the total dinner too?
MS. BRADY: Ya, that included the tip.
MS. FOUSE: Well the liquor and the dinner were separate so the
tips were separate.
NOTE: Indiscernible, everybody talking at once.
MR. ROGERS: Is there further discussion on the proposal, how much
it would cost us.
MR. LUDWIG: Was one of those drinks not very (indisc.)?
MR. POURCHOT: You know, we'd better go around the room and see
what everybody had because I had a $8 beer.
MR. ROGERS: I haven't heard - I don't hear anybody seeking the
floor on the issues of -- Mike
MIKE O'CONNOR: I have another proposal. I think we ought to do
what we're doing. Just make it to....
TAPE 1, SIDE B
MR. O'CONNOR: ...even though we don't want to talk about an
average spending. We don't want to talk about average taxing so.
MS. MCCONNELL: I would agree with that.
MR. ROGERS: Georgianna.
SENATOR LINCOLN: You know, I don't care - I don't care if alcohol
was raised from 20 to 100, but lets have a reality check here. I'm
afraid, you know, we're right down to the wire and now all of
sudden we put a lot of discussion into figures that were here on
the paper and now all of sudden we're saying, "Oh my God, we gotta
find $50 million or $49 million, lets tweak this and lets tweak
that and I just would caution everybody to rethink that.
MR. ROGERS: Hugh, then Bruce.
MR. MOTLEY: Georgianna, I don't think that. If for instance the
years where we say there is a deposit, what we're talking about was
something more. I haven't changed my position, I still think it
ought to be (indisc.). And I like what you said, going from 20 to
30, but instead of 35 I'd go from 20 to 30 to 40 to 50 in three
year jumps. I understand it may not work but I also understand
even when you got to 50, you wouldn't be covering half the cost of
what alcohol does to the system.
MR. ROGERS: Bruce and then Mary.
MR. LUDWIG: I've been under the impression the whole time that we
were going to step it up like cigarettes. I mean I thought we had
that discussion and this never did get put on the spreadsheet or
something. We spend hundreds and hundreds and hundreds of million
dollars and if we can detour just a little bit of that expense
through a tax, it just seems like a good investment.
MR. ROGERS: Mary.
MS. NORDALE: I have real problems building a budget or a scenario
based on reform or zeal. I'm not sure that we're going to be able
to get that kind of revenue and if we build a scenario counting on
substantial blocks of money from these taxes, which will bitterly
fought in the legislature. We may find ourselves having, you know,
just built a budget out of froth. And so while I don't have any
problem with raising the taxes, I do have a problem with building
a scenario based on those raises. You know I just think there is
a real difference between arguing that it's time to put the clamps
on alcohol and alcohol abuse and a spending plan for the state that
contemplates that legislature is really gonna buy in to that. I
don't think they will.
MR. ROGERS: Judy and then Hugh.
MS. BRADY: Well we don't know if they're buy in the whole thing.
I mean each one of these is gonna have to be argued as part of the
package. And we did talk about this early on and we did agree to
index it and we looked at all the figures. We probably had more
people and more information on alcohol tax and what you're gonna
get and what's fair and what other states do and what happens when
you do it then we've had on anything else. And so I think we
should just vote on it. I would like to a -- I move Annalee's
figures.
MR. ROGERS: O.K., Annalee your figures were again?
MS. MCCONNELL: Twenty million in 98, 30 in 00 (indisc.), and 35 in
02.
MR. ROGERS: You know, two years in a row. 98...
MS. MCCONNELL: Ninety-eight, then 00, so it stays 20 20, then 30
30, then 35 35.
SENATOR LINCOLN: Mr. Chairman, before we vote on that I thought we
were going to step that up and -- or somebody said since tobacco
starts in at 97 - what was the rationale for having it 98 instead
of 97.
MR. ROGERS: I think Pat raised the idea of one sin tax a year is
enough to expect out of the legislature.
SENATOR LINCOLN: Mr. Chairman, if that's true then I guess I would
say then put the 20 in 97 and the 5 in 98 if you're going to have
one sin tax. If what is being said around this table is that a lot
discussion went in to the expenditure side and the GF going to
alcohol related problems in the state, then lets move that one.
MR. ROGERS: The tobacco is 43.
MS. BRADY: I think we can do two -- I guess I -- the other thing
I think is if we're gonna do a package, lets do a package and lets
start it out. Lets just go with all the -- just start it out and
go.
MR. ROGERS: I disagree. I think we should balance the taxes
between the two years and not try to do them all at once. I think
that there ought to be some parallelism between the general fund
spending cuts, which don't all hit the first year. Some of them
hit the second and third. I think some of the taxes should hit the
second and third for the same reason. We ought to just try to
weigh which ones to do. You know this one shows, and I think it
was passed conceptually, we have the highway - the motor fuel tax
one year and the license plates the other year. We have the two
sin taxes split between years and the tourism and the fishery taxes
we hold off a year so that there is time to develop em, and I'd
rather not have em hit all the first year because a lot of this
package doesn't hit until the second or third year.
SENATOR LINCOLN: Mr. Chairman, I guess I'm going to continue to
argue for putting then the alcohol and cigarette together that --
when it's discussed I think it's that one more than any others that
are discussed as a package. And I think it just makes sense to try
and get an alcohol cigarette tax, or tobacco tax, together as "the
sin tax." I think everybody talks about it as that. Those are the
two.
MR. ROGERS: Should we move the consumption tax, the highway motor
fuel, back a year so that it's not too front loaded.
MR. LUDWIG: I think we ought to move the income tax up so we can
capture all the lobbyists income from these two, the alcohol and
cigarette.
MS. NORDALE: I think we ought to stay on schedule on the highway
fuel tax.
MR. O'CONNOR: So do I.
MR. ROGERS: Pat.
MR. POURCHOT: Actually I was gonna do somewhat of a point just to
remind -- put it in context, the alcohol tax. We get about $12
million now I think and we rank, depending on whether beer, wine,
or spirits, we are in the middle range now on alcohol tax at $12
million. So -- I mean that's just the context of the work that --
this is a substantial tax.
MR. LUDWIG: Where are we on cigarettes now?
MS. NORDALE: (Indisc.).
MR. LUDWIG: (Indisc.) we be number one in the nation with the
dollar pass. I mean I don't know why that argument doesn't hold
for alcohol or tobacco (indisc.).
MR. ROGERS: Hugh, you've been seeking the floor.
HUGH MOTLEY: I just wanted to say that I have never before in my
life been characterized as a reformer. I am talking about user
fees. It's different.
MS. BRADY: Just for the record.
MR. ROGERS: I think the proposal before us is to step up the
alcohol taxes every two years going from 20 to 30 to 35, and then
indexing thereafter a million. We'll have a separate vote on
Georgianna's proposal to advance it a year. Are you ready to vote
on Annalee's 20, 30, 35? All those in favor please raise your
hand. Three, four, five, six opposed. One, two, three, four,
five, six, seven. Motion fails. Georgianna wants to (indisc.)...
SENATOR LINCOLN: What was it eight?
MR. ROGERS: Seven to six.
MS. MCCONNELL: Does 20, 25, 30 help people or does that bring us
more support? Is it too big a jump in one year is that part of it?
Could we try a vote at 20, 25 to 30 then?
MR. ROGERS: I think Georgianna's vote comes next and that would be
to move the whole schedule up one year to put the alcohol tax in
97. Discussion on moving alcohol tax to 97? Sean.
SEAN PARNELL: I was just gonna suggest that we move all the taxes,
the three taxes we had scheduled for 97. I would say we push those
to 98 and demonstrate we can get the cuts that are planned here at
$40 million before we -- I think we're kidding ourselves if we
think the legislature is gonna pass three taxes and increase user
fees next session without any real - without demonstrating the are
(indisc.) under the plan. So I would argue to push the taxes one
year the other way.
MR. ROGERS: That could be a motion after -- you're third in line
now. Georgianna's motion is to move it up a year on the alcohol.
Question?
MR. O'CONNOR: And package them together?
SENATOR LINCOLN: Ya.
UNIDENTIFIED SPEAKER (Male): Is that the same or is that a
different question?
MR. ROGERS: I think each tax sort of stands on its own. There are
taxes. Judy.
MS. BRADY: What I'd like to point out is that it would be -- one
of the reasons that alcohol and cigarette taxes fail is because a
lot of times, you know, those are people who are very active in
campaign contributions and that kind of thing which is perfectly
alright (indisc.). There are, though, in the state a whole lot of
people who are - who are extraordinarily - becoming extraordinarily
concerned about alcohol and cigarettes and so it would be good to
have this on the ballot. It would be good to have this in front of
a legislator who is getting ready to run cause then people pay
attention to the -- that there is a whole lot of people who are
gonna pay real close attention to votes on this.
MR. ROGERS: Are you ready to vote? The motion is to advance the
year on the alcohol tax from 98 to 97. All those in favor of
advancing from 98 to 97, please raise you hand. One, two, three,
four, five, six, seven. Opposed? One, two, three, four, five,
six. Motion is adopted. Next is Annalee's motion to advance the
schedule that's gonna be to step up the alcohol tax. Do you want
to try another restatement of that?
MS. MCCONNELL: So it would be 97, 98 at 20; 99 and 00 at 25; 01
and 02 at 30; and then index after that.
MR. ROGERS: Discussion?
MS. MCCONNELL: Oh and a big feature that in my mind is dealing
with the disparity between the hard liquor and the beer and wine -
some stuff we've heard that consumption on beer and wine is -- or
the taxes are out of whack with the problems in that area, but I
don't want to propose specifics at this point.
MR. MOTLEY: I'm not sure as we're fighting for that (indisc.) of
the year. Probably urge (indisc.).
MS. MCCONNELL: I could live with -- that would be fine with me.
MR. ROGERS: Is that a friendly amendment?
MS. MCCONNELL: Friendly amendment - I would still make the bill --
the bill of the first thing would say the rate is this in this year
and at the same time it says it goes up to such and such the next
year and up to such -- or I mean in the third year, and up to such
and such. So we only have one bill that accomplishes all three.
Obviously, the legislature could always change it later on but we'd
put that in the initial package and every third year, except
(indisc.).
MR. ROGERS: So the motion would be that 20 plus population, and
actually the number will be 20, 21, 21, and then 26, 27, 27, and
then 32, 33, 33. And do you keep stepping after that in the
proposal or...
MS. MCCONNELL: I'd probably go three steps and then just index for
91 on.
MR. ROGERS: Discussion on the motion? Ready to vote?
MS. NORDALE: You know, I think you're gonna see that your numbers
aren't gonna hold through in reality, and so I'm hoping that we've
got some kind of a fallback position built into this scenario
because I think that one, your gonna find it difficult to increase
the taxes to that level and secondly, you're gonna find revenues
dropping.
MR. ROGERS: I think we need to remember on all of these we have a
fallback plan which is in the winter 98 and 99, a new group looks
at the situation and decides which fork to take in the road. And
again, I think we have close to super majority if not super
majority for that three year plan and if we have support on the
five and ten, it a bare majority. That fork is a major part I
think of report that describes the dynamics of what's going on and
that is that three year reset point. Are you ready to vote on
Annalee's motion? All those in favor of the motion please raise
your hands. One, two, three, four, five, six, seven, eight, nine.
Opposed? Motion passes. Sean, you wanted to move - you had a
motion to move one back a year.
REPRESENTATIVE PARNELL: I'd move the highway motor fuel tax, the
marine motor fuel tax, the tobacco tax and now the alcohol tax.
Instead of implementing them next year, next legislative session,
I would move it to 98 - FY 98.
MR. ROGERS: Would you consider dividing the question?
REPRESENTATIVE PARNELL: You mean between the taxes?
MR. ROGERS: Ya.
REPRESENTATIVE PARNELL: It defeats the principle of what I'm
getting at but I'd have to...
MR. ROGERS: Alright, lets do it where you have it and then if you
want to make a subsequent motion, you can. So the motion is to
move highway, marine, tobacco, user fee and alcohol taxes back to
98.
MR. LUDWIG: I'm wondering the impact to -- you'd have a better
sense of it than I would. That would be just before an election
night. You'd have to pass...
UNIDENTIFIED SPEAKER (Male): Next session is a campaign year.
Correct?
MR. ROGERS: If it's FY 9 -- it'd put it in the year after the
election. Pat.
MR. POURCHOT: I mean I appreciate Sean's concerns about the
politics of it. I think it is absolutely a legitimate point,
however, I -- you could take all that off and maybe look and see we
go with the 40, 30, 30, which we're still gonna discuss. What the
big question then in the public's mind is, "What have we done year
one?" What have we done towards the gap? That number goes up just
a little under $500 million for year one. I don't think we'd have
done our job if we only reduce in year one, the gap a very marginal
amount.
MR. ROGERS: Hugh.
MR. MOTLEY: Cut em all out it's $150 million less that will go
into the permanent fund and $150 million bigger deficit here and
it's what we came to deal with, and to skip a year bothers me.
MR. ROGERS: Annalee
MS. MCCONNELL: I'm also encouraged by - at least hopeful - by the
statistics that we heard over the tobacco tax in particular, that
that has tremendous popular support. I don't think it needs to be
used completely as a negative in an election year.
MR. ROGERS: Are you ready to vote? All those in favor of moving
those five lines back to 97 and 98 please raise you hands. One.
Those opposed. The motion fails.
REPRESENTATIVE PARNELL: O.K., I would divide the question and I
would vote -- I would move that we push the highway motor fuel tax,
the marine motor fuel tax, to 98, doing alcohol tobacco tax next
year.
MR. ROGERS: Everybody clear on the motion? Pat.
MR. POURCHOT: I would just comment in the case of the marine fuel
tax, I say this with some embarrassment, it passed last year, so I
don't know what downside this is to the legislature but the
legislature already voted on that.
REPRESENTATIVE PARNELL: O.K., you're planning on the increase
bill, (Indisc.) withdraw the motion and not take up the
commission's time.
MR. ROGERS: Judy.
MS. MCCONNELL: Did he just pull his motion?
MR. ROGERS: Ya. Do you want replace it so you can discuss it.
REPRESENTATIVE PARNELL: No.
MR. ROGERS: I wonder if it might make some sense to move the
highway motor fuel tax back a year, partly for the reason Sean has
indicated. You know, we have some spending cuts in the first year.
The other two taxes I think are popular taxes, and the marine did
pass last session, and moving the highway back a year I think gives
the public a chance to see that the spending cuts in fact do keep
up with it and I think I'd be supportive of such a motion, although
I expect that when push comes to shove, the public will support a
highway motor fuel tax as well. Pat and then Annalee. Mike and
then Georgianna.
MR. POURCHOT: I was going to raise this actually as a technical
point. I had forgotten about this. I mean many people have
discussed whether or not a non dedicated fuel tax is possible
politically or with the public, and whether or not it would require
a dedication. Lets just assume the dedication scenario. That
would require a ballot measure this election coming November,
presumably if the legislature agrees with that approach. You
wouldn't have the tax take effect until after, when and if, a
dedicated constitutional ballot measure passed in the fall. So if
that balancing has to be a commission recommendation, but if that
were the case, you might not even have this $40 million come in 97.
It may be just a half a year in 97.
UNIDENTIFIED SPEAKER (Male): If it were dedicated, it'd never come
in because it would be dedicated and wouldn't be gap filling.
MR. GORSUCH: You could be gap filling by requiring all the O and
M come out of that dedicated fuel which could total $20 million.
MR. POURCHOT: Yup, it could easily be debt fulling - I mean
deficit filling.
MR. ROGERS: Annalee, Mike, Georgianna, Lee.
MS. MCCONNELL: I do feel that having $100 million in new taxes
while we're doing $40 million cuts in the first year is going to
appear to be a real imbalance to the public. I think - and I want
the tobacco tax in the first year. So if the alcohol tax is gonna
be in the first year, that does sort of put it on to motor fuels.
The other thing that could be considered an advantage of that is
that we could maybe say that that period of time then gets used to
really work out the whole system of the local/state split of
responsibilities during that period of time, and I think we're
closer to having that. It's a little easier to deal with on the
harbor side, so the marine motor fuel can fit in more quickly. But
I think there would be good justification to say that we need a
little more time for the plan to pull together. And because
alcohol and tobacco have such high costs associated with it in
terms of the budget, in a way there are also spending cut type and
that's part of our rationale that they deal with - government -
trying to help control government expenditures for those abuses.
So I would fell comfortable moving the motor fuel tax to 98.
MR. ROGERS: I'm not sure whose motion it is. Sean?
MS. MCCONNELL: We're gonna link our motions here.
MR. ROGERS: We have a motion to move highway motor fuel tax back
from 97 to 98. Is there further discussion? Mike, Georgianna,
Annalee.
MR. O'CONNOR (?): Well, when are we make it dedicated fund. I
don't really think we really decided, but we did say that we are
gonna use that to help push the tax and if DOT, I spent some time
with em, it's about the only budget that's been flat for ten years
and...
UNIDENTIFIED SPEAKER (Male): That and the university.
MR. O'CONNOR: You know we're paying 8 cents. Nobody is paying
diddely for the use of roads in this state, including the
maintenance or snow removal or anything else. And they're also
taking care of all the buildings that you guys are talking about
deferred maintenance. They've got over 250 buildings that they
maintain with DOT. I think we need the money and we need it now.
MR. ROGERS: Georgianna.
SENATOR LINCOLN: Well I was just adding here. If we move the
motor fuel tax over 98, then we're looking at $118 million in new
taxes in 98. If we leave it as is, it's 110 in 97. I guess I'm
concerned. I hear what Sean is saying but I'm concerned that if we
say we're gonna have have taxes next year of $110 million and then
the year after that $118 million, it just sounds like more than if
you say we're gonna have $110 versus $60 million the following
year. I think it's gonna be a harder sell to split it out like
that rather than to getting it...
REPRESENTATIVE PARNELL: Georgianna, do you think it's easier to
say we're gonna cut $40 million now plus we're gonna increase your
taxes by $100 million the same year?
SENATOR LINCOLN: Well that the sell isn't going to be any easier
the following year is what I'm saying because you're still coming
in with $118 million. So it's not going to be an easier sell the
following year. So I guess that I'd be willing to put it on this
year. I don't -- a reality check again as you and I think that it
probably be shoved out anyway, but I think that we should give it
a shot for 97.
MR. ROGERS: Lee.
LEE GORSUCH: Brian, we can't fall into the same trap the public
falls into, and that is inflation is a real cut. It's a 3 1/2
projected budget cut for this next year. That's 80 million is
gonna come out. The cost of fuel goes up, the cost of power goes
up, the cost of paper goes up, contract agreements go up. Those
are all in place. Those are real cuts. We're cutting $120 million
from the state budget next year if we stay to the 40, 30, 30 plan.
And to sort of collapse to say the public doesn't understand
inflation, well I'm sorry, it is a real cut. And if we keep
playing around with this idea that only the nominal cuts count,
this is a never-ending kind of exercise. We're cutting $120
million of purchasing power from the the state government in FY -
we're proposing to in FY 97. That is huge. I don't know if
they're gonna be able to make it or not, but not to take into
account the significant pain and agony that is come with telling
everybody to beat that inflation cost, which is equal to $80
million for you to assume a 3 1/2 percent inflation, is silly. Now
the taxes that we have currently are roughly in that vicinity of
$100 million. There are taxes that we think should happen. I
personally think we should have a quasi dedication of that tax, not
in the constitution but at least in statute that says, "We expect
you're gonna use this to get these roads in shape." And,
therefore, even though it doesn't close the gap by, you know, the
equivalent amount of money, it does make a significant contribution
towards it. And -- so none of these are popular, but this idea of
sort of sharing the burden and responsibility - trust me, every
agency's costs are going up. They're not going down. This is a
real cut, not just a nominal cut. So I would urge the defeat of
moving that back a year.
