Legislature(2003 - 2004)

02/25/2004 07:00 AM House W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                       February 25, 2004                                                                                        
                           7:00 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker, Chair                                                                                               
Representative Bruce Weyhrauch, Vice Chair                                                                                      
Representative Vic Kohring                                                                                                      
Representative Dan Ogg                                                                                                          
Representative Norman Rokeberg                                                                                                  
Representative Ralph Samuels                                                                                                    
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Paul Seaton                                                                                                      
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 493                                                                                                              
"An Act relating to adoption and revision of a long-term fiscal                                                                 
plan for the State of Alaska."                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 493                                                                                                                  
SHORT TITLE: LONG TERM FISCAL PLAN                                                                                              
SPONSOR(S): REPRESENTATIVE(S) HARRIS                                                                                            
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       W&M, FIN                                                                                               
02/25/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
WITNESS REGISTER                                                                                                              
DAVID TEAL, Director                                                                                                            
Legislative Finance Division                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Provided comments during  the discussion of                                                               
HB 493 and answered questions.                                                                                                  
DAN DICKINSON, Director                                                                                                         
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Provided comments during  the discussion of                                                               
HB 493 and answered questions.                                                                                                  
ACTION NARRATIVE                                                                                                              
TAPE 04-7, SIDE A                                                                                                             
Number 0001                                                                                                                     
CHAIR MIKE HAWKER called the  House Special Committee on Ways and                                                             
Means  meeting to  order at  7:00 a.m.   Representatives  Hawker,                                                               
Samuels, Kohring,  Weyhrauch, Wilson,  Gruenberg, Moses,  and Ogg                                                               
were  present at  the  call to  order.   Representative  Rokeberg                                                               
arrived as the meeting was in progress.                                                                                         
HB 493-LONG TERM FISCAL PLAN                                                                                                  
Number 0217                                                                                                                     
CHAIR HAWKER announced that the  first order of business would be                                                               
HOUSE BILL NO. 493, "An Act  relating to adoption and revision of                                                               
a long-term fiscal plan for the State of Alaska."                                                                               
CHAIR  HAWKER  listed the  documents  in  the committee  members'                                                               
packets.   He spoke of  a bar  chart that showed  three different                                                               
scenarios projected last year by  the Department of Revenue (DOR)                                                               
comparing  dividend splits  of [percent  of market  value] (POMV)                                                               
proceeds  and the  resulting  consequence  on the  constitutional                                                               
budget reserve fund (CBRF) balance.   He said the graph depicting                                                               
the budget at $7.5 billion "in  the hole" shows the reason behind                                                               
needing a long-term fiscal plan.                                                                                                
Number 0334                                                                                                                     
REPRESENTATIVE WEYHRAUCH asked if  the chart reflected any growth                                                               
in  the  size  of  the  CBRF, even  if  there  is  no  additional                                                               
appropriation  and there  are increases  only through  investment                                                               
CHAIR HAWKER said yes, there  would be no additional investments.                                                               
"The charts  indicate a  consistent budget  deficit for  the next                                                               
few years without material additional revenues," he added.                                                                      
Number 0408                                                                                                                     
REPRESENTATIVE OGG  asked if it  was possible to put  more charts                                                               
together to have a realistic  picture that shows if government is                                                               
kept  at  the size  it  is  right now,  what  the  cost would  be                                                               
[through FY 2012].                                                                                                              
CHAIR HAWKER said  that the committee is headed  in the direction                                                               
of Representative  Ogg's suggestion.   He  noted that  the second                                                               
chart showed a 2 percent increase.                                                                                              
REPRESENTATIVE WEYHRAUCH related:                                                                                               
     The out  years, say 2010,