MR. ROGERS: Are we ready to vote? All those in favor of moving it
back a year signify by raising your hand. Three. Opposed? Motion
fails.
MS. MCCONNELL: Can I make a suggestion for the format? I think
Lee has made a good point and maybe we could put, under that note
which is now gonna say just spending cuts and have 40, 30, 30,
maybe right below that then we have a line that says, "Cut into
today's dollars," or "Cuts in today's dollar," or something like
that so that we have shown on here that point.
MR. ROGERS: I'm not sure that this spread sheet is actually gonna
be, in its current form, is gonna be part of the plan when we look
at particularly the three year and the five year. So I'm not sure
we need to get into individual formatting. If you think about
Ross' presentation, which is gonna be the main thing, we can't fit
all these numbers onto the screen. So it'll be done more
graphically. We had a motion by Judy early on that it's a bigger
than these little tinkerings we're doing and that gets into the 25
percent versus 50 percent deposit into the permanent fund. Run the
numbers, assuming they're right, using the 4 percent payout rule
and using the decision we made yesterday that an income tax would
be voted on two years before the budget is projected to go negative
again. In 99 we have a surplus under the 25 percent plan of $200
million in debt to the $50 million onto the 50 percent plan. FY 05
a small surplus and a moderate surplus in those plans. The income
tax under the budget going negative would dip in 2001, for 2006 per
fund balance again 2010 would be $43 million versus $40 1/2
million...
UNIDENTIFIED SPEAKER (Male): Billion.
MR. ROGERS: So the annual payout rate would be a billion 488, a
billion 409 is the difference on the 4 percent. I just ran a third
one which I haven't put up here which would be somewhere in the
middle using a 25 percent dedication but dropping the payout rate
to a 3.5 percent and I can add that if people want to see the
numbers on that. Judy.
MS. BRADY: We're already bulking the permanent fund, we're doing
that, and we're cutting the budget back and we're doing an
endowment which is - the central thing here is the endowment which
takes -- and putting the earnings reserve which takes -- which
doesn't give you any leeway except what new money you know that you
earned. It defines - it defines the reoccurring revenue stream in
a way that hasn't been done before. We also have talked a lot
about the pressure that there is gonna be on spending and the
pressure there is gonna be on reform. If it's clear - I mean it's
gonna be clear when we talk about this plan with the governor and
the legislature and the public where we're taking money off the
table - take public money off the table for the future. We're
saying we're gonna bulk up the fund for the future and that you
cannot spend it now. That works as long as you don't get too
greedy for the fund for the future. You can get too greedy for the
future too. And so I just think that if we - there is a point past
which will be too much and I would argue that we stay - stay to the
25 percent and we close the gap. I think it's important that we
close the gap forward, but we also give some time for people to see
before we do the income tax, which is the deal breaker with money
on the table for just a whole big part of the population, that we
do -- we see if the legislature can hold the line. We see where
(indisc.) really to do some reforms and then I think people will
not have have -- I think they'll go for an income tax. I think
they're willing to pay as long as they see that money is being
spent well. But if you're taking money, public money, off the
table at every turn, it doesn't give us any -- we've got to have a
little room to move here.
MR. ROGERS: Hugh
MR. MOTLEY: I go the opposite direction. I already have problems
with the plan because there is too much room to move and I will
remind you that other $88 million won't even come close to touching
the $400 million drop in revenues as forecasted and (indisc.)
forecasting. But there is a big number out there in 2011 and we're
not spending at a level that we can sustain and if you think taxes
are gonna be hard with the deficit showing, they're gonna be
impossible if you're gonna show surpluses but you're gonna turn up
the surpluses so I speak against it.
MR. ROGERS: Lee
MR. GORSUCH: Well the other issue that has been attractive with
support around the Roger's plan was even more ambitious in terms of
taking everything off the table in terms of 100 percent and then
withdrawing down, try to maintain some kind of level. What I think
in part we're trying to do is also try to correct what we thought
was shortsightedness in the initiation of the permanent fund that
we would have been better off in the earlier years if we'd gone to
a 50 percent contribution rate. So part of this is to, as was
suggested, to try to create some kind of offset to that declining
oil production in future years but is also a constrain on state
spending. That is that 50 percent of - 75 percent of the royalty
that comes in now goes right into the general fund budget. It gets
spent. So part of the idea of taking the 50 percent out was to put
that in. Now that puts a lot more constrain on state spending
because state spending is now has to be raised through taxes not
through using "general fund money" that just comes in from oil. So
it - it not only sort of saves more money for the future, which I
think is very important, but it also puts more discipline that if
you want to spend the additional money you gotta raise it through
taxes and I think that's an appropriate balance for us to be in.
If we don't put the additional money away, I think it'll be spent.
And now that we're looking at the prospects of ANWR as a - at least
a possibility, that means that 50 - that 75 percent goes into the
treasury again and we're back to the same habit of fooling
ourselves that we can spend 75 percent, save 25 percent and balance
this thing out in the future. It isn't gonna work. So I think
that the strategy we have is a good one, I think we should stay
with it or this whole thing is gonna start apart in the eleventh
hour.
MR. ROGERS: Sean.
REPRESENTATIVE PARNELL: I'm gonna track what Hugh said in response
to Judy is I don't think we're taking money off the table. It just
seems that, yes, we're increasing it to 20 from 25 to 50, but we're
pulling out of the endowment in the first three years - 98, 99 and
00, pulling out $2 bill plus bucks. We've put 1.2 of the permanent
fund earnings reserve into the permanent fund and we've also put
another $700 million from that 25 to 50 percent. So we're spending
exactly what we're taking out, at least in the short-term. I mean
-- so I don't see that we're taking money off the table, we're
still spending the same money. It's just shifting through a
different account. I mean am I missing...
MR. ROGERS: You left the dividends out. That $2 billion includes
the dividends, so it's actually only $800 million net of dividends
- $700 billion. The 683 plus 732 plus 796...
REPRESENTATIVE PARNELL: Less the dividend?
MR. ROGERS: Less the dividend is what's actually available for GF
spending in this year. Bruce.
MR. LUDWIG: There's a couple of things - problem that troubles me
with this. One is that it takes an income tax clear out of the
plan and that's unacceptable. That's just flat unacceptable. The
other thing is that I think people are underestimating the public
on the use of the permanent fund earnings. I think that permanent
fund is a little more sacred then an income tax and I think that if
you can show that you've got a plan that repays that through a
higher portion of the the revenues coming in that that's an
acceptable tradeoff in people's mind. But if you just start doing
things status quo and start taking the money out of the permanent
fund, I think it kinda -- it changes the whole flavor of it. And
for that reason, I'd vote against it.
MR. ROGERS: Further discussion? The motion is to go from 50 to 25
percent. Are you ready to vote? All those in favor of the motion
please signify by raising your hand. One, two. Opposed? Motion
fails. The -- I want to talk about the spending side, the 40, 30,
30. In year 00 we then convert to this formula that says,
"Inflation plus half of population growth." We still have about a
$40 million deficit and I'd like to advocate that the plan not
allow the full formula spending in FY 00, but that the plan say we
balance in 00. What that would mean is that instead of the budget
growing according to inflation and half the population growth at
about $95 million in that year that the budget would only grow by
about half of inflation and a quarter of population in that year in
order to balance, and that the target should be that we force the
number either by not allowing growth or if the tax numbers turn out
to be different, we sort of force the number to 0 at 00 with what
are some more real budget cuts but are nominally would still be an
increase. I don't know if the chair can make a motion or not
but...
MS. MCCONNELL: I'll do it for you then.
MR. ROGERS: O.K., Annalee has made the motion to get the issue on
the table. Is there discussion?
MR. O'CONNOR: How do you know that what you just said, I mean is
that (indisc.) somewhere or have I just...
MR. ROGERS: On the total GF spending, the numbers from 00 out are
that inflation plus half of population growth, and that's basically
out of the base case except we've taken a whole bunch out of the --
- since we've cut, we've also cut all that growth in the out years.
Mary and then (indisc.). Mary.
MS. NORDALE: Just point of information - so that there are line
that says, "Cumulative spending cuts total," would read, "40, 30,
30, 50."
MR. ROGERS: No, because in that - that it's not - it would not -
those 40, 30...
MS. NORDALE: I don't mean cumulative, but I mean just spending
cuts.
MR. ROGERS: No, cause 40, 30, 30 is the nominal dollar spending
cut.
MS. NORDALE: Right.
MR. ROGERS: And in the fourth year there would be no nominal
dollar spending cut. In fact, if you notice right now the budget
grows from 2376 to 2471. So instead -- it was would grow from 2376
to about 2421 so there's not...
MS. NORDALE: Right but you would...
MR. ROGERS: So there's not -- there's no nominal dollar spending
cutback.
MS. NORDALE: Oh I see.
UNIDENTIFIED SPEAKER (Female): But we're squeezing in the
increase.
MS. NORDALE: Ya.
MR. ROGERS: Lee then Judy then Annalee.
MR. GORSUCH: Well the first is we're looking at a population
growth -- well I mean these are all again projections. We're
looking at a 35,000 additional residents over that five year period
of time. You know on average, assuming that the growth is
reflective of the current composition of the population, probably
somewhere in the vicinity of the third are school age children.
That means 10,000 additional kids coming into the public school
system. Currently, we spend somewhere in the vicinity about $8,500
per student in public education. Multiply that times the 10,000
students. You're looking at a huge increase in the education
budget. To assume that that can simply be absorbed again by
transferring the cost or getting the - that level of reduction I
think is gonna wind up either simply transferring the expenses back
down to the municipalities who ironically, and I think it's
important for all of us to understand, is the municipalities
actually do get their revenues from taxes and they tend to be
regressive taxes to the extent that everybody believes in the
regressivity of property taxes that's unrelated income or sales
taxes which they, arguably, are also on the regressive side. So
we're saying, "Well the state doesn't want to do any - any taxes
and we'll simply transfer the services to the municipalities and
you can raise your school taxes." I just think this is a - is a -
is gonna be extremely difficult to try to pull off and, you know,
we're already looking at a 25 percent real reduction in a, you
know, state spending per capita. And I think we're not likely to
kind of achieve these results if we just assume without tracing
through the consequences of how we're gonna get there.
MR. ROGERS: Judy.
MS. BRADY: Well all of us have different concerns, you know, we're
kinda even to go along with the whole package about what we think
is true. We haven't had 3 1/2 percent -- I mean we are - we are on
the low in a sense, you know, jacked up our base case quite a bit.
We have had actually 3 1/2 percent growth in the state since we
have had (indisc.) every year, every year.
MS. MCCONNELL: We're assuming 1.6 percent published.
MS. BRADY: And we haven't had...
MR. GORSUCH: Half of the actual.
MS. BRADY: And we haven't had either. Again, you know, we're
doing cadillac version of everything and we're not willing to give
that up for, you know, to make all kinds of investments in other
ways. You know you're perfectly willing -- put some of those
perfectly willing apparently to push the figures on one side and
not willing to give it all on the other and I -- to - to continue
to push about how awful it is to take out a small amounts of money
in a huge huge huge budget is just -- I mean I'm fighting that to
get to the endowment I guess. But, you know, my feelings about
what we could actually do in terms of cutting our - our -- if we
we're really going to go into do reform are a whole lot more
serious then these are now. And so to say -- I think we can not
assume as big as jump through this time period and get to 0 fairly
easily. My feelings have been, from the beginning, either use the
money and jack the thing up or if you're gonna take it off the
table and stop saying, "Well we can't do it," and just do it and
make the changes. And every time we make a little change downward,
oh my God, we can't do that and every time we make a little --
every time we start to move it up we're at the other end. You
know, everybody whose for income tax, oh that's a good idea, we can
pay it in taxes. The same people at the municipal level that pay
property tax are also the ones that have jobs, they're gonna be
paying income tax and it's not just the rich guys, it's that big
middle in our state that just is making it, it's just making it.
And so these are guys you're asking to pay income tax when you
can't make budget cuts or take money off the table because they
also don't get the money from all of the social services and that
kind of stuff. Those people are done it the other way. It's this
middle group but now you're asking to -- the property tax is a --
and income tax and not near the benefits that the low end and the
high end get. So I think we can knock a half a percentage off and
come to 0.
MR. ROGERS: Annalee.
MS. MCCONNELL: Well, I should be arguing to let it go up because
if I still have a job, that's why I'm gonna be so exhausted and
crabby then. But I really do believe it's important to balance in
00 and I think I would prefer to see a more -- not have it go up as
quickly and balance it and I'm comfortable balancing it on the cut
there because I think psychologically, it's real important for us
not just sort of come close in 00 but do it in 00 and, you know, I
recognize that there will be a tremendous amount of pressure, but
on the other hand I think we can take it up a little more gradually
and gain a lot of (indisc.).
MR. LUDWIG: What does that figure do when we increase the taxes
(indisc.)?
MR. ROGERS: The tax numbers, we only had about a $5 million.
Instead of -49, we're at -43. What it does, by bal -- if we
balance in 00, it would have the effect of allowing us one more
year if we wanted it for the income tax. The income tax could take
effect in 02, we could calendar in 02 instead of 01, because we're
balanced in 00 and we're within $5 million in 01 without a tax.
MS. BRADY: Which is what our -- which is what we talked about
anyway, having the thing in 98, 99, starting at 2 - 1 or 2.
SENATOR LINCOLN: Could you give me those figures for 00 and 01
without a tax.
MR. ROGERS: Without a tax, with Annalee's motion, for....
TAPE 2, SIDE A
MR. ROGERS: ...and that means that the growth, instead of being
from 2376 to 2471 is 2376 to 2428 in nominal dollars. In real
dollars that would represent a reduction of $20 million in real
dollars in FY 00 in order to make it.
UNIDENTIFIED SPEAKER (Female): A reduction of $20 million.
MR. ROGERS: A reduction of $20 million real and an addition of $70
million, excuse me of $50 million nominal. That's - that's a point
at which real and nominal have different signs to them.
SENATOR LINCOLN: In the gap then would be...?
UNIDENTIFIED SPEAKER (Male): Zero.
MR. ROGERS: Zero in 00 and $6 million in 01 without an income tax.
And I think under our income tax trigger two years, we'd really -
we'd push the income tax from 01 to 02. Bruce.
MR. LUDWIG: Mr. Chairman, I don't have a problem I guess going
with 000, but I don't want to change the assumptions of the
population in (indisc.). I mean I could - I can support taking $20
million or $50 million, whatever that cut is out, but I think we're
just sticking our head in the sand if we don't think that the
buildings that we lease from people are gonna go up and the goods
that we purchase are gonna go up. So I wouldn't support changing
the formula but I would support cutting it to get it to 0 for that
year.
MR. ROGERS: I think the motion is only to go to 0. Is that right?
MS. MCCONNELL: Right.
MR. ROGERS: Further discussion on that motion?
UNIDENTIFIED SPEAKER (Male): And what happens after that?
UNIDENTIFIED SPEAKER (Male): Back to the base case.
MR. ROGERS: Basically the -- what happens after that would be the
existing model.
MR. POURCHOT: From that point.
MR. ROGERS: From that point.
MS. MCCONNELL: So lower the spending in the out years.
MR. O'CONNOR: So does that mean that the bottom line of this would
go 40, 30, 30, 50?
MR. ROGERS: No because 40, 30, 30 is in nominal dollar and there
is no nominal dollar cut in that fourth year.
MS. MCCONNELL: You actually would allow for about a $50 million
increase then.
MR. ROGERS: In nominal dollars.
MS. MCCONNELL: In nominal dollars.
MR. ROGERS: So in nominal dollars you'd have -40, -30, -30, +50,
and in real dollars it is -100, -100, -100, -20. The effect of our
- of the 40, 30, 30, is $100 million real cut the first year, $100
million real cut the second year, $100 million real cut the third
year, and then under Annalee's motion, $20 million in real cut the
fourth year.
MR. GORSUCH: Mr. Chairman.
MR. ROGERS: So the motion is whether we go from 100, 100, 100, 0
to 100, 100, 100, 20. Speaking to that motion.
MR. GORSUCH: A Mr. Chairman, the a -- I think it's important for
us all to appreciate that the base case we use already has implicit
additional reductions. That is it is not inflation and population
growth. In my recollection is that we cut it in half.
MR. ROGERS: Inflation and half population growth under the theory
that some programs are not population driven.
MS. BRADY: It is inflation. It'd have to be.
MR. ROGERS: Cut in half - population.
MS. BRADY: Inflation and half population is inflation - does have
(indisc.)
MR. GORSUCH: So, again, just turning back to the spreadsheet.
Under the original plan, per capita spending in real dollar terms
goes from $4,000 down to $3,328.
MS. MCCONNELL: In -- that's in the year what?
MR. GORSUCH: In the year 2000 under the current plan.
MR. ROGERS: And under this -- under families (indisc.) 3271, a
reduction of another $50 per capita.
MR. GORSUCH: And, Mr. Chair, I don't -- I think we're far enough
along to balance this into the 0 in 2000, but I just want to
emphasize that not certain -- using disdain that inflation doesn't
really have budgetary impacts isn't true. I mean it does have big
impacts. Now - so all I'm asking is that we keep in mind that a -
having - what represents a significant drop in four or five years
is a - is in fact big and if we're not giving ourselves and the
public sort of an understanding of what that represents, I do think
that it does have some consequence. The other thing I would just
urge then as we get to the spending cuts, so we can address Judy's
point earlier about where do we expect these to come down. And I'd
like to do some of this generally specific guidelines, which I
think we made some headway day before yesterday, but I think we
kind of petered out around $100 million. So we got $200 million
more to go and people are gonna ask us, "Well what are you - what
are you expecting to be cut when you sort of set this target? It's
nice to do it mathematically, now could you give us a little more
specificity," and I'd just like to sort of round out that
conversation. So I think balancing this is fine. I just want us
to be aware that if we don't take inflation into account as a cut,
then it is gonna be hard to sell this in the general public.
MR. ROGERS: Motion on the table is to move to balance in 00 - 0 in
00. Are you ready to vote? All those in favor signify by raising
hands. Passes unanimously, passes...
UNIDENTIFIED SPEAKER (Male): Are you opposed?
SENATOR RIEGER: I think that the problem is that you're trying to
find ways to bail out of the problem created by diverting the
royalty stream. (Indisc.) appropriate to participate in that when
I'm against the diversion of the royalty steam.
MR. POURCHOT: Do you support moving the income tax back a year?
SENATOR RIEGER: I don't support the diversion of the royalty
stream or some of the other ventures that were done to bulk up the
permanent fund. So you know some of these it's not really fair for
me to vote on them. I'm not with this program right now.
MR. ROGERS: So where we are now is with a gap of 0 in 99, a
surplus of 137 in 05, a postponement of the income tax one year to
FY 2002, a permanent fund balance at 43.7 - that taken $50 million
out in nominal dollars made a half billion dollar difference in the
permanent fund in the out year. That's how big the effect of
spending reductions is, and we picked up another $11 million on the
out years. I want to break now for a few minutes. Do people have
preferences for what we might order in for lunch. Pizza O.K. or?
MR. GORSUCH: Last night's dinner was fine.
(Discussion regarding what to have for lunch) O.K., we'll take
about a 15 minute break here and then resume at 12:30, we'll break
again whenever the pizza, or whatever arrives, probably around
1:00. We have have a little more work on the spending cuts...
MS. BRADY: I want to talk again a little bit about spending cuts
and - because we're still trying...
MR. ROGERS: We're gonna take a break, spending cuts is the first
thing on the agenda after the break.
(After break)
REPRESENTATIVE NAVARRE: Did we put in a suggestion that if the
legislature chooses not to implement these other taxes that income
tax gets moved up?
SENATOR LINCOLN: (Indisc.) a negative. If it goes for a
negative...
MR. LUDWIG: (Indisc.) saying they elect not to do...
REPRESENTATIVE NAVARRE: I mean they could also do it by further
cuts in the budget but they're not gonna get there.
CHAIRMAN ROGERS: I think in terms of giving a three year plan with
a super majority saying that if we fill it with an earlier income
tax might be a serious problem.
UNIDENTIFIED SPEAKER (Female): (Indisc.--coughing).
MR. ROGERS: I think that the commission - on the commission.
SENATOR LINCOLN: Aren't we trying to get to -- I mean it'd be nice
to get to a super majority (indisc.).
CHAIRMAN ROGERS: I think it carries more weight in terms of the
plan that people can endorse.
REPRESENTATIVE NAVARRE: I just have a difficult time understanding
why that is because income tax does have a benefit of being able to
be deducted from federal taxes. It's the out-of-state workers in
Alaska, so we're weighing everything pretty heavily for Alaskans on
here and that -- I guess we could debate this in the legislature.
I just don't want to set it up so that the legislature says we're
not going to do income taxes until this year. It may be, in fact,
a better choice than many of the other taxes.
MR. O'CONNOR: Mike, if I -- one of the things is working it we're
also saying before you get an income tax. We want to see some
cuts. We want to see some services that where the user pays for
the services before you (indisc.--) you know tax everybody. I
think that was kinda the way this thing got there.
MS. BRADY: Ya, we're saying we're doing systemic changes by doing
an endowment, we want to see some systemic changes way some money
is spent on (indisc.)
REPRESENTATIVE NAVARRE: All except for the head tax on individuals
which is a reduction in dividend and it translates in to a head
count.
UNIDENTIFIED SPEAKER (Male): On residents.
REPRESENTATIVE NAVARRE: On residents. It's a resident tax period.
I understand what you're saying, I just -- a reduction in dividends
is a head tax on residents of Alaska.
MS. BRADY: Where we're you when we voted on this?
UNIDENTIFIED SPEAKER (Male): I was here in the majority.
MS. BRADY: Well...
MR. LUDWIG: Well it's also -- he was gonna give us a proxy, but
you objected to the proxy so we couldn't use it.
MR. ROGERS: We're gonna move to the budget cuts list. We need
about 8 more bigs, about 12 more mediums and a lot more small. Lee
did a rough calculation at a 100 - roughly a $100 million, not
counting the conditionally big.
UNIDENTIFIED SPEAKER (Male): Is that real or nominal.
MR. ROGERS: Yes. Judy
MS. BRADY: I gonna make a - I'm gonna make a pitch again that we
don't spend a whole lot of time on this and that we look at areas
that are obviously are drivers that need to have some special
emphasis, perhaps from a group of people with the directives that
they cannot add to - to apparently what the formula - education
formula group did - that they must use a systemic change to change
it because this kind of thing, especially the way we did it where
we said, "If anybody objects, it goes off the list." That's not
how cuts happen and that's not -- and cutting $30 million here and
$5 million there and $1 million there is also not gonna fix - not
gonna get us where we need to go. We need to change some things
pretty seriously because we are so far out of whack in areas that
other -- not even where we're unique where other states are doing
the same things, we are out of whack and we're not even willing to
deal with that. And we don't have enough time, we don't have
enough time to be believable in coming up with, you know, even as
specific as some of these are. So I just think we need to be very
careful about -- maybe identify those areas where there just quite
obviously has to be some big changes or it'll be (indisc.).
MR. ROGERS: Mike and then Hugh.
REPRESENTATIVE NAVARRE: I was just looking at the freezing the
"Certificate of Need" for hospitals or nursing homes or whatever,
as a medium savings over five years. Actually I don't think it
saves anything, it just reduces what would otherwise be a potential
increase. It doesn't save anything from the budget. So it...
MR. ROGERS: It reduces budget increases.
MR. LUDWIG: Which would be a nominal cut?
MS. BRADY: Well see that kind of argument that just makes us look
(indisc.) right.
REPRESENTATIVE NAVARRE: But it doesn't - it doesn't reduce
anything from what goes in our base case because all of those are
gonna continue. So I don't think you save anything. You see it
doesn't help bridge the budget gap.
CHAIRMAN ROGERS: But if you don't do it, the budget gap will
grow...
REPRESENTATIVE NAVARRE: No, I think we should do it but I think
that you should, I mean I think that should be a recommendation but
you can't show it as a savings.
MR. ROGERS: Good point.
MR. LUDWIG: ...presume that...
MR. ROGERS: It's a cost avoider.
MR. LUDWIG: ...and increased population, you (indisc.) that as you
got the savings back and expenditures.
MR. ROGERS: I think a more accurate title, I mean that would be
avoid cost increase. Mike O'Connor and then Sean.
MR. O'CONNOR: O.K., I'd say one that you can put on there is
consolidate higher education. It could save $20 million a year.
SENATOR LINCOLN: And I object to that and I think that, Mr.
Chairman, that the reason that -- and I mentioned before exactly
why I object to that. I object to it because when you consolidate
then you're talking about eliminating the community colleges,
you're talking about eliminating rural distance delivery and the
services then are going to go to the urban population and to hell
with the rest of the state.
MR. ROGERS: Are you ready to vote?
UNIDENTIFIED SPEAKER (Male): On what?
MR. ROGERS: Mike's motion to add "Consolidate higher education."
REPRESENTATIVE NAVARRE: Oh to this list?
MS. BRADY: Can I point out that before if someone objected, it
just went off. I mean we didn't even vote on things.
MR. O'CONNOR: Two objections and it was off. That's right.
MS. BRADY: So, see this is not -- all this does is we don't have
time for this, we don't have time to do the information that we
need to know, you know, back and forth and the cut now or cut
later. We don't have the people here to let us know, you know, to
do the kinds of thinking through we have to do. I'm just real -
I'm...
MR. ROGERS: Annalee and then Hugh.
MS. MCCONNELL: I share some of the Judy's concern. I think that
we had felt that we needed to have some degrees of specificity in
order to lend credibility to our argument that there are places
that could be cut in the budget and it should be, and I think we
have given some good ideas, and I think we need to be careful that
we don't try to get a level of precision that indicates that this
is the most appropriate package. I think we have to be sure that
we make it really clear that there are some very specific areas,
some of which we think there is probably very little disagreement
that there are significant savings that we should proceed. Others
on this list I think fall more into the category of needing a fair
amount more discussion and more information. But I think -- I'm
glad we've done this now. I feel that we've got some stuff here
that adds to the credibility of the overall report. But I have to
agree with Judy that we probably shouldn't try to make it too
precise a package, it implies a level of accuracy that we don't
have - of course big, medium and little, it's not exactly accurate
but still....
MR. ROGERS: Hugh.
MR. MOTLEY: I guess I share Lee's concern that we've asked for
$250 million in real cuts and we have identified what might amount
to $100 million. I've got one that I didn't address the other
night because I was tired and we ran out of time and I was kind of
shocked that one of my suggestions got through anyway. I have
one...
MS. MCCONNELL: We might shock you again.
MR. MOTLEY: I have one, incentive programs, tier three retirement
for TRS and PERS. We're talking about retirement, I guess I'd like
to expand that and say as to PERS and TRS that we look at
compensation levels in competitive areas like the Northwest and
labor availability and look toward a scaling down to a comparable
level which would be more nearly what the private sector has, not
just retirement benefits but also compensation level because I
think the public is going to demand that and if we don't put it on
the table, we'll never meet any of this stuff.
MR. ROGERS: Let me ask a question about that. What if that study
showed that certain categories should be scaled up. Would you
support scaling those...
MR. MOTLEY: Yes.
MR. ROGERS: Would you support scaling the ones that are over
market down and the ones that under market up.
MR. MOTLEY: I think you clearly have to live with the result. I
don't think it's gonna be an automatic scale down for everybody.
I think there -- but...
MR. ROGERS: Could you take the word "down" out and say, "Scaling
to comparable level?"
MR. MOTLEY: Ya, scale to comparable level.
MS. MCCONNELL: I don't think the public will stand for me making
a salary if equivalent to what would be paid in the private sector.
MR. POURCHOT: Annalee, you ought to abstain from voting on this.
UNIDENTIFIED SPEAKER (Male): (Indisc.)
MR. MOTLEY: Private sector where?
MS. BRADY: See I think it should be indexed to what people are
paid in other states - in other similar states, and that's
education salaries. I mean up -- we've always been more, but man,
we are like...
MS. WESTFALL: Way more.
MS. BRADY: Way more. That's gotta -- not for the people already
making it. You don't expect people to do that, but for new hires,
boy index to what - closer to what folks are making.
MR. ROGERS: Sean.
REPRESENTATIVE PARNELL: Just clarification here. Are you talking
about indexing it to comparable public sector employees or
comparable private sector in other states. Which?
MR. MOTLEY: One of the reasons that we -- that the private sector
here is troubled is because the indexing that is occurred here
occurred at a time when the private sector was in a boo pipeline
type scenario and the public sector was brought up to those levels
to be competitive. The private sector has gone down since those
pipeline days. The public sector has not and I don't mean public
sector individually but there are -- this has got to come to
balance because you'll never cut this stuff until there is some
work done on the....
MR. ROGERS: Bruce.
MR. LUDWIG: I think what Hugh is saying is, in a large part,
valid. I think there are certain occupations where it is over and
maybe for some policy reasons they've stayed higher, but I think in
a lot of cases they're under market too. We're talking about doing
something to the retirement system that maybe comparable to other
people in the health insurance. I think you have to the total
package as far as the wages go. I don't disagree with it, I think
that's what the law says you do right now. The Division of
Personnel does a study, supposed to be annually. They do about
once every ten years, but they did make an adjustment I think two
years ago on administrative and clerical. They did downgrade some
positions. I think just spending a little more time in that area
might save some. It's still routine fairness.
MR. ROGERS: I support the motion because I think there is an
inherent fairness in looking at comparable studies. I have a
problem with the effect of this - the political effect. If it
does, as I expect it will, show that the - some of the lower paid
employees are high relative to market and some of the higher paid
employees are low relative to market. And I think that we should
be looking at market. I think it's the right thing to do but the
net effect of doing that my be to widen wage disparity between the
lowest and highest paid workers in Alaska, and I think that that
will violate some people's sense of fairness, but I think that a
market based approach makes a lot of sense and the public can
ultimately accept that.
MS. BRADY: You mean - you mean if you're...
MR. ROGERS: I think what you'll find is that...
MS. BRADY: I know but if that's the way -- if you're working at a
job that requires certain skills and you're getting paid at five
times more than those skills and you should because you're lower
paid, and if you're a manager and you're not getting paid enough,
that's O.K. because after all you're a manager.
MR. ROGERS: I'm not saying I believe that, but I believe there is
a widespread -- I hear proposals to cut everybody making more than
$50,000 a year back to $50,000, or cut everybody making over
$50,000 by 10 percent. Those have been made by the legislators as
part of the budget process and that it -- everyone's countered,
(indisc.) market based approach. I support a market based approach
and support Hugh's motion but I think there could be some political
difficulty if the effect were for certain. Currently, high paid
positions that are 10 percent or 20 percent or 30 percent below
market, to go even higher - I think there would be some political
heartburn in the legislature over that even if it makes sense form
a market based approach.
MS. BRADY: Well I think it's gotta -- are you talking private?
It's gotta be public market not -- is there a mix?
MR. MOTLEY: I'm talking market based. I think we need to -- for
example, I don't know that we can say what education is gonna be.
I'm just saying that I believe that state funding should go to a
market level comparison with other jurisdictions comparable,
whether it's Northwest or whatever, I don't know how you compare
education to a private sector. So I -- it doesn't do much for me
but -- and it's not saying -- we're talking about a tier three,
we're not talking about changing anybody that's there but we got to
do something because you've seen the formula, 10,000 more students,
more money. We've got to change that. We've gotta look at it and
if the local area wants to pick up that other tab, then to it, but
I don't think the state can handle that kind of funding. I think
the state has got to fund it at one level and if the others want to
pick it up, that's fine.
MR. ROGERS: The motion before us is that do we include in our
budget area a recommendation for look at comparative compensation
levels and scale compensation levels to a comparable levels for
both salaries and benefits. Are you ready to...?
MR. MOTLEY: And it's right to pass through with any objections.
MR. ROGERS: Are there any objections? Hearing none, that's
adopted.
MS. MCCONNELL: And Judy knows CPR since you're about (indisc.)
shock but too.
MR. POURCHOT: Briefly comment on -- even though I was sitting
there, I missed the chalkboard when the assignment that big was put
next to administrative consolidations of departments. There is two
parts to that. I mean I think everyone agrees that department's
divisions should be looked at for consolidation. Several years ago
Senator Faiks had directed a fairly intensive private contract to
look at Natural Resources, DNR, DEC and Fish and Game
consolidation, and after a lot of look at that and consolidating
the proposal essentially saved the price of the two commissioners
that you wouldn't have. Many looks have resulted in the same
thing. Just rearranging the boxes typically, you know, you
eliminate the two division directors or one of the two division
director's salaries or one of the two commissioners. Those are not
big savings. To get big savings, and maybe this was intended, if
you eliminate functions which, I mean that's a huge area underlying
that - those simple words, "Administrative consolidations," then
you really need to look at what functions are you talking about not
doing like the Division of Sport Fisheries or I mean that's where
you get big and I don't think we're prepared to get into that.
MR. ROGERS: I think what was meant by this, and I was a little
surprised to see the consolidation because I thought we were -- the
discussion was that re-engineering the way we do certain
administrative practices in that as well. I personally think the
statement was our big fair in terms of looking at a single
administrative services office covering five department instead of
five separate administrative services within five departments and
re-looking at the way procurement is done by departments or payroll
is done by departments or personnel or those other support
functions. I think there are, you know, if big was over $20
million a year by year five, I believe the state can go much
further than that.
MS. MCCONNELL: What if we just add a couple of words to expand on
the rest of that concept from yesterday - administrative
consolidation, streamline, and it was sort of a grouping of
efficiency related things.
MR. ROGERS: Re-engineering.
MS. WESTFALL: How about (indisc.) and privatizing.
MR. ROGERS: I think privatizing is a separate issue and we ought
to look at that separately from those. Judy.
MS. BRADY: I'm gonna try this once more. We are asking for a big
change in the way we do business in this state, a big change, and
that's gonna be the center of the debate. This trivializes
everything we've said, I mean, because people look at this and they
say, you know, change the fees for the pioneer homes. I mean it's
kinda like big stuff and little stuff all kind of mixed in and
that's not important, it is important, but it's like what are we
doing here. We want to pick the three or four things that we need
to concentrate on. That might be interest, I mean the three big
things because it would make a difference.
UNIDENTIFIED SPEAKER (Male): Health, Education and Welfare.
MS. BRADY: Ya, Health, Education and Welfare; Corrections; and
Transportation. I'm tired of hearing about fat budgets when people
just took things off budget. But someway of big things and then
leave all this other stuff and lets get done...
MR. ROGERS: With education, you said slow the growth of general
fund education spending. With welfare, we said their welfare
reform package would help, with Transportation, with Corrections we
haven't said anything.
MR. POURCHOT: Hospitals CON.
MR. ROGERS: Ya, but that's a cost avoider, not a cost saver.
MS. BRADY: Shouldn't we be indexing our costs to what everyone -
to what similar states have on those areas where we are not unique.
Every state has corrections, every state has education, every state
and those areas where we are not unique, there is no reason for us
to be 8, 9, 10, 15 times over their costs. There is no excuse for
it. It means we're doing something that they're not doing or we're
doing something really wrong. So why don't we take a look -- why
don't we seriously look at indexing our costs to similar to like
states like Wyoming, Montana, places that have big distances and
have some of the same kinds of problems and see where we are and
see why we are and stop throwing it off to saying oh we're unique
because we are not unique in education, we are not unique to
corrections, we are not unique in welfare. And then take a look at
those place where we are unique and say O.K. do we still want to do
this. Do we still want to do longevity? Do we still want to do
all this other stuff, and just -- and start paying serious
attention where we're way off the scale in normal functions.
MR. ROGERS: Georgianna, Mike.
SENATOR LINCOLN: Well Judy, I guess I'd have to disagree with you
then when you say we're not unique. We are unique in education, we
are unique in corrections. We are unique in that we can't just get
in a car and drive to all the communities as the majority of the
rest of the United States enjoys. So the cost of doing business is
much much greater.
MS. BRADY: Our salary scale's 88 percent higher in education than
any place else. That doesn't have to do with driving, that has to
do what we pay people than anybody else.
SENATOR LINCOLN: But to just say that we're not unique. We are in
how we deliver those services.
MS. BRADY: Separate out the uniqueness and then take a look at
where we're not unique because I'd be willing -- well we all know,
that's where our prices are. Our costs are higher. Not where we
are not unique. Where we are unique, O.K., ya easy to sell, but we
need to be indexing where we are the same as every other place and
why are our costs so much higher there. And maybe we say fine, ya
there is a reason and here's why and we buy in. Distance is a way
- is a reason for being higher but that doesn't account for the
fact that you pay the people ten times more than anybody else does.
MR. ROGERS: Mike Navarre and then Annalee
REPRESENTATIVE NAVARRE: Well I don't think that we're paying
either ten times or 88 percent higher in education than any other
place. Also, we are unique because Wyoming or Montana or wherever
else, have many small communities but it's not the same transition
from a lifestyle that our villages had to an economic structure
that was forced upon on them. So then what you have in a lot of
those rural areas that have absolutely no economic base now is a
social system that compensates based on whether or not they have
access to a job and things like that. So, I mean we've seen a
tremendous road in a lot of rural Alaska in health and social
services' costs and welfare costs. We've also seen because of
decisions that we made or that were made years ago by courts,
education system and legislative decisions when we had a lot of
money. I think we can realize some savings there and I think that
the savings come out here in year FY 03 and 04 and 05, rather than
in FY 97, 98, 99. In fact, if you want to do some of that we
should be loading more ability into the - into the front end to get
the savings at the - at the far end and we're not - we're not doing
that. What we're saying is you're gonna save $350 million over the
first three years (indisc.) and do it through some type of
reorganization and reduction and then you allow for growth out here
into the future. And I think we've set up an impossible task. I
think we can achieve some real significant savings but I guess I
sort of agree with you that what we're doing is putting everybody's
pet peeve on here without a lot of information about how we got to
where we're at and some - you know pulling out of the sky what
types of savings we're likely to realize when the legislature
(indisc.--coughing) and I could tell you, it's easier said than
done. I mean it's -- and not without very legitimate attempts by
a very conservative legislature. It's a slow process or you see a
lot of economic impact that you don't want to see.
MR. ROGERS: Annalee:
MS. MCCONNELL: I think we're falling a little bit into the trap of
getting so much caught up in whether we're alike or different and
we all view it so uniquely that I think we won't get off it. And
I think departments like Corrections are aggressively pursuing a
budget regardless of deciding whether we're the same or different.
They're going gung ho on a bunch of cost savings measures now to
find out why - where we can pick up big savings then. I think
that's where we want to emphasize our efforts is the practical
stuff and not let ourselves get caught in the battle of which way
we perceive the world. So that was just a general comment and then
on a specific thing, I'd like to change the one on education to
allow for the incorporation of an idea that Hugh had mentioned in
the context of compensation. Allow the possibility that maybe we
standardize a - for salary levels of state support and locals would
be free to do something different. Sean was suggesting maybe just
take out first three or four words to say, "Slow the growth,
general fund education spending." That might be the education
formula, it might be do an indexing of salaries and its shift in
local/state split or something of that sort but it would open up Aa
couple of other possibilities.
MR. ROGERS: Bruce, then Annalee.
MS. MCCONNELL: I mean don't know if that's gonna accepted but I
just throw that out as an idea.
MR. GORSUCH: Mr. Chairman, the way many of these things tend to
work is they're indexed off of Anchorage and then everything
becomes a factor off of the Anchorage is 100, and in the past we
always assumed that the cost of living between Anchorage and
Seattle was 25 percent and then 13 percent. So it does seem that
if the -- if there is a desire to try to bring in comparability
where comparability is important, it would be in our large urban
areas of Fairbanks, Anchorage and Juneau, since on most of these
formulas their so called 100, that's the base from which everything
else starts. So to get at this issue means that those are the
groups that have to be indexed first to get to the point to drive
to the bush and the outlying areas where we do have work done on
the cost of living geographic differentials and so forth. Now I
think it applies not only to compensation, but it also applies to
benefits. That is trying to move towards the target that
compensation and benefits are indexed in some degree where
appropriate towards this kind of level. And when there are
arguments about discretion, I think that's perfectly legitimate
that there is some other reason why there should be exemptions and
waivers and so forth, above and beyond. But the truth of the
matter is if we're gonna get at this $2.4 billion dollar budget
knowing its composition, it has to get into those entitlement
programs and it has to get into education or we've lost over 50
percent of the entire budget. And as we look at our expenditure
graph, again going back to our first report, the Runaway Program,
as Annalee said was in Corrections, and the -- so I think it's
appropriate to be looking at those budget busters. But the core of
it, even though Corrections has been growing rapidly, it's still a
hundred and twenty some million dollars on a $2.4 billion dollar
budget base, so that's 5 percent of the budget. So even if you
have effective cost containment on corrections, you still have the
other 95 percent of the budget you have to be worried about. So I
think this idea of trying to come up with a strategy on both
benefits and -- I mean compensation and the benefits appropriately
benchmark, or however you want to characterize the reference, but
as Mike said it's gonna take years to get into that point if you
use the tier, you know, (indisc.) such as the tier three strategy
because the normal turnover in employment is around 10 percent, so
as you're hiring back at a rate of about 10 percent a year, so over
a ten year period of time you can expect to get a major change, I
mean a fairly dramatic change which you put in place the systemic
change by you initiation practice. That is putting the tier three
concept, you know, into place but I think it would have to handle
benefits as well as the compensation since so much of past
(indisc.) on block grants to individuals and to - and to
communities. The -- so I think that's big big downstream. I'm not
sure how big it is in any particular year but I think over the
accumulation of our five year plan and our ten year plan, those are
the major potential savings. The second is to turn to the
Corrections as an example. I had mentioned this in one of our
earlier conversations. When I spoke with the Alaska Sentencing
Commission, one of our Supreme Court justices had said our
mandatory sentencing could be reduced by 25 percent and still be
within the national averages. Now again, part of what's happened
is that we've rushed in to sort of lock everybody up for long
periods of time and then we don't want to pay the bill. Now on one
hand we can get our bill down, as Judy was suggesting, by again
doing this bench marking and how much do you pay for cards and how
much do you pay for this and that and the other thing. But still
the rate tends to be a lot higher because we have significantly
higher mandatory sentencing. So if we're serious about this, then
you gotta reexamine whether or not those particularly stiff
penalties is affordable and if it's not, then that's one of these
compromises that also has to be put back on the table again. Is a
shorter swifter justice better than a slower longer justice? And
I think that's a fair issue to put back, you know, back on the
legislature. On the Medicare Medicaid costs, where those have been
growing in excess of 10 percent a year for the past several years,
that's another one of our big budget busters in terms of how you
come up with effective cost containment on Medicare Medicaid. But
the truth of the matter is we don't even know what's driving the
cost. That is it could be partly driven by a changing demographics
that the more -- the elderly populations are both fastest growing
and they get sick more than the sort of middle population. So part
of it may be built in to the - to the population base but we need
a cost containment strategy on health related costs and this idea
of whether or not we want to use a Certificate of Need as the
intervention, you know we're build hospital beds because they're
free assuming that there is no cost. It's like building additional
roads because 90 percent comes from the feds but we have to
maintain them. So in the cost costs more than the match to get the
federal dollars. The only way we're get a cost containment is to
get better bed utilization rate, better equipment utilization
rates, but I don't think the state has a coherent strategy. Now
again, it's gonna be hard to put a short-term on a health care cost
containment plan but there's gotta be something put in place there
or we're we're tinkering with marginal savings when the larger
long-term savings, or a Judy was referring, are and serve systemic
changes. So I think those are three areas that would warrant the
potentially large savings even though it's gonna be hard to sit
down and actually say, "Well how much do you expect to get out of
that." I think the number is big.
MR. ROGERS: Bruce.
MR. LUDWIG: I wanted to address Judy's point that this is somewhat
of a waste of time in trying to come up costs. I don't think we
ought to have a list and have it broken out like this, but I think
we owe it. If we just say we're gonna cut $300 million or $250
million, hey that's a real easy thing to say and it could could or
could not be impossible to do that without - without a lot of
defects. But I think we owe it to whoever reads our report to at
least list examples that make that feasible number and if it is not
a feasible number, we shouldn't use it. If we can't come up with
some ideas that generate that kind of savings, we got no business
(indisc. ) numbers the door. So I mean if we get our list up and
it comes up to $100 million and we can't think of anything else
that's not going to kill some sector of the economy then it doesn't
do all (indisc.). So I think it's a valuable exercise to go
through and I think it's a valuable thing to include in the report.
MR. ROGERS: Annalee.
MS. MCCONNELL: Would people feel comfortable if we had -- we have,
of course, an addition to this list we have narrative about - that
talks about many of the kinds of things that Lee and others have
been discussing recently the idea that we look at structural
change. We have a section that deals with a lot of the budget
process things that Judy has addressed in terms of outcomes phased.
Do people feel comfortable if we - just keeping in mind we've still
got that narrative stuff that goes into some of these areas in
having a list like this that could be titled, "General
Recommendations For Budget Cuts," and grouped as those that we
think would produce in the name of - for the over $20 million,
those that produce in the $5 to $20 million and those that would
produce under $5 million and list these, not trying to be - not
trying to peg a dollar amount to each item but just categorize by
magnitude and then let that, and the text together reinforce how
strongly we feel that there needs to be substantial change in how
we approach this whole area of spending.
MR. ROGERS: I think add to that a reference to the four scenarios
in - or the three scenarios with cuts in the original report. That
gives people a flavor of what other options are out there.
MS. BRADY: And we have working papers that just lay all that out,
I mean there's 4 or 500 and $13 million dollars cut three ways.
We've got em right down by department. If you want to go through
and look at em, that's fine.
MR. ROGERS: Georgianna.
SENATOR LINCOLN: Ya, I would agree that rather than to have this
as a separate page having generally specific budget cuts that some
of them aren't cuts as as I think our chairman pointed out that
they're cost avoiders, and I would rather see it in a narrative
form rather than that these are recommendations because there might
be -- there are some areas that I sure that some of us around this
table would not support and for the legislature to look at - at
some of the areas that we considered and that these should be
serious considerations, but I think that since we don't have a
dollar figure and we certainly can't come with a $300 million that
we should just list some of those areas that we discussed that
should be there for consideration. And having said that, it
doesn't really fall under a budget cut but I think as savings....
TAPE 2, SIDE B
SENATOR LINCOLN: ....would save the state money if we contracted
out more than if the state undertook it themselves. I really think
that's a large number. I don't know whether I'd categorize it as
but I think it's - it could be a large number and would save the
state a great deal of money. So I would like to have that included
somewhere in the narrative.
MR. ROGERS: There was some discussion on that one of allowing the
people who are currently doing the work to bid as well to see if
they can do it more efficiently than the state rules currently, you
know, allow them. My sense is, and that's in the narrative. Is
that consistent with your - with that proposal?
SENATOR LINCOLN: I need to look at that narrative again. I don't
know - but that's generally (indisc.).
MR. ROGERS: Is there any objection? Hearing none, it's adopted.
REPRESENTATIVE PARNELL: Ya..
MR. ROGERS: Oh, you're objecting to privatization?
REPRESENTATIVE PARNELL: No I was objecting -- I thought you were
talking about Georgianna's idea about using a narrative versus just
listing things out. I guess I didn't understand the motion you
we're (indisc.)
MR. ROGERS: O.K., the question is whether to increase
privatization contracting out opportunities within state
government.
MS. NORDALE: (Indisc.) privatize as many state services as
possible rather than - rather awkward language contracting out.
SENATOR LINCOLN: Well I the contract slash privatization.
MR. ROGERS: Mike.
REPRESENTATIVE NAVARRE: Are we gonna also put in a recommendation
that the legislature go to a full-time legislature until these
tasks are done because, you know, it's legitimate duty and I share
your frustration with the amount of information but take the
discussion that's gone on here and then do it with the legislature,
first in subcommittee, then in full committee, then in caucus, then
on the floor and then you go through it a hundred times because
many people don't pay attention. And then besides that you get
information and then new information and then, I mean you get - as
much paperwork we've got here we get that much on each department
potentially. It's such a huge task. It would be much easier if
the legislature took one or two departments each year for five
years and just completely run through them.
MR. ROGERS: Judy.
REPRESENTATIVE NAVARRE: I mean it's frustrating...
MR. ROGERS: Sorry.
REPRESENTATIVE NAVARRE: ...because we keep hearing about
(indisc.).
MS. BRADY: I think that's a good recommendation. I absolutely
believe that. I absolutely, you know, just - just in a short time
I was in government what I found out is there is too many things
going on. You just simply cannot focus to change things easily.
I mean you really have to decide you're gonna focus in on
something. I think maybe taking a department a year would be an
enormous -- would be very interesting to do and take it apart, put
it back together, and have special task forces. The whole idea is
that you don't get to add see the whole idea is how are we gonna do
this. Commissioners would love to be able to do that but, you
know, they can't even get around -- they haven't got any time to
get around the union contracts so they just let go and try to add
enough people just to make it work, and this is not -- I mean this
is nothing against unions. This is just saying what's in place
it's just so hard to get around and so it's just easier to kinda
add on top. So the whole thing is frustrating. I like some of the
things I think Hugh said. I like the three things Lee said. I
like the privatization thing. I mean kinda general things like
that that need to be worked on. I like the idea of the legislature
taking a look at what -- taking focusing on one department a year.
SENATOR LINCOLN: It'd take us two years to decide.
MS. BRADY: But I mean that would be a very exciting way to do
business. I mean everybody would tap out but it would, you know.
SENATOR LINCOLN: We're talking reality you know.
MS. BRADY: Well what's the matter with that?
MS. MCCONNELL: I'll bet there's a lot of good meat for (indisc.)
here. I'm actually starting to get charged up about going ahead
and doing some these things.
MR. ROGERS: And so she's the one that has to.
MS. MCCONNELL: And I have to start tomorrow at 8:00 a.m.
UNIDENTIFIED SPEAKER (Male): Annalee, Mack the Knife.
MR. ROGERS: Where I'd like to go in the last two hours we've got
here is I'd like to get a vote on the package in the three year and
the longer term, and then I'd like to go over the two page summary
because I think that's what we need to focus on or the governor and
the legislature - legislative leadership tomorrow so let me first
look at the package as...
MR. GORSUCH: (Indisc.) remains before the two hour time limit.
Can I just ask...
MR. ROGERS: Not if you're gonna take the whole file.
MR. GORSUCH: Did we do anything with the Longevity Bonus Program?
MR. ROGERS: We have a recommendation that if the lawsuit against
the ALB phase out is successful that the program should terminate.
MR. GORSUCH: Could we also consider the possibility that we at
least use the Alaska median income as the cutoff or threshold for
continued eligibility?
MR. ROGERS: I think there are -- we operated - when we were going
through these spending cuts, we operated under a close to consensus
model and I know that there are at least -- and things came off if
there were at least two objections and there are at least two
objections on the commission to that.
MS. BRADY: Well lets try and get those three things on that we
talked about then. Is there any objection to those three things.
MR. ROGERS: What were they restated?
UNIDENTIFIED SPEAKER (Female): Education.
MR. GORSUCH: One was doing this indexing as it relates to
compensation and (indisc.).
MR. ROGERS: That was Hugh's -- we already had that. That was
Hugh's (indisc.).
MS. BRADY: O.K., what's the second -- the second one was -
Anchorage. In Anchorage you know...
MR. O'CONNOR: Education, Corrections...
MR. GORSUCH: Corrections was...
MR. ROGERS: Reducing mandatory minimum sentences. Are there
objections to reducing mandatory minimum sentences?
MS. MCCONNELL: What about doing the same sort of thing we had in
education? Slow the growth of - I mean slow the growth of
Corrections which could include that and other possibilities.
Would that be acceptable. That's too vague?
MR. ROGERS: That's too vague. When you're dealing with
Corrections, there's only one way to slow the growth and I know
there are two ways, one is have fewer prisoners and the other is
(indisc.) as long.
MS. NORDALE: Well we've got two branches of government too and the
sentencing comes out of the Judicial.
SENATOR LINCOLN: But Mr. Chairman, I think we heard from, you
know, Art Snowden that said if you want to stop the growth in
prisons, if you want to stop the bottle necking in the court
systems, the four priorities - alcohol, alcohol, alcohol, alcohol.
So...
MR. ROGERS: But the motion to ban alcohol in Alaska failed.
SENATOR LINCOLN: Well I think there is other ways to address it
other than to do that.
MR. GORSUCH: And to ignore the cost associated with with locking
people up at $35,000 a year in contrast to other alternative
sentencing options and our alternative sentencing is sticking our
head in the sands even if we can get those costs down by indexing.
MS. BRADY: Yup.
MR. GORSUCH: Or locking up misdemeanants, I mean...
MS. BRADY: I like the idea if we could buy -- no, I'm sorry.
MR. ROGERS: I think Hugh was next and then Judy.
MR. GORSUCH: There are objections to anything on the longevity
bonus? Millionaires are still eligible for the longevity bonus?
MS. NORDALE: No, the program would terminate.
MR. MOTLEY: I don't know, I'm just asking whether or not in
addition to the legal challenge, if it fails, that we're still
opposed to bumping millionaires off the Longevity Bonus Program.
MS. BRADY: I would vote to do away altogether right now.
MR. O'CONNOR: That was part of the legal problem though was it?
MR. ROGERS: Lee's suggestion is that longevity bonus be cutoff at
the Alaska median income, whatever that is.
MR. LUDWIG: Regardless of the outcome of the court case?
MR. GORSUCH: I started at millionaire and moved my way down, but
I'd like to use -- I mean if there was support for median I'd like
-- but it just seems to me...
MR. ROGERS: Is there opposition to cutting off longevity bonus at
people making more than the median.
UNIDENTIFIED SPEAKER: Yes.
MR. ROGERS: Sean, Steve, Mary.
MS. BRADY: Try again to get rid of it altogether.
MR. GORSUCH: How about at over a million?
MS. NORDALE: Because I think, you know if you do something like
that, you perpetuate this.
UNIDENTIFIED SPEAKER (Male): That's right.
MS. NORDALE: And you want to help poor people.
MS. BRADY: Oh, that's right.
MR. GORSUCH: Could I ask for a vote of over $1 million.
MR. ROGERS: O.K.
MR. LUDWIG: Why don't you reverse it Lee and ask how many want to
continue it beyond the median income because I think - I think a
couple would fall off the vote.
UNIDENTIFIED SPEAKER (Male): What's that?
MR. LUDWIG: He's asking who wants to cut it above the median. I
said change it so who wants to continue it above the median.
UNIDENTIFIED SPEAKER (Male): Why don't we double it and go back to
the old program and then the public will know that if we can't
afford it, maybe we'll see some change it would eliminate.
UNIDENTIFIED SPEAKER (Male): Thirty seconds left.
MS. NORDALE: I think there are recommendations (indisc.).
SENATOR LINCOLN: Are you asking for the question of who wants to
eliminate it?
MR. ROGERS: We didn't hear a motion.
MS. BRADY: I move.
MR. ROGERS: O.K., the motion has been made to recommend
elimination of the Longevity Bonus Program. Is there objections,
please raise you hand. We've got four objections.
REPRESENTATIVE PARNELL: That's why we all came to this conclusion
yesterday about eliminating it if the court case is successful.
MR. ROGERS: We're counting on the court to fix it for us. Lets
look at the three year, five year, ten year plan as laid out in the
endowment scenario projection. Steve, you want the floor? The
plan as laid out now for the three year period balancing in FY 00
endowment with a mix of taxes and cuts. Are you ready to vote for
or against it?
MS. BRADY: Can I just ask technically -- when we say three years
does that - give me the year from when to when.
MR. ROGERS: Well the legislature -- the legislation says three
year plan. I guess my sense is this is really a four year plan to
budget, to balance and the decision for income tax comes - is
immediately following that period.
MS. BRADY: I know but are we saying - that's why I'm asking - are
we saying...
MR. ROGERS: So it's really most of the -- all of the decisions are
made in the first two years.
SENATOR LINCOLN: What's the three years she's asking, 96, 97, 98?
MR. ROGERS: No, 96 is already done. It's 97, 98 and 99. It's
through the end of 99 which is through the $100 million nominal,
$300 million real budget cut. It's through the imposition of the
taxes.
MR. POURCHOT: Why have we highlighted or drawn A box in around 98
and 00. I guess I've been focused on the wrong...
MR. ROGERS: The box has been -- I don't know, it was there.
MS. MCCONNELL: Because we felt that was there...
MR. LUDWIG: I thought it was on the spreadsheet.
NOTE: Indiscernible, everybody talking at once.
UNIDENTIFIED SPEAKER (Male): The commission can't even count.
MS. MCCONNELL: The commission was put in place -- the commission
was put in place before FY 96 started so we thought, "we" meaning
OMB, we thought that the three years we were -- three, five and ten
years were 98, FY 98, FY 00 and FY 05. That's the reason why those
that are high - or have the boxes. It doesn't really matter in
terms of...
MR. POURCHOT: It matters a little bit because when we were talking
about balancing, I mean it's strictly esthetics maybe but I guess
I was focused on balancing within our stated time frames.
MS. MCCONNELL: Right, this would be (indisc.) in the fifth year.
SENATOR LINCOLN: But the fifth year being 00.
MR. POURCHOT: Not - no it wouldn't. Now it's 01 and we're not
balanced.
SENATOR LINCOLN: I, Mr. Chairman, I too have been thinking that
the three year is 96, 97 and 98, and the fifth is 00 and I think
that if we can agree upon it we should just go with that because...
MR. ROGERS: Rather than -- I think we could avoid about another
ten minutes of debate is - is the plan, the actions in the plan
that we're - we have laid out take place in 97, 98 and 99. There
is a minor action in 00 and then a major action in 01, and rather
than speak to three, five or seven, perhaps we should speak to our
plan for 97, 98 and 99 and 00 as being the base level plan because
it effectively - those are the years in which the major elements of
the plan, with the exception of the income tax, come into play and
we ought to talk about our plan for those four years and avoid the
arguments to which is three and which is four. Is that acceptable?
MR. GORSUCH: No, I object.
MR. ROGERS: O.K.
MR. GORSUCH: Five is five.
MS. BRADY: What now.
MR. GORSUCH: 01 is the fifth fiscal year.
MR. ROGERS: 01 is the fifth fiscal year from now but by - but it's
the sixth fiscal year showing on our spreadsheet and I think people
have a terrible problem with deciding which is five and which is
five.
SENATOR LINCOLN: The only problem I have is exactly what Pat said
is that I was looking at in the fifth year, we should be at zero
and that's what I thought we were trying to come to this morning is
balancing that at fifth year. That's the only problem I have. I
just want to see it zero on...
MR. POURCHOT: Then what's the ten year because our ten year is not
05 then our ten year in your count is 06.
SENATOR LINCOLN: Right.
MR. POURCHOT: And we haven't been taking 06 seriously until just
now.
MR. LUDWIG: We just got a problem with 06 because (indisc.) it's
a plus.
MR. ROGERS: Take a five minute break. We've got a $2 million off
01.
MR. ROGERS: Let me try phrasing the question another way. The
actions - the actions required in the 1996, 1997 and 1998 sessions,
which are the actions that are the three years that I've conceived
of as being the - the period. That would be a 99 - FY 99 impact.
All of the budget cuts are made in that three year period. I hear
some people wanting to count the actions of the 95 session, the one
that's already completed, as being the first year of the plan.
Should we vote on which year is the first year of the plan as to
whether the first year of the plan is to 1995 session or the 1996
session.
UNIDENTIFIED SPEAKER (Male): I think the confusion comes in FY
calendar year.
MR. POURCHOT: Calendar and fiscal year.
MS. NORDALE: Well the first year of the plan would be fiscal 96
even though it gives us the 96 session of the legislature in which
to begin the process.
MR. ROGERS: But during fiscal 96 none of the actions of the plan
were place.
MS. NORDALE: That's right but it's just...
MR. POURCHOT: But they accrued...
MR. ROGERS: So our plan is to do nothing in the first year of the
plan.
MS. BRADY: No, you can't. The problem though is that your
legislature meets (indisc.)...
MR. POURCHOT: There's actions taken into this fiscal year 96.
NOTE: Indiscernible, everybody talking at once.
MS. MCCONNELL: Although we we're asked to look at plan for three,
five and ten years, there was no place in the resolution where we
were told in what year, between now and the tenth year, to have the
balance. And I think we have two separate conversations going on.
We -- I felt that there was - we were so close to balancing in FY
00. I thought there was some physiological value. It's an
additional pressure to say lets bring -- lets start the century
fresh. I don't think it matters whether that's happening in your
four, five, two, one or twenty in that sense. I think that was
separate conversation in my mind. I don't care which three we
pick. I think the important thing is within the first five years
we have brought the budget into balance and we have recommended all
the steps that are necessary to do that, and it really -- we could
take off the highlighting and then people can decide which year
they want to count as three and five, but we have shown every
single year along the way. So I think we've more than covered our
obligation in that respect.
MR. GORSUCH: Does it solve it to simply say, "Legislative
96/fiscal 97?"
MR. ROGERS: If we speak to -- maybe the thing is that there are
certain actions that can be taken in the 96 session, some in the 97
session and some in the 98 session. To see where the impacts of
those decisions are, they're always in the following fiscal year,
but if we couch our presentation as what are the actions - the
actions that need to be taken in the next three legislative
session, the actions that need to be taken in the next five, the
actions in the next ten. On the issue of the actions that need to
be taken in the next three legislative sessions, which are the 100
-- the 40, 30, 30 in nominal budget cuts; the reduction of the
dividend from $565 to $415; the passage of the constitutional
amendment for the endowment plan; and increase permanent fund
deposit and the elimination of the CBR sweep; and conversion of CBR
to revenues; and the deposit of the permanent fund earnings reserve
to the permanent fund; and the adoption of the sin consumption and
business taxes in that package of three years. Are you ready to
vote on that package?
UNIDENTIFIED SPEAKER (Male): I'm ready.
MR. ROGERS: Mike.
REPRESENTATIVE NAVARRE: Isn't it a 40, 30, 80 now?
MR. ROGERS: In nominal dollars, it's a $40 million cut, a $30
million and a $30 million. In real dollars, it is a $111 million,
a $212 and a $309 million cut.
REPRESENTATIVE NAVARRE: I thought that there was agreement to make
up the deficit...
MR. ROGERS: In the fourth legislative session which is the
legislative session in which the FY 00 budget, we force the balance
by not allowing full growth at inflation and half of population.
Pat.
MR. POURCHOT: I want to make two comments, one philosophical that
in the first three years these actions, when measured against one
of these principles of regressivity or progressivity, I think it's
important to recognize that I would say on the balance of these
things these actions would fall, I would say largely in the
regressive category just in terms of taxation, in terms of
permanent fund dividend taking away and knowing a little bit about
the budget that level of budget cuts undoubtedly get regressive
also, just in the nature of how they're taken and where they're
taken. That's kind of overlying philosophical concern of mine.
The second and I guess I may have missed something, I don't
remember. Was there a vote on the 40, 30, 30 or was that just
built into the plan and that's an assumption?
MR. ROGERS: There was on Thursday night.
MR. POURCHOT: O.K.
MR. ROGERS: If people like to return and re-vote on it...
MR. POURCHOT: I don't necessarily want to re-vote it and maybe I'd
just like to stick up for Annalee's job here a little bit. For
people who have gone through this process, and there are lots of
people around this table who have, this -- not even getting into
these very valid argument about real versus nominal, these are huge
cuts, huge cuts to make, painful cuts. They'll get right into the
things that most people around this table think are good ways of
spending government money. I just - I worry that it's on the verge
of unreality to talk particularly in year three of compounding
those - that level of nominal cuts. We've gone a long way from
flat, hold the budget flat which is painful enough. I mean I
wouldn't say -- I wouldn't stand to argue that you can't make more
nominal cuts in year one particularly. But year two year three,
those are major significant very hard cuts to make.
MR. ROGERS: Pat, I share your concern. I think that when we
consider the impacts of the federal transfers to State of Alaska
that these are very severe budget cuts and I think they will
disproportionately fall on lower income Alaskans, but I think it's
part of a package that designed to provide for future generations
that this level of reduction is necessary to balance the present
needs against the future needs. I think that each of us have areas
that we don't like about this and really the question is whether
the package spreads - spreads the pain perhaps equally, whether the
balance is there between the tools. I think when we were charged
as a commission with coming up with this, the list of tools that we
put together was floating around in various people's minds and we
were asked to balance those (indisc.), and I think really the
question in adopting the plan for the next three legislative
sessions is, "Is this a fair balance among the tools?" Mike.
REPRESENTATIVE NAVARRE: Just getting back to the question on
what's supposed to be implemented by the legislature in the next
calendar year. I think we should make sure we state it
specifically in the report because the legislature might get it but
the public will miss it if we say -- there will be a confusion
between 96 and 97.
MR. ROGERS: Annalee had a first year report card that we might put
forward that would - that listed the major elements that would need
to be adopted in that first year. The first year would include at
least 40 million nominal dollars cut from the budget, $50 million
cut from permanent fund dividends, imposition of alcohol and
tobacco taxes, imposition of highway and marine motor fuel tax, the
passage of the constitutional amendment for an - the endowment and
payout rate from the permanent fund and the increase from 25 to 50
percent, and the deposit of the CBR excess of a billion five from
the the permanent fund earnings reserve - the last one being
contingent on adoption of the amendment. Those be the key pieces
that would be required.
MS. WESTFALL: Be done in 97.
MR. ROGERS: In the 96 session.
REPRESENTATIVE NAVARRE: The endowment has to be done this session?
CHAIRMAN ROGERS: Yes.
MS. MCCONNELL: And I can update -- I didn't update that one last
night but I would update both that first year, which was split into
legislative action and budget action to clarify bills like the
retirement incentive bills. And then I just got started on the
second year report card but I could do the same thing and run
through all the elements for the second year - second session I
guess I should call it. How about progress report?
MR. ROGERS: Lee.
MR. GORSUCH: I think we're really close where I have the sense of
the package is gonna go. Just again, try to emphasize that while
on one hand, it may be necessary to try to squeeze the cuts earlier
rather than to have them phased over a longer period of time. If
we run through the fiscal year 2000, we're gonna take - and again
I apologize for insisting on using real dollars - we're gonna take
$300 million out of spending cuts. We're gonna take $200 million
out of the dividend and we're gonna take - we're gonna raise $200
million in terms of taxes. So it's a 300 - 200...
CHAIRMAN ROGERS: It's 150 out of dividends.
MR. GORSUCH: Pardon.
CHAIRMAN ROGERS: 150...
MR. GORSUCH: It's 200 real out there
UNIDENTIFIED SPEAKER (Male): Using real dollars.
MR. GORSUCH: Sorry Mr. Chairman.
MR. GORSUCH: And again what that means is a 6 percent real
reduction to the general fund budget each year. My only anxieties
about that is I'm not opposed to the idea as Judy saying "Going
after the systemic changes." But in that first year you don't get
systemic changes. That's the first year which you get the
enactment. You put it in place. Now if we go after some of these
indexing things, we might be able to come up with something, but I
have no idea if those would - if those would fly. But if not, then
I know pretty well what's gonna happen and the only way they're
gonna be able to achieve that is to start doing more across the
board cuts irrespective of the legitimate or illegitimate causes
they could debate. Not uniformly but to some extent that's the
only way they would ever achieve that level of a - of a reduction.
You know I'm a - I'm willing to to go but I just think this is a
enormous and I would feel much more comfortable with this as the
target out in 2002, but it may well be that the advice we've gotten
is you can't get there if you don't step up to this and people feel
the pain associated with the reduced services and the importance of
doing the systemic reforms. But we've not seen anything like this
to date, and try to do it on back to back years is gonna be
extremely difficult.
MR. ROGERS: Mike Navarre.
REPRESENTATIVE NAVARRE: Judy (indisc.) ya I think I'm -- yesterday
I was real comfortable. Today I'm luke warm on supporting the
package, mostly because I'm not sure that the spending cuts could
be achieved even though I'm willing to try. So I still think that
we ought to put some narrative in that says if the spending cuts
aren't achieved, then it may mean that the income tax has to be
moved up because then it acts as a pressure to help force those
cuts, and I also think in looking at the recommendation, which is
cut permanent fund dividends, create a draw off the permanent fund
and raise taxes along with what is - will be viewed by a lot of
people as a minor cut in the budget even though it is a huge cut in
the budget that anybody is gonna believe it that this a very
conservative measure. I mean I worried to death that people are
gonna say, "Gosh, all they did is recommend spending, spending,
spending," and that's not the case at all.
MR. ROGERS: Judy, Annalee.
MS. BRADY: Well we're all gonna be (indisc.) a lot I guess for
different reasons, and you know the idea of putting some money back
on the table (indisc.) and probably that's what the legislature
will do because that's (indisc.). If we're gonna have change in
this state, it is gonna have to be the legislature looking at one
department a year or the governor's office actually focusing on
one. We're saying we cannot come back with raises, you know, so
whatever it is if we don't get that, nothing is going to hold this.
Nothing is going to hold this and, you know, we all argue about --
and those of us who - who have feeling about income tax, at least
for myself, it's not that I'm not willing to pay. I am willing to
pay. I am not willing to pay for the kind of appropriations list
I see now and - so that you - so that legislature doesn't have to
cut. I just -- but I am -- but but if there is vote that there is
change to work with and show and help and bring things into line
just a little bit, hey I'll pay. You know I don't -- and I think
that's all the general public is saying is, "O.K., sure we'll pay."
You guys have just gotta do something - some change here. And so
I think besides this, that's why I was saying that besides this we
just have to say there has to be some different way of doing it and
I really did like that recommendation about doing one -- do the
main four that take the biggest - take the -- and how you decide
which one comes first is the one that's got the biggest budget goes
first. The one that's got the next biggest budget goes second and
you spend the whole year looking at it coming up with
recommendations. I mean I think that would go a long ways to four
years we'd have four departments with real tough...
SENATOR LINCOLN: Doesn't necessarily mean that's where the waste
is just because they have a bigger budget.
MS. BRADY: No, I'm not talking about waste. I'm talking about a
way of systemic changes that would - that would - that would maybe
even change what you're trying to accomplish and how you accomplish
it.
MR. ROGERS: Annalee.
MS. MCCONNELL: I think it's pretty natural that as we get right
down to the moment of trying to vote that - that all of us start to
see again the things that we'd hoped to have come out of this that
may not be in the - in the final plan or maybe not at the time we
wanted or in the volume we wanted or whatever. I would like to
really encourage us to come out with, if we possibly can, a
unanimous report for a couple of reasons, one of which is that
there have been, as was acknowledged in the original resolution,
half a dozen or 15 or whatever of these various summits an how ever
many legislative sessions since people first realized that there
was going to be a fiscal gap and none of those have been able to
come to the point of getting an agreement about what a plan could
be. And it seems to me that this is the best shot that's gonna
happen for doing and even though all of us, I don't think there is
probably a single one of us that doesn't have some substantial
reservation about at least one, if not more than one, element in
the plan. I think as we pointed out in one of our earlier meetings
the only thing that's truly disastrous is if we can't - we get
paralyzed and can't do anything as a state. And I think having a
unanimous report or recommendation, even if there are some
additional points people want to make, will go a long way toward
advancing that conversation. It has to happen in the state and the
(indisc.) may have some slight modifications but this is a shot
that's not gonna come to many other times. Certainly none of us
are gonna have the energy to go through it again next year so - I
don't think anybody will. So I think every -- you know there has
been a tremendous amount of contribution from people, including
people who sit out in the audience who aren't even listed on the -
as members of the commission who have really put in a extraordinary
amount of time and energy and effort throughout this whole process.
And I think the final plan does have at least something that
everybody brought to the table at one time or another that changed
our thinking or added something - some improvement. So I hope that
we could come out with a unanimous report.
MR. ROGERS: Georgianna.
SENATOR LINCOLN: Well Mr. Chairman, I think for us to think that
we're gonna come out with a unanimous decision around this table,
I don't believe that's going to happen but I think that it is -- I
believe that the vast majority of folks around this table will say
yes, that this is a report that should go forward and I'd be
satisfied with that. I would be nice to have unanimous but I never
thought we would ever get to a unanimous. It was this great big
chunks in here of a dividend, the spending cuts, the tax portion of
it, an endowment, that those are big chunks that some of us feel
really close to is a lot of little pieces in here that when I get
to the other end, I might bring up as a concern that I have. I
intend to vote for this because I think everybody had an
opportunity to have their say. I think that the voting was fair.
I believe that when we first started, and I think it Hugh that said
spending taxes and dividends, you know, that we all need to see a
proportionately cut. Granted that it going to be difficult to come
up with those cuts but I think it's going to force the legislature
totally to look at how we do business. I believe that the taxes,
I'd like to see the income tax moved forward. However, I think
that by us putting in the kicker that at the (indisc.--coughing)
where the scenario grows negative, then you have a two year prior
to that. I'm satisfied with that. Dividends, I'm satisfied that
we're going to have a program here that Bruce's grandchildren will
be proud of - that we're going to have something for the
grandchildren and the great grandchildren and that we're going to
look at it again in 99 or 01, whichever the case might be, to take
another look at it. I also don't believe, and I hope -- or I don't
think anyone around this table is foolish enough to think that this
is going to have a big stamp of approval on it by Administration or
the legislature. It's just not going to happen so we -- I'll feel
- and I have some more suggestions that I want to make not to the
three year plan or the five year, but just some of the narrative
language change. When I leave here I'll feel good about answering
questions from the general public. I fell that there was good
input around here, that there was a good cross section of folks.
Maybe I would a liked it a little bit different but I can vote for
it and hold my head up.
MR. ROGERS: Lee.
MR. GORSUCH: Mr. Chairman, I think we've done an enormous amount
of work. Let me just sort of try to check off what I see as the
major accomplishments of what's in front of us.
MR. ROGERS: Can ask you if wait to check off the major
accomplishments to see we in fact have a support for this
because...
MR. GORSUCH: I believe it's an argument in support - I'd like to
make in support of the plan.
MR. ROGERS: O.K.
MR. GORSUCH: The first is the public has always been concerned
that the legislature has slush funds, there is cash around. There
really isn't much discipline in the use of the so called cash
reserves. We have two different cash reserves accounts, lots of
confusion. We've straightened out the idea of the cash reserves
issues and we've even come up with some suggestions as to how to
change the constitutional budget reserve problem. Those are two
major accomplishments. We were asked to do that and I think we
have solutions to them. You know secondly, there is this concern
about the instability associated with, you know, fluctuating oil
prices. I think the plan we now have has a significant quality of
improving the so called instability of the oil price commodity by
having a specific reserve fund with rules for its access that
brings that sort of smooth stability. There were concerns about
whether or not the earnings reserve wasn't simply a slush fund to
be accessed by the legislature whenever really hard times came.
We've solved the earnings reserve account by going to the endowment
(indisc.) approach. There was concern about the fact that
inflation proofing would come by legislative prerogative after
dividends are paid rather than before. We've solved the inflation
proofing question by building inflation into the - into the - into
the payout rules of the endowment fund. It is now inflation proof.
There was some concern, although we may have some variances on the
commission about the importance of compensating for declining oil
production. If you support that position we in fact have also
accomplished that objective by allowing the fund to grow through
some retained earnings. There was a general public concern that
Alaska, if in fact we had another oil boom, would go crazy again.
We'd repeat the same experience we had the last time because we
didn't change any of the spending rules. We have now change the
royalty rules where half of all royalties, rents and bonuses must
go into the Alaska permanent fund and only half of it is available
for appropriation. There has been some concern about the fact that
spending is running out, you know out of control. We've come up
with some very specific recommendations about how we think could do
some structural change on the state budget. I've shared my own
reservations. All of you have other concerns and reflections on
that, but nonetheless, state funding under our plan is coming down
very significantly under real terms, however, to the extent that
some people think it's coming down too fast. Others may think it
coming down too slow. That's up for discussion. Every legislative
session can decide where they want to cut more, whether they want
to take some additional funds out of dividends, or where they want
to tax to make up the difference. People have talked about the
income tax as being a fair reasonable way. We've set up now a plan
whereby it can be triggered by a mechanism when you go deficit. If
you don't want to go deficit, you have three alternatives. You can
cut the budget further, you can raise some other taxes or you can
take away some of the dividend fund. We've left open that whole
political process to set priorities on a year to year basis without
necessarily triggering the income tax. Another important issue
that I think has generally been sentiment is that we had to come up
with some redefined role of the permanent fund and it's growing
role in terms of the state budget. We have clearly defined that
one of the functions of the permanent fund is to be a contribution
to support essential services of state government, another very
important accomplishment that this plan recommends. And finally I
think most importantly is we've asked that the public have an
opportunity to have a voice in the fiscal plan. By our coming
forward with the endowment plan that has two important
constitutional amendment to it, one to correct the constitutional
budget reserve problem and redefine the role of the reserves; and
secondly, to establish the permanent fund and to ensure that's
inflation proof and have a stable pay out. The voters are entitled
to vote on the question. If it's a bad idea, if they disagree with
it, they get a chance at the ballot box to decide whether this a
good plan or not. I think we've accomplished an enormous amount
through this and if we're out of sync with the public, they have a
chance to vote that down. So I think from my list as I go through
it even though I have differences on any one of these items, we've
done an enormous amount of work and if we could get even half of
those accomplished through legislative action or voter approval, we
have done a great service to the state of Alaska. I urge support,
unanimous support of the plan even though we all have significant
individual differences. The core structure of it allows us to
continue to carry on that debate inside the legislature, but what
it does do is give the voters a chance to decide on its main
linchpin and that is the appropriate role of the permanent fund.
MR. ROGERS: Are you ready to vote? Mike.
REPRESENTATIVE NAVARRE: I'm not sure that we're gonna be able to
achieve the dividend reduction....
TAPE 3, SIDE A
REPRESENTATIVE NAVARRE: They feel that too much money is being
spent on education. The public - in the polls that I've seen - the
public is willing to pay more taxes, income tax or otherwise
including reduction in dividends, to put more money into education
and we're not allowing that. We're not allowing that except
through, I guess, additional reductions beyond what I feel are
unreasonable levels. I am -- you know, I came into the - onto the
commission with the hope that we could reach a consensus plan,
because I think that's the only way that we have - we stand a
chance of getting this implemented by the legislature. And I am,
despite my concerns, prepared to support this plan. I may submit
a letter of dissent on some of the points on it or concerns, and --
but -- and I'll support it in the legislature also. But I will
also be very hard to deal with if there is a selective picking of
different items within this that are implemented which cause really
the whole plan to fall part, because I disagree that if we do any
of them, we'll have accomplished something. I think if we do some
and not the others, then we've done a -- the legislature -- we will
have done a tremendous disservice in terms of -- in terms of what
happens to this state. I -- I still wish we could move the income
tax up as an option, because and I guess that if left to the
legislature, they could choose to move it up in lieu of some of the
other reductions. I guess I'm not entirely comfortable; in fact,
I'm very uncomfortable because I think that -- that -- that some of
the recommendations are -- are built on what I feel is a false
premise and -- but beyond that, I appreciate all the time and
effort that people have put into this and I -- I that it's a
workable plan, we're moving in the right direction and -- and just
hope that we can convince the public that -- that what we've done
really does make some sense.
MR. ROGERS: Anyone else seeking the floor? Sean
REPRESENTATIVE PARNELL: Brian, first I just want to say thank you
for serving as chairman. You've put in a lot of time, as have the
other members of the commission, and I did want you to know and the
other commission members to know that my dissent and the dissenting
report I intend to (indisc.) is not a reflection on anybody
personally; it's just a differing opinion on the direction we
should be taking. And I've already tried to state my objections as
we go along and Hugh has stated his. I've heard Steve state some
of his. Mary stated some of hers, and so I'll just reserve my
comments for (indisc.). I do appreciate all the hours of time that
everybody's put in. I just feel that, in general -- my general
feeling is that we're sacrificing what could be the permanent fund.
I think we're sacrificing permanent fund earnings, permanent fund
growth, and basically, on the altar of spending and I think there's
a better way than the endowment approach, but that's -- that's
already something I've tried to articulate (indisc.).
MR. ROGERS: Steve.
SENATOR RIEGER: I'd like to echo some of Sean's comments. I
appreciate the time people have put in. I'll be voting no, and
submitting a minority report also, but I appreciate the long hours
that people have put in.
MR. ROGERS: Are you ready to vote?
UNIDENTIFIED SPEAKER (male): On what?
MR. ROGERS: On the actions to be taken in the next three
legislative sessions. Would all those in favor please....
REPRESENTATIVE NAVARRE: Mr. Chairman....
MR. ROGERS: Yes.
REPRESENTATIVE NAVARRE: Can I -- can I just say that after hearing
Sean and Steve, I guess, I don't think it matters how we vote. And
-- and no -- I mean I have a great deal of respect for both of them
as legislators, but the fact of the matter is that the legislators
here and in Juneau are the ones that are going to be making the
choice. If two or three of the -- and the reason that Sean and
Steve were both put on this, as well as Georgianna and myself were
put on this commission, is because we have a lot of respect among
our colleagues and the fact that dissenting opinions are going to
be filed is going to, I think, prejudice the legislature against
taking any action. And as a result, I think that maybe -- maybe we
should spend some time talking about whether or not accommodations
can be made because I think that while the plan might pass this
commission, I don't believe that it has a chance of being adopted
by -- by the legislature.
MR. ROGERS: I think we have one problem on that, and if I
understood Sean correctly in earlier meetings and today, his
concern is we're not putting enough in the permanent fund to build
the Cremo-type endowment and that Steve's is we're putting too much
in the permanent fund, and I don't believe that there's a way of
resolving not putting enough and putting too much. And....
REPRESENTATIVE PARNELL: Can I address -- address something else --
and Mike -- Mike, you're right -- I mean, to some extent. However,
I know my position and I'm sure I could speak for Steve on this -
we believe our -- I believe my position does in large part reflect
my constituency. However, if in the next three months and into the
legislative session, something changes dramatically, I'm not -- I
don't think you should foreclose the -- I mean, you shouldn't
foreclose the possibility that this plan will be embraced by the
general public, because I think that is something that an
educational process may accomplish. But yet I realize the
practical reality that you're saying, so there's a balance there.
MR. ROGERS: Annalee.
MS. MCCONNELL: It seems...
MR. ROGERS: Lee, Georgianna.
MS. MCCONNELL: It seems that if the dissents are in one direction
not enough and in the other direction too much, that to me re-
enforces that this kind of approach is the only thing that has a
prayer in hell of moving us off of the standstill position that
we've been in as a state as far as dealing with the fiscal gap.
But since the average of too much and too little is where we are at
the moment, and I think that goes back to the idea that -- that as
we -- as we came into this, we all recognize that our individual
plans were irrelevant because it was the composite that was gonna -
- gonna (indisc.). My -- still my favorite phrase out of the
commission is Judy saying, we'll all have to give up some of our
nevers, because in Alaska we have lots and lots of nevers and --
and so there has to be some way of finding the middle that does
bridge the two. I think we tried very hard in -- in -- as was
discussed yesterday to look at the more wholesale approach that
Roger Cremo had advanced (indisc.) but for various reasons,
including (indisc.) couldn't get from here to there, find a way of
doing that, came to this -- this partial endowment....
UNIDENTIFIED SPEAKER (male): Diet Cremo?
MS. MCCONNELL: What?
UNIDENTIFIED SPEAKER (male): With Diet Cremo?
MS. MCCONNELL: Diet Cremo (indisc.) But -- but that is the
essence of this -- of this whole process and I share Mike's concern
that if we have particularly -- if we have our two majority
legislators who are not part of -- of the report and feel that they
can't participate in the shared plan, that that does start us off
on a different foot. And you may be right, it may be that you find
that many of the kinds of organizations that your constituents and
the general public belong to, decide they can go with this even
though it's not done all the things they would want. But they
don't want to sit in this room a year from now and go through this
kind of routine. There still, as Lee pointed out, be lots of
opportunity for public debate and so on, but it's -- it's coming
out of this door that we have to sort of convince everybody, I
think that it takes a little bit from all of us, both the good
ideas and the willingness to give up the things that we didn't get
to pull this off. I would hate to see another legislative session
where we can't -- we can't get beyond saying gosh we've got a
fiscal problem.
MR. ROGERS: Lee.
MR. GORSUCH: It always -- I've participated in at least a half a
dozen of these types of sessions and in several we've had
legislative representation. And interestingly in many instances
the legislators are the ones who can't seem to agree with the
public members. I don't know if that's because they're in better
touch with their constituencies, a different touch of relationship
with their constituencies or what. But it wouldn't -- it wouldn't
bother me if we didn't -- I'd much prefer to have unanimous support
for the first three years or the five year or the ten year, but I'm
not too concerned about the level of cuts and the imposition of
taxes. The one thing that I am concerned about is whether or not
our delegation would at least give the voters the opportunity to
vote on our core constitutional amendments. And that requires a
two-thirds vote. If we don't have your support to even allow the
public to vote on the question, then I think we really are in a --
in an exercise that's not likely to produce much results, because
what I hear from the public is they would like to have a voice in
this and a direct voice, not just a representative voice. And I
think we've worked on a reasonable plan and we have on a
constitutional ballot opportunities for Sean and Steve to offer,
you know, the op-ed pieces that go into the constitutional
amendment language. But I would be interested to know whether or
not our legislators would at least be willing to allow the public
to vote on our proposed endowment.
REPRESENTATIVE PARNELL: I'll just speak to that because I don't
know if it's even possible for any one of us three to make that
commitment now because there will be changes in the presentation as
it comes to the legislature, so....
MR. GORSUCH: Assuming there were none, I mean....
REPRESENTATIVE PARNELL: Well, assuming there were none, what
you're going to have is you're going to have to get a majority --
to get a super majority on a vote like that, you're going to have
commitments made by some people to, ya, I'll give you my vote if we
do this, I'll give you my vote if we do that. So, to commit now,
to (indisc.) my question, well we don't know what the price tag is
on the other end is folly on our part as legislators to make that
commitment. I mean -- I'm committed certainly to doing what my
district wants (indisc.) and if they want to vote on it, I'm happy
to let them vote on it. But I want to know what the full cost is
before I make that huge commitment. But I don't think we know the
full price tag here at this point. You know, like the price tag in
the legislature, is what I'm talking about.
MR. ROGERS: Georgianna.
SENATOR LINCOLN: In answer to your question, I've never been
afraid to put anything out to the general public for their vote, I
don't care what it is. Let the general -- I think that the general
public does know what they want, and so I've never been afraid of
that. But, Mr. Chairman, I'm very concerned - when I said before
that I didn't think we had a unanimous and I never thought we could
get a unanimous, I'm extremely concerned that my two friends - and
I do consider them friends, too - are not voting for this because
they are in the majority and it concerns me that as being the
representatives of the majority in the House and the Senate, that
the -- the voice then would be to take it back to change it in some
way. That, I see -- if there's major parts on here that's going to
be changed, it just throws everything off. It -- this whole
scenario changes dramatically. And I just implore everyone around
here that even though I represent an area that's predominantly
(indisc.) rural and bush, when I sat here I had to keep saying, I'm
here on behalf of the state of Alaska and not on my constituents'
behalf, but for everybody. And I think we have to look at it that
way. Like I said, there's thing that I don't like about the plan,
but for the state of Alaska, for the good of all the state of
Alaska, is this something - a plan that we can put forward for the
legislature to consider and the Administration to consider. Nor do
we support everything in here. You have the ability to write --
and that is my next question too is, how do we have minority
reports? Are we going to allow everybody to write a 10-page
minority report; a 50-page minority report and have it as an
addendum? But you have that ability to do that is to write a -- a
section on there. But overall, is this plan something that the
whole state of Alaska should get a shot at? Not what we believe
our party's position is. I personally have not even talked with my
minority Senate members. I've purposely not talked with them about
this and I have had a couple of calls to return to my Senate
minority members and I have done that because I don't believe that
I'm sitting here as representing just the minority members. All of
Alaska -- what's good for all of Alaska. I don't believe that
Bruce's grandchildren -- I don't know maybe they are my
constituents, but -- but it doesn't matter. We have to look at
what's good for our next generation that there's something there
for the future of Alaska and we're going to have a healthy Alaska.
So, I just ask that before we vote really to think about that we're
sitting here, not with a hat on that we're representing any
particular group, but we're representing all of Alaska.
MR. ROGERS: Before Judy, if I could respond Georgianna to your
question about minority reports. That's an issue we still have to
deal with after we deal with what's the majority report for which
we have 65 minutes remaining. And we had earlier developed an
outline of what looked like it would be an 80-page report. I don't
think that we have the time or the patience to edit that in the
next two weeks and I would suggest we look at a short report with
bullets with the main points, organized in much the same fashion as
Annalee's report with some -- a second set that takes each of the
components and gives a short set on those. What the commission
wants to do on minority reports, we will have a lot of ancillary
material available for people who want it and certainly my sense
would be anyone who wanted a file on minority report, we could make
people aware that those are available. But if we were going to be
publishing long minority reports, then I think we should plan on
devoting the time to write a comparable majority report - if
there's a majority in this room for something.
Note: There was an indiscernible comment or question.
MR. ROGERS: Well, one idea that -- if we have a more significant
report and if we're prepared over the next three or four weeks to
draft it or even over the next two weeks to draft it, would be to
have the opportunity for anyone to submit a concurring or
dissenting paragraph that wishes to do so. But I -- I'd like to
wait and see if we've got a majority. If we do, work on a majority
report before dealing with minority reports. Judy.
MS. BRADY: Well, I -- you know -- I think -- I agree with Annalee.
I think we're in good shape here and I think that the reasons are
that that people disagree are you know nice playoffs against the
regular, you know, the whole plan, and I think there is three or
four months to see if there's public buy-in on this plan and we'll
know and the public can talk to their legislators and legislators
who have -- you know we've all had a lot of -- a lot of difference
of opinion around here and come and -- and kind of settled in to
move it. I think of Roger Cremo -- Roger Cremo -- I didn't --
hadn't met Roger Cremo until the fiscal thing we did about four of
five four years ago and he came up and said I'd like to make a
presentation, and I said you can't, we don't have time. And -- but
he ended up doing -- making a presentation at every fiscal gap
thing afterward and we have a partial endowment that we never would
have had if he hadn't just shown up every time and I think things
do change and I think people change them and -- and I think we have
a real good shot at this. I think we have enough for a good solid
majority and I think we have a shot at solving all the problems
that we talked about. So, I feel real good about this right now.
MR. ROGERS: Mike O'Connor.
MR. O'CONNOR: I was just going to ask how you were going to handle
the minority report.
MR. ROGERS: I think that will be up to the commission as a whole.
Anyone else seeking the floor.
MR. LUDWIG: I didn't understand your answer.
MR. ROGERS: On the minority report?
Note: Answer was indiscernible.
MR. ROGERS: I'm not saying as we need to discuss it, but until we
know whether -- what we may have is 15....
UNIDENTIFIED SPEAKER (male): Minority reports.
MR. ROGERS: ....15 minority reports and no majority report or we
may have -- I don't know -- I don't know at this point. Annalee.
MS. MCCONNELL: Am I correct that at this point we are -- we're
voting only up through the 1999 evaluation of where we go with the
next set of choices, so that we're not making any pre-determination
in this first vote of where the choices end up in the second half.
Is that right?
MR. ROGERS: This is only for the actions of 96, 97 and 98
sessions. Prior to the review commission that will follow those
three sets of actions.
MS. MCCONNELL: So those who have a concern about the income tax
in the out years could still support this piece and -- and we would
have the ability to have a second section where there's -- we could
unanimity or close to it up through the first part and then split,
right?
MR. ROGERS: That's (indisc.)....
MS. MCCONNELL: Okay, I just wanted to be sure....
MR. ROGERS: I'm sure -- I know that the -- what we called the
1998-1999 fork in the road, I that there's greater (indisc.) after
that period. I don't know if there's divergence if there is up to
that period, but a vote for the plan in 96, 97, and 98 sessions is
not an assumed vote for the plan beyond that.
SENATOR LINCOLN: Mr. Chairman, I -- I have to ask you one more
question. When you say a minority report, that doesn't mean that
if somebody votes for this plan, that they couldn't still write a
quote minority report.
MR. ROGERS: Well, as -- as Mike called it, a concurring report and
maybe a concurring and dissenting report might be a better way of
putting it than minority report. There may be people who want to
supplement -- there may be people who vote for it but they want to
explain -- they don't like a piece of it, but they voted for it
anyway.
SENATOR LINCOLN: Right. Okay. I just wanted to clarify that.
MR. ROGERS: And there may be people who vote against it who might
say I support it except for this one item which caused me to go
over the edge.
MR. LUDWIG: Question.
MR. ROGERS: Bruce.
MR. LUDWIG: I'm going to support this plan for 3 years, 5 years,
10 years. I think there's some big problems with it. I think it
was wrong to take oil off the table, I think that that's a common
resource - that's our oil and we should -- I think there's
questions out there about whether we're getting the value out of
it. I think it's wrong to just take it off. We should have looked
it. I think the tools we used are ass backwards. I think we did
the things that hurt the economy more sooner than the things that
don't hurt it as much. But I'm also aware that if we don't do
anything, we're going to be in a bigger problem than not. And I
think we have to do something and this seems to be something. I
think we've got a fairly good microcosm of the state - it's
acceptable to the vast majority of us and I think it's acceptable
to the public if we educate them. And I think that has to happen.
For that reason, I'm going to support it.
MR. ROGERS: Are you ready to vote? Question being on the
legislative actions for the next three legislative sessions - 96,
97, and 98 sessions - all who support the recommendations as laid
out in the endowment scenario projection, please raise your hand.
One, two, three, four, five, six, seven, eight, nine, ten. Those
opposed? One, two, three, four. On the recommendations for the
10-year period....
UNIDENTIFIED SPEAKER (female): Five year?
MR. ROGERS: Pardon?
UNIDENTIFIED SPEAKER (female): Five year.
MR. ROGERS: Okay, five year which would add -- actually 5 year and
10 year are basically the same, if I'm not mistaken.
UNIDENTIFIED SPEAKER (male): Yup.
MR. ROGERS: So, those for the 5 and 10 year, those that favor the
5- and 10-year plan, please indicate by raising your hand. One,
two, three, four, five, six, seven, eight, nine, ten. Those
opposed? One, two, three, four. Ten/four. Hugh.
HUGH MOTLEY: I intentionally didn't make any comments before the
vote and I had told you in advance that it would be very hard for
me to go through the process and support things, and vote on
things, and express views when I knew that in the end I would have
to vote no. That does not mean that I don't believe personally
that this is the best plan that could have come out of this group.
Under the ground rules that we worked with, we were not able to do
something that I thought would be better, but under those
circumstances, I do want the (indisc.) and I do want the people to
get a chance to vote on it. It's just that I can't support for the
reasons I've already given several times, but I don't think we
could have done any better than what's here.
MR. ROGERS: Mike.
REPRESENTATIVE NAVARRE: I move that we be -- that everybody be
allowed to write no more than -- anybody who wants -- be allowed to
write no more than a two-page dissent or concurring opinion because
I have some problems with the components of this plan and some of
the trade-offs. I supported the plan because I think we -- we need
to do something and the public debate really does have to go
forward, but I do have some concerns with what is encompassed in
the plan.
UNIDENTIFIED SPEAKER (male): (Indisc.) second.
UNIDENTIFIED SPEAKER (male): Mr. Chairman, make it a one-page.
MR. ROGERS: I'm a little -- I'm concerned about the logistics of
getting a report describing this out. If we're going with our --
the earlier outline that we did, we have a huge amount of writing
and editing as a group left to do. If we look at a summary with
bullets we're talking about probably an 8- to 10-page report versus
a 50- to 80-page report. I'm not sure how -- I guess I would
oppose the motion in the hopes that we'll go with the short version
of the main report and I'd hate to have everybody's concurring and
dissenting opinions outweigh the report itself. I would prefer to
say that anyone can write as long a dissent or concurring, and that
we would refer to those and make those -- what people who want to
get those, but just publish a brief executive summary that has the
main points that lists what dissenting and concurring reports have
been submitted and let people go 50 pages if they want to go. So,
for that reason, I -- not because I oppose the reports, but I
oppose the limitation and the publishing.
REPRESENTATIVE NAVARRE: Well Mr. Chairman, the reason I suggest
that is because it would be just as easy to vote no on the plan and
say what I like about it as it is to say yes, in favor of the plan
and then not be able to say anything. Because like it or not, this
is public record and what I have just voted for is to cut
dividends, use permanent fund earnings, raise taxes, and not take
care of any of the needs that have been suggested to me by my
constituents and other people around the state. That's what I
voted for. I only won a few of the things I wanted. I wanted an
increase in transportation; instead I got a transportation tax with
no increase. So, that's where my concern comes in.
MR. ROGERS: On the motion, is there further discussion? Judy.
MS. BRADY: Let's see. First thing -- first thing is you know how
do we get (indisc.), I'll get to the second part about the
dissenting and concurring (indisc.) in a second. The first thing
is the report itself and how we get it tomorrow and I think we can
just do dots for tomorrow. But the second thing is I think that
what we could do is go ahead and do the -- the (indisc.) dot report
with -- and especially with an explanation of you know almost each
line of why we did things - what we were trying to accomplish - and
maybe at that point, we could even on one of them talk about where
the back and forth was. Because that's a good way to present it
anyway, because as people go through it they'll have the same kinds
of back and forth comments. And then send it to everybody in like
a week and a half and everybody have like a -- and then maybe have
one more teleconference or however we want to do it to do the
editing, or have people submit comments and just do it that way
back and forth only once or twice or not at all. There's got to be
someway of getting in -- getting people's comments in and then the
paragraphs, I think even the concurring and dissenting things could
be a paragraph -- maybe do that for the final report. Would that
work? Where -- you could say what you were concerned about in a
paragraph and so could Steve and so could Sean. All of us could
say probably in a paragraph what our concerns would be.
MR. ROGERS: Bruce and then Annalee.
MR. LUDWIG: I'd like not to stop a dissenting report, I think
that's a person's right, but I think the body of the main report
ought to address some of the things that Mike or I or Georgianna
might bring up in a concurring report. I mean all of us have given
up some. You know as Judy said, we've all had nevers that take
place and I don't think there's any of us here that didn't. So, I
-- if we try to accommodate some of those nevers, I think it helps
educate the public too because they've got some of the same nevers.
But I don't want to stop Steve's right to write a dissent or Sean's
right, or even my friend, Hugh. But I agree with you that it
shouldn't . . .
MR. ROGERS: I figure we need about a one-hour meeting for every
page of text we want in the report and it's 80 pages already?
Well...
MR. LUDWIG: I heard him say 8 to 10.
MR. ROGERS: My preference is 8 to 10 brief, bullet points, not a
whole lot of explanation, and then I'd go for a paragraph apiece on
what we have as major -- major problems for both the concurring and
dissenting. That's the way I'd personally like to see it, but I
think on the concurring and the dissenting we can go -- we can go
longer if we want to, but the main report - if we're looking for 8
to 10 pages, we can figure 8 to 10 hours of editing to get a report
out and that has to happen relatively quickly and there's a lot to
amass from the various sections people have already written
(indisc.). Group editing a report is a significant task as we
found out. On the first report we ended up casting a bunch into
appendices that we didn't group edit and we group edited 14 pages
and we were four weeks late in getting the report out from our
original target. So, think about the amount of time we went -- we
spent going through that. That was a significant effort and that's
why I want to try to shrink that. Personally, I think a lot of us
have limited amount of energy left to write and to edit and to get
the plan out. So, again I'd like to keep it short and simple so
that people can understand it. Lee.
MR. GORSUCH: Well, I guess my sense is I'd like to know from the
no votes in sort of a concise statement -- I think I understand it
-- I'd like to sort of have sort of concision around the -- the
fork in the road that sort of caused one to go, whether it was --
as I understood Steve's position -- Steve if -- if I understood
your -- it was really sort of building -- building up the permanent
fund as a measure taking money off the table and not using other --
other of the fiscal tools.
MR. ROGERS: Maybe we should go around the room and let every
person express their concurring or dissenting opinion now as to
what the major issues are for them.
MR. GORSUCH: And that's what I was going to suggest. If we could
just -- if we could get to a one sort of sentence statement about
where -- what was the concurrence with reservation or the
opposition so we just had a sense for ourselves what was -- what
was the break point or the issue that the overall recommendation
didn't erase. And if that were the case, the last of our report
could show essentially where -- where did we have relative degrees
of unanimity and where would we encourage public debate and
discussion. Because I don't want to get to -- I certainly wouldn't
want to create the impression that we're not going to have a
division of opinion out in the community, as well, over similar
kinds of questions. So -- but I -- I think in order for this to
have its integrity it should show where we agreed and where we
disagreed to the extent that we could even though we all wound up
in this different position.
MS. MCCONNELL: I think there's a motion on the floor, too isn't
there?
MR. ROGERS: A motion on the floor to have -- allow each member to
write up to a two-page concurring or dissenting opinion and Mike
was that to be published with -- Mike was the motion to be
published with the report?
REPRESENTATIVE NAVARRE: Ya, I'll make it one-page instead of two-
pages.
MR. ROGERS: Motion....
MS. MCCONNELL: And be bound in with the original or....
MR. ROGERS: ....bound. The motion is that it be bound in and
distributed with whatever majority report we're able to produce.
MR. GORSUCH: Make it as an appendix and I'll support it.
REPRESENTATIVE PARNELL: Appendix is fine. I just never (indisc.)
expression of dissent as long as it's not dilatory. I mean I can
understand space constraints or whatever, but I, like Bruce, think
we can write whatever the heck we want to write as a dissenting
report and I'm just kind of curious where I'm missing the boat
on....
MR. ROGERS: Steve, Bruce, Annalee.
SENATOR RIEGER: I that that my dissent would be concise, but
complete, would require two pages of text and perhaps one
spreadsheet. So, that's what I would anticipate it to be.
MR. ROGERS: And I think for me to write my concurring opinion
expressing my reservations would take a similar or a larger number
of pages.
SENATOR LINCOLN: Then I'll have to take 10.
MR. ROGERS: Annalee and then Bruce.
UNIDENTIFIED SPEAKER (male): We're talking about a bunch of
minority opinions when we can't even write a majority opinion.
MS. BRADY: We can write -- well, that's what we're talking about
though. See I like the idea of appendix, then you can write
whatever you want, I don't care.
UNIDENTIFIED SPEAKER (male): Ya, just write the majority opinion.
MS. BRADY: All we were talking about is how you -- how we -- all
were talking about is how we include the dissenting and the -- in
the report, when we're going to have enough trouble writing the
report. And I like the idea of appendix. That can be a separately
bound appendix that goes out with the report and the two things go
together and if someone just wants the appendix, they get the
appendix. And so everybody -- probably could do the appendix first
-- everybody write their two pages. You have until next Friday to
do it - we would put that in an appendix and it be called something
to go out with the report and it goes with the report.
MR. ROGERS: We will publish no minority -- individual opinions if
we don't publish a majority report.
MS. BRADY: Right. That goes with it.
MR. ROGERS: And I watch this clock go around and around and around
and we talk around and around and around and we're unable to get to
talking about writing the damn report.
MS. BRADY: Well I thought we were just going to do that in the
next week. I'll serve on that committee -- to write the report.
Who else?
MR. ROGERS: Why don't we take a five minute break. The chair
needs a break.
MR. ROGERS: The security guard for the building has just given us
suggestion for another change and that is that it ought to be
against the law to have to be indoors on a day like today. Can we
talk about the timetable for producing the majority report before
we figure out what the minority reports and concurring majority and
concurring -- and the dissenting minority and dissenting majority.
The motion's been withdrawn. In terms of the schedule for
producing the report, does anyone have....
SENATOR LINCOLN: I wanted to talk about that motion -- and that
has been withdrawn? I'd liked the motion and unless there's
something I missed when I came in.
MR. ROGERS: What I'd like to do is for us to figure out how we're
going to produce our report and then once we've figured out how
we're going to produce the report, as part of that, discuss how we
deal with concurring and dissenting opinions. I think we have to
deal with the larger issue of production of the report while we
still have 30 minutes to do that, unless there's a vote to extend.
Does anyone have a suggestion for how we produce this report?
Mary.
MS. NORDALE: Mr. Chairman, I'll work with you in a 8- or 10-page
statement of what the elements of the plan are and the rationale
for those elements which I think is an extremely important aspect
of producing the report. The fact that I disagree with some of the
major components doesn't necessarily mean that I can't argue in
their favor or describe them. But I think that if we can just get
the major elements described and the rationale for the cap on
spending because of the long-term business, then if we can get that
done, faxed around to people, then I think that you're going to be
farther ahead than if you had a whole bunch of meetings to edit the
thing.
MR. ROGERS: Lee.
MR. GORSUCH: I move that we authorize the chair to commandeer
whatever assistance necessary to produce a draft report within the
week.
UNIDENTIFIED SPEAKER (male): Second.
MR. ROGERS: (Indisc.) looking at my schedule -- how much time I
can devote to such a task.
MS. BRADY: You're gonna commandeer....
MR. GORSUCH: You can commandeer whoever you like to assist you in
that....
MS. MCCONNELL: I volunteer to help with this.
MR. GORSUCH: Mary and Annalee and Judy have already indicated....
MS. BRADY: And I'm going to have some help -- you know, we've got
some help too about how we put this together so it's clear and then
the list of legislative options.
MS. MCCONNELL: (Indisc.) report. I've got that here.
MR. ROGERS: And then the commission will need to get together
again to discuss whether that draft does fairly represent the
majority. Is there a time or day, that works better than others
for people to do that?
SENATOR LINCOLN: Mr. Chairman, before you go into that segment.
I guess I would ask - and I know Annalee has been great on typing
this up with your PC there, but I don't want the report to be
suspect - that Administration had too great a part in it or
legislators had too great of a part in it, so I would suggest that
this final portion be done by public members, just so it's not in
suspect.
MS. MCCONNELL: That's okay by me.
MR. ROGERS: So, if Mary and Judy and I were try to get together on
one or more occasions in the next week or so I'll try to get
something out prior to Mary's departure on the 10th. Is there a
day or an evening that would work for people? Would Monday night
the 9th for a video conference from 6 o'clock on be an acceptable
time for the group to meet to review a draft which will probably be
faxed out that morning.
UNIDENTIFIED SPEAKER (female): For the whole commission, you're
talking about on the 9th?
REPRESENTATIVE NAVARRE: I'm going to be out of the state. I would
very much like to participate by teleconference though even if I
can't be on video conference.
MR. ROGERS: We'd certainly have audio link for anyone who is in
Ketchikan and doesn't want to fly to Juneau for the video
conference. We unfortunately don't have a video unit in Ketchikan
yet.
MR. LUDWIG: I'll be on a plane at that time.
MR. ROGERS: You'd be on a plane Monday night.
SENATOR LINCOLN: Mr. Chairman, I too, will be out-of-state. Is
this going to be an evening....
MR. ROGERS: I -- I would prefer to do it in the evening. I'd
consider a day time as another possibility.
UNIDENTIFIED SPEAKER (female): Evening is bad for me.
MS. BRADY: How about the 10th?
UNIDENTIFIED SPEAKER (female): Same, same.
MR. ROGERS: I'm on a plane between 6 and 7 o'clock that evening.
MS. NORDALE: I leave in the morning of the 10th.
MS. BRADY: Oh, yes.
MS. NORDALE: What about the previous Saturday? Is that possible?
MS. WESTFALL: Saturday, the 7th?
MR. ROGERS: Saturday, the 7th.
UNIDENTIFIED SPEAKER (male): That's not enough time. That gives
you one week.
MS. BRADY: You know what? What if, guys, what if we just did this
like on the 16th? That gives us two weeks to edit, send it out,
fax it around to everybody once, get stuff back. I deal with
committee reports all the time. I've got 17 people on each of my
committees and everybody we need two-thirds vote, so you need time
to fax it out to everybody, have everybody fax their comments back,
incorporate the comments in your final (indisc.) actually goes
pretty quick. Because if you have to fax everything you don't get
to say diddly.
MR. ROGERS: What about Friday, the 13th?
SENATOR LINCOLN: I will be on a plane.
MR. ROGERS: Sunday, there is a....
MR. GORSUCH: How about Wednesday evening?
MR. ROGERS: Wednesday evening, the 11th?
MR. GORSUCH: Yes.
MS. BRADY: Ya, let's -- let's try that.
UNIDENTIFIED SPEAKER (male): That's good.
MR. ROGERS: Does Wednesday evening, the 11th work for people?
SENATOR LINCOLN: As long as we can call in.
MR. GORSUCH: Mr. Chairman, if it were possible to fax it out on
Monday evening as you had proposed so that we could get comments
back Tuesday and hopefully incorporate some master list of those
comments so that we could actually....
TAPE 3, SIDE B
MR. ROGERS: I have a 6:20 flight the next morning. So, we're
going to meet on Wednesday, the 11th. We'll try to get a first
draft out on the 9th, ask people to turn it around quickly and
we'll try to have a second draft out on the 11th.
UNIDENTIFIED SPEAKER: What time (indisc.).
UNIDENTIFIED SPEAKER (female): Six p.m.
MR. ROGERS: Six p.m....
MS. BRADY: Melissa, did you -- did you write down when Lee was
talking -- do you have that on tape?
MR. ROGERS: ....on video so we'll notify people as to what the
video sites are, whether they're here or -- probably be the
university sites because it's after hours. So, it will be in all
likelihood University Lake Building, Butrovich Building, and the
Governor's conference room.
MR. GORSUCH: Mr. Chairman, I'd -- I'd be happy to offer offices in
terms of trying to do graphic presentations of whatever this is,
once it's in draft form so I'd be happy to avail my offices to
assist in that finalization of the draft.
MR. ROGERS: We also have -- Northwest Strategies has offered their
assistance in that process (indisc.) graphics, etc., layout. In
terms of how we want to publish the report, are there any
preferences as to what it looks like whether we're aiming for
something similar to the 8 1/2 by 11 format or a newspaper format.
If you remember, there's a check off on the dividend that people
can ask for a copy of our report. That may mean tens of thousands
-- last year there were 30,000 people that asked for a copy of the
permanent fund report.
MR. LUDWIG: What do we have in the budget left?
Do we have -- can we....
MR. GORSUCH: That will be a permanent fund expense.
SENATOR LINCOLN: I don't think that will come off of our expenses.
MR. ROGERS: What I discussed with Jim Kelly at the Permanent Fund,
he was surprised at the thought that it might be a Permanent Fund
expense, but I think it might be a Permanent Fund expense for that.
MS. BRADY: But they're off budgets, so nobody pays any
attention....
MR. GORSUCH: Mr. Chairman, I -- when we did the Commonwealth North
report, I thought that that actually came out pretty well because
it could then be easily formatted for the press presentation, so I
would just encourage us to think about that as a possible format or
presentation. It lent itself well to both a 8 1/2 by 11, as well
as to be blown up into newsprint form. But I think that gives us
further encouragement to keep it as abbreviated as we can and still
make the essential points.
SENATOR LINCOLN: I wish that we could have it in some type -- and
I don't know what that would take, but just for consideration -- a
-- a booklet type of - what would this be - 4 1/2 by....
MR. ROGERS: Five and one-half by eight.
SENATOR LINCOLN: Five and one-half by eight? Five and one-half by
eight, because people tend, I mean if it is for them to read it, to
set it down and then to pick it up later, but what I've found is
that if you've got a report that is a larger report, they'll look
at it and pitch it rather than to use this later to read. And so
I would like to see it as a booklet-type report, if that's
possible.
MR. GORSUCH: And Matt Zency suggests the title be "The Alaskan No
Brainer."
UNIDENTIFIED SPEAKER (male): What's wrong with that?
MR. ROGERS: For those who are not part of the majority, if you
could have some bullet points, I'd like for the main text to
include bullets on what the major objections are to various
provisions of the report. And that that be - my own preference
would be that that be included in the majority report is some sense
of where the greatest concerns are. That's not in lieu of, but
supplemental to whatever we do with the full minority reports.
With full concurring, as Mike had asked for the ability to say what
concerns he had, even though he's part of the majority.
SENATOR LINCOLN: Mr. Chairman, I guess I have a problem with that
because then it would be to my advantage to have voted as a
minority because then I'm going to have a special section there
that I can speak to the portions that concern me. I think that
it's enough to - and I'm going to reintroduce the motion to have a
one-page as a minority - anyone that would like to write a minority
- or not minority, but an addendum, to have a one-page. So, I
would oppose having a segment that would be just for those that
voted against the final report.
MR. ROGERS: I didn't have in mind a separate segment for those but
rather when we discussed the income tax, discussing what the
concerns that some members had - it was too late, others the plan
required it too early, on the 25 to 50 percent laying out what the
concerns were over that, what the concerns that Lee and others
expressed over the budgets cuts, etc. - so that people understand
some of the trade-offs. I think in order to understand the trade-
offs, you have to understand what people's concerns are.
SENATOR LINCOLN: So -- so, you're not suggesting that it be just
those that voted against it....
MS. BRADY: All of ours.
MR. ROGERS: No. All of....
MS. BRADY: And this will lend itself to this -- this is going to
lend itself to that kind of playoff I think really well, and give
people even a better understanding of....
MR. ROGERS: And then my personal preference would be that the
report list any -- any expanded concurring and dissenting opinions
that people have had and that those be made available to anyone who
asks for them, but that they not be published as part of the full
report. But that the full report list them and -- and let people
know where they can get copies of those opinions, which we might
bind separately, but maybe not send out 30,000 of them.
UNIDENTIFIED SPEAKER (male): Ask unanimous consent.
MR. ROGERS: Is there objection to that approach? We'll meet on
the 11th -- we may need to meet once again -- it would be my goal
that the published report be available on Monday, the 16th --
Monday -- that there be copies available on Monday, the 16th. The
Chamber of Commerce, Commonwealth North have asked for a
presentation of the report at that time. I think that would be a
good time to make the published report available to two of the
groups that were most responsible for initiation of this project.
And that that be the date that we have the full presentation that
Ross is working on available. I'd like to invite all the members
of the commission to come to that luncheon on the 16th. Some of
you, I think, have already received invitations that are members of
those groups. The other presentations that I've been asked to, and
I would encourage anyone who would like to, to come to them are on
this Tuesday, the 3rd at the Fairbanks Chamber of Commerce; on
Thursday, the 5th at Common Sense for Alaska in Anchorage; on the
19th, Fairbanks Rotary; and the 20th, Alaska Federation of Natives.
MS. BRADY: I have a 19th to the Alaska Credit Union League dinner.
MR. ROGERS: The 19th is the credit union League?
MS. BRADY: Something. If I can't make it, maybe you could?
MS. FOUSE: The 17th, House and Senate leadership.
MR. ROGERS: Seventeenth -- House and Senate leadership at what
time?
MS. FOUSE: There's no time set -- in the afternoon, I believe.
MS. BRADY: Mr. Chairman, are we going to ask as part of this
report that the legislature spend a day or two -- maybe even two --
on the fiscal gap in open session that we can talk about this
report and talk about the various things and get caught up -- I
mean, if they're going to deal with this there's got to be an up to
speed day or some -- you know, there's got to be some -- you know
and you could have members of the Administration or members of
legislators make presentations.
MR. GORSUCH: Preferably on a sunny Saturday and Sunday.
MR. ROGERS: In Juneau in January.
MS. BRADY: I think that's fair to ask. I think that's fair to ask
if they're going to deal with this and they have to. If they say
no, fine. Okay. But I think if they're going to deal with this,
then they have to have, you know, the legislators who came to these
meetings are all caught up and obviously (indisc.) before, but
there's some who don't know.
MR. ROGERS: I guess my sense is, you know, there have been calls
for a special session at the beginning of the legislative session,
or special session separately for treating it separately, I really
think that's not our call. It ought to be up to the legislative
leadership. I would assume that the Governor's State of the Budget
will probably speak to a lot of these issues (indisc.) State of the
State and while I suppose we could make recommendations as to that
process, I think we're better off letting them grab hold of the
issue and decide how best to deal with it. I have my own
preferences and like you, I think the beginning of the session is
a good time to deal with it, but -- but I don't want to second
guess what the leadership wants to do. And it really - the ball is
in their court after today, not ours. That's my feeling.
SENATOR LINCOLN: Actually I think -- Mr. Chairman, I think
probably that will come out on the 17th when you meet with the
leadership what the next step is going to be.
MR. ROGERS: Other thoughts on that issue?
MR. POURCHOT: Related issues on legislation. Did you speak to
that (indisc.).
MR. ROGERS: On legislation - we have some bill drafts already.
We'll need to draft the constitutional amendment and discuss that
on the 11th. Again, I think if we outline the legislation, that's
probably going to be enough. For the Constitution - because every
word matters in the Constitution - I think we should prepare to
spend a half an hour or an hour - recognizing that may not be
enough and we may have to go back to an outline form for the
constitutional amendment. If we can get agreement on portions of
it, I think we're in good shape and we would submit those tomorrow
to legislative drafters.
MR. POURCHOT: I agree with that. I would also suggest that that
the commission draft the resolution that we would be submitting
asking the legislature to adopt something.
MR. ROGERS: So we would have a commission resolution and then the
commission constitutional amendment and then the elements of the 96
legislative package in terms of the bills outlined or the bill --
series of bills outlined. Annalee and then Lee.
MS. MCCONNELL: What about the briefing for tomorrow? It is
definitely 9 o'clock, is that right for the Senate President, the
House Speaker and Governor?
MR. POURCHOT: Did somebody talk to -- did you talk to the
Governor?
MS. MCCONNELL: As long as -- you made the last call that changed
it from 8:30 to 9:30 right?
UNIDENTIFIED SPEAKER (female): Ya, we're square....
MR. ROGERS: What -- what video conference sites is that?
MS. FOUSE: Fairbanks, the Butro, Governor's office in Juneau and
here.
MS. BRADY: LIO here? Right here?
MR. ROGERS: Yes.
SENATOR LINCOLN: Could you say that again on what the time is?
MR. ROGERS: Butrovich Building -- 9:00 a.m. tomorrow, Butrovich
Building, Fairbanks; Governor's Office, Juneau; Legislative
Information Office. I will try to summarize the major points --
let them know the report is coming in about two weeks in writing --
but summarize the major points, and then go to individual members
of the commission to speak briefly on -- to pick up elements that
I had missed in trying to summarize it verbally and to express
concurring or dissenting opinions.
MS. MCCONNELL: And who -- how many of us are going to be able to
be there? Are there a fair number of commission members....
MR. ROGERS: I'm assuming that's the case. One, two, three, four,
five, six, seven, eight, nine -- ya, so the majority of the
commission will be present.
MS. MCCONNELL: And what about any pieces of paper -- at that point
are we -- is it your intention that we have the spreadsheet or the
two page bulletin, (indisc.) edited or just nothing at the moment
and just verbal.
MR. ROGERS: My -- I think probably just verbal. It's possible
that we might be able to produce a couple of -- of bullet sheets
that we can put up on the E/MO unit so that people can see it on
the screen, but there's not a lot of time between now and 9:00 a.m.
tomorrow.
MS. MCCONNELL: Right. That's why I was wondering whether we
needed to do anything.
MR. ROGERS: We still have to work on editing your two-page summary
before we leave today. Lee.
MR. GORSUCH: Mr. Chairman, I think now that we're, in broad
strokes concluded, I would encourage the -- the chair to see if we
could have either a special meeting or a - at least a briefing of
the Alaska Permanent Fund trustees. They're a group who are very
much affected by the recommendation of the conversion to the
endowment plan and I think it's very important that we have a
conversation with them as early as possible to try to avoid any
negative reactions on the part of the -- on the part of the
trustees. And secondly, all of us are involved in a host of
different service organizations and I guess I would just encourage
all of us who feel so inclined, to really try to make a special
effort to reach out and talk to those groups as quickly as possible
because the rumor control is going to be an important dimension of
this. It's really unfortunate that we'll wind up getting news
coverage before we actually have the report available, but that's
just the way -- that's just the way it is. So I think it's going
to be important that we hit -- hit the Alliance, we hit the
Commonwealth North, we hit the Chambers, more than just the
presentation, but in their small group - the regular meetings and
so forth, that we try to make the rounds as much as we possibly
can. It will be the beginning of the educational program. But I
think those early days will be the most important ones because
that's when opinions are being formulated around first -- first
impressions. And if I could just -- I think it's important that in
all of our publicity we try to give as much attention to what --
what the plan accomplishes as much as what the plan is. I really
feel strongly that the public has some real preoccupations and to
the extent that we've addressed some of the things that they've
constantly been complaining about, it's important that we highlight
that the plan addresses those concerns and if you want to learn
about it, then we'll make the thing available. But I think
(indisc.) going to try to reiterate in terms of supporting our
recommendations is very important that it be high profile in terms
of what we release to the public.
MR. ROGERS: The summary has a working title of "Securing a Stable
Fiscal Future for Alaska." We had earlier proposed for the interim
report but it got bumped (indisc.) consideration now the "Fish or
Cut Bait" as the title. We had Lee's "Cut, Cap and Tax" as a
title. Are there any other suggestions that people have?
MS. NORDALE: I think we ought to stay with our other title.
MR. ROGERS: Closing -- and Mary's is Closing the Fiscal Gap.
UNIDENTIFIED SPEAKER (female): Same as the last one.
MR. ROGERS: No, the last one was Growing Fiscal Gap. It's called
Alaska's Growing Fiscal Gap is the first report.
MS. NORDALE: I think we ought to -- the whole publicity on this
thing has dealt with the gap and we've played into that, so I'd
kind of like to stay with....
MR. ROGERS: So yours would be....
MS. NORDALE: Closing the Fiscal Gap.
SENATOR LINCOLN: Then I guess I'd just stay with the same title as
we had before.
MR. ROGERS: Well....
SENATOR LINCOLN: Just to be consistent.
MR. ROGERS: I don't think it's consistent because the plan -- with
the plan, it's no longer a growing fiscal gap.
UNIDENTIFIED SPEAKER (female): What was the whole title of the....
MR. ROGERS: Alaska's Growing Fiscal Gap.
MS. MCCONNELL: Does somebody have the extra -- there was a --
there were a bunch of copies that -- the edited version for today
starts off Alaska's fiscal gap is real and growing. Is there
(indisc.) because not everybody got one.
MR. ROGERS: If we -- if we would take a little bit of Mary said
and a little bit of what Georgianna said, we would just add the
words "Closing" to the beginning of the title, to be "Closing
Alaska's Growing Fiscal Gap."
MR. ROGERS: No? Okay. Closing Alaska's Fiscal Gap.
Note: Comments are indiscernible.
MR. ROGERS: Well, that's what we been working at for five months.
Closing Alaska's Fiscal Gap -- is that acceptable?
MR. LUDWIG: Going, going, gone.
MR. ROGERS: Pardon?
MR. LUDWIG: Going, going, gone.
MR. ROGERS: Hearing no objection. On Annalee's two-page summary
here. First paragraph, second paragraph.
MS. BRADY: I would just take out all the stuff about "while you
may disagree da da da da da da -- you know, on the first one, let's
just say this plan is for ourself and our grandchildren. Everybody
has to share in the solution. Everybody's going to -- we all gave
up something what we believe -- you know, we all gave up -- we all
did trade-offs to come to a -- something that would work and we
expect you to -- (indisc.) two, three sentences.
MR. ROGERS: Okay, the goals.
UNIDENTIFIED SPEAKER (male): Of our plan?
MR. GORSUCH: Suggest we have another bullet which is to stabilize
both revenues and to take dollars or....
MR. ROGERS: To stabilize revenues.
MR. GORSUCH: Stabilize revenues.
MR. ROGERS: Stabilize and diversify.
MR. GORSUCH: But we're also taking money off the table which has
been a very consistent concern.
UNIDENTIFIED SPEAKER (female): Mr. -- are you done?
MR. GORSUCH: No, I had under the -- building up the permanent
fund, I had -- again, I don't know if we want to do this or not,
but in -- in parenthesis was this offset declining oil revenues.
So, it could read build up the permanent fund for future
generations and to offset declining oil revenues.
MS. BRADY: You know, if we could get that -- get a word by word
run -- that summary that you did about what the concerns were and
how this goes to solve it, that was just a really good play
(indisc.).
MR. ROGERS: I took a lot of notes on that too for the same reason.
MS. BRADY: That would make a real good -- a real, real good
summary.
MR. ROGERS: And that -- that would sort of go right after the
goals and the plan and stick in these -- accomplishments of the
plan.
MS. BRADY: Ya, and as a response to public concerns, you know, the
concerns (indisc.).
SENATOR LINCOLN: Mr. Chairman, I would also under the goals,
change maybe the second line down to establish clear, viable
choices for the following three, five and ten years.
MR. ROGERS: Down under the first four years, I think we're talking
the first three, -- first three legislative -- first three years;
then we'll need to change the numbers a little bit out on this.
MS. BRADY: People might get mad about this inflation adjusted
dollars and today's dollars. People always just think they're
getting ripped about that. I don't know how to handle that, but if
we could just avoid that kind of reference in the summary sheet.
Is there any way to do that?
MR. ROGERS: I think I would -- I think it will be hard to avoid
doing that and so what I would advocate is whenever we speak to
nominal dollars, we put in parenthesis real dollars, where real
dollars in parenthesis nominal dollars; that at all times we report
them both ways so that people -- so that the two -- two ways of
seeing it are both on the table at the same time.
MR. GORSUCH: And I'd try to use it just in terms of equivalent to
x in today's purchasing power. Mr. Chairman, just a couple of
editorial things. I'd say the first three years and then say key
elements of the plan between now and the year 2000 are. Always try
to make it in the active voice rather than the -- the passive
voice. And then under the spending and reforms, I would say cut
spending (indisc.) reform by 100 million and then do the listing
and raise revenues and consolidate reserves by 200 million, and
then the same thing with the permanent fund - decrease or reduce
permanent fund dividends....
MR. ROGERS: (Indisc.) permanent fund earnings and reduce permanent
fund dividends by....
MS. BRADY: You know what (indisc.-coughing) could be hard to show
but I know we want to talk about spending reform first, but this
whole thing requires a constitutional amendment and it's a way of -
- we need some kind of overall statement that this -- this plan --
the center of this plan is a constitutional amendment that....
MR. ROGERS: Increases permanent fund deposits, establishes an
annual draw from the permanent fund, fixes problems in the existing
constitutional budget reserve.
MS. BRADY: Ya, but that's not public -- I mean, that's not
going....
MR. GORSUCH: Ya, I think our first -- under the three-year plan,
our first italicized should be put before the voters constitutional
amendment....
MS. BRADY: To reform how we spend....
MR. GORSUCH: To whatever -- however we punch that out.
MR. BRADY: To....
MR. ROGERS: Speaking of constitutional amendment, Sean raised
something yesterday that we never voted on and that was whether the
constitutional amendment should address this -- the spending limit
-- should repeal the spending limit -- inoperative spending limit
or keep it on the books. Did we ever vote on that?
REPRESENTATIVE PARNELL: The question was whether it was going to
be part of...
MR. ROGERS: Ya.
REPRESENTATIVE PARNELL: ...the overall package or whether it was
going to be a separate -- you know, should be taken out anyway,
regardless of anything else.
MR. GORSUCH: Who knows, we may need it some day.
MR. ROGERS: Well, it does ensure that the spending won't exceed $6
billion this year. And it's obviously effective because spending
isn't going to exceed.
MS. NORDALE: The (indisc.-coughing) is you should just leave it
alone.
MR. GORSUCH: I don't think we want to....
MS. NORDALE: It's not (indisc.-coughing) anybody - it just raises
a red flag.
MR. ROGERS: Fine.
SENATOR LINCOLN: Mr. Chairman, I guess when I was reading this,
you know, the goals to look at the three year, five year, and a ten
year and we start out by saying the first three years and then the
next line says between now and the year 2000. I think we should
have a three year and then say then the next -- the next five years
and giving that break and here's what it does, and then the ten
years, here's what it does so....
MR. ROGERS: So, it would say the first three years, key elements
of the plan are and then say what it is in the first three years.
SENATOR LINCOLN: Right. And then to follow that with a five year
and then the ten year.
MR. ROGERS: And again, I think that the fork in the road after the
first three years is a -- is a good way of characterizing what the
choices are at that point and what the majority choice is at that
point. But making it clear that there are still choices after year
-- after the first three years. After this -- after this then we
would be adding the five year and the ten year; we would be adding
some of the general recommendations for budget cuts; adding a
little bit of detail on the recommendation for revenue - for tax
and user fee increases and when they come in; a section on the
budget process; on the recommendations affecting division of
responsibilities between state and local government, we adopted a
series of those...
UNIDENTIFIED SPEAKER (female): Did we adopt them or...
MR. ROGERS: We adopted a series of bullets on....
UNIDENTIFIED SPEAKER (male): Recommendations for them to look at.
MR. ROGERS: Things dealing, for example, with the oil and gas
property tax split between state and local, on the tier-three road,
public protection, a whole series of them.
MS. MCCONNELL: And so you'd want that in this two-pager, you
mean....
MR. ROGERS: No, this would be -- it's been moved from the two-
pager (indisc.).
MR. POURCHOT: Have we left this or where are we?
MR. ROGERS: No, I was just trying to see what else is out there.
UNIDENTIFIED SPEAKER (female): Gotcha.
MR. ROGERS: Are there other concerns or suggestions for
improvements to this?
MR. POURCHOT: I would separate revenues from reserves on this. I
just think you've got enough reserves (indisc.) I think that's kind
of a separate section that actually has, you know, separate goals,
separate mechanics and the part about impose no new types of taxes,
actually there are new taxes that we are recommending now.
MR. ROGERS: Ya.
UNIDENTIFIED SPEAKER (female): Not for the first three years.
UNIDENTIFIED SPEAKER (male): Tourism.
UNIDENTIFIED SPEAKER (male): Tourism.
UNIDENTIFIED SPEAKER (female): Oh, that's right we do have
(indisc.).
UNIDENTIFIED SPEAKER (female): This is from last night....
UNIDENTIFIED SPEAKER (female): That's right.
UNIDENTIFIED SPEAKER (male): Would that be (indisc.).
MR. ROGERS: Then we have the pieces of other sections that will be
in here. In the final will be pieces of the budget puzzle that
explain the relationship of general fund expenses to non-general
fund expenses and break the total spending of 5 1/2 billion down
into the categories and show how -- where there may be options that
would affect the budget gap and where in the majority of cases,
there are not options that affect the budget gap.
MS. MCCONNELL: I have here the version that Nancy faxed to me
yesterday of the different fund sources with the notes. Would you
like that to still be in the appendix? Something that goes out
(indisc.).
MR. ROGERS: No, I don't think something that detailed ought to be
-- ought to go out with the report, but I think -- I think we may
want an index to supplemental information and we're going to want
to summarize that clearly; the public told us they want all those
pieces of the puzzle and I think the other summary - pieces of that
are more likely to be helpful in the report.
MS. MCCONNELL: And this other thing I want -- before it gets
passed out, I want to put 7,000 caveats on this. This is a first
cut that Tamar DeFranco in Revenue did, to try to think of how to
visualize between the 6 billion dollar number and the 2.47 number
so people understood, it needs drastic editing as you'll see from
some things that are in here and the numbers are not yet -- they're
not final numbers, but it's to give you an idea of how you could
walk through it. So, please take it with those 7,000 caveats.
MR. GORSUCH: So, we need -- we need our short version, but we do
need some bullet on expenditure of other funds or....
MR. ROGERS: Yes.
MS. MCCONNELL: I've got (indisc.) breakdown....
MR. ROGERS: And the relationship of the expenditure of other funds
to the fiscal gap...
MS. MCCONNELL: Right now, it's under budget reforms (indisc.) all
state spending, not just general funds (indisc.).
MR. GORSUCH: Annalee, in addition, on the bottom of that page,
2000 and beyond, I don't know -- did we talk about the condition of
having a reconvening (indisc.-coughing) -- did we talk about annual
scorecard, or did that get lost.
MS. MCCONNELL: I have that in budget reform - report annually to
the public on the progress toward closing the fiscal gap. I could
put it in the text -- I could do it either way.
MR. ROGERS: I want to make sure -- you said the word reconvening
in 1999...
MR. GORSUCH: Well, no -- I mean....
MR. ROGERS: Convening a new commission in 1999.
MS. MCCONNELL: (Indisc.).
MR. GORSUCH: Thank you for the correction, Mr. Chair.
MR. POURCHOT: I don't see the part in here about the deposit of
the earnings reserve account. We want to make sure we get that in.
MR. ROGERS: Right.
MS. MCCONNELL: Ya, I just got started (indisc.) deposit to the
CBR.
MR. GORSUCH: And our income tax figure goes under this discussion.
MR. ROGERS: Under the 2000 and beyond?
MR. GORSUCH: Yes.
MR. ROGERS: How many people by the way will need -- will want
copies of the endowment spreadsheet on disk? One, two, three.
MS. BRADY: Are you going to call (indisc.) and let him know?
Note: Indiscernible conversation.
CHAIRMAN ROGERS: I've got a -- I've got a couple of minor
adjustments to make (indisc.).
MR. ROGERS: So, we'll just make sure everyone gets copies early
this week from the commission office of the spreadsheets. Let
Melissa know whether you want it in IBM or MacIntosh format and
what version of software you're using. We'll try to make it in the
version that you use -- the machine you use, but there are no
guarantees. Other issues on the summaries? I'll be using a lot of
this model for the introductory remarks. Anyone have anything else
they want to do today?
SENATOR LINCOLN: I have something I want to raise, Mr. Chairman.
The -- Annalee, the draft of the final report is -- it was -- had
it pieces of the budget puzzle versus parts of the gap, where or
what parts of this was going to be used? Where does this fit?
MR. ROGERS: Those parts that the drafting committee puts in to
what you see on the ninth which may be portions of that and will
probably exclude major portions of that.
SENATOR LINCOLN: Okay, if we have concerns about portions of this,
we should contact you?
MR. ROGERS: Contact Melissa and I'll make -- and she can track
them and make note of them and get them to me. That would probably
work best.
MR. LUDWIG: Physically mark something up for you?
MR. ROGERS: Yes, that would be best. Physically mark them and fax
them. Further business to come before the commission?
MS. BRADY: I think we just did great.
MR. ROGERS: I think that given the philosophic differences on the
commission, and there were seven Democrats and seven Republicans
and one Independent running a broad spectrum of the state, as I
noted last night, nearly five centuries of Alaska residency on the
commission, four of which have been spent meeting (indisc.) and I
think that everyone -- that what's here, while it did not achieve
consensus, that there are elements of thinking of every member of
the commission embodied in the plan and elements of thinking of
some of the key individuals who participated in the process. And
I particularly want to note the participation of Roger Cremo,
Cheryl Frasca and Byron Mallott, who each have contributed
substantially to the -- to the work of the commission, and the
thinking of the commission and the report. I think that we can be
proud of our public service to the state. I hope that the report
has a positive impact on the public debate about how to fill the
gap and we'll recess until....
UNIDENTIFIED SPEAKER (male): And the staff.
MR. ROGERS: ....and the staff of the commission. Bob Walsh is not
here today, because of his father's illness and he's been gone for
three days. Melissa and Brad - their long hours supporting us.
With that, we'll recess until Wednesday night, the 11th.
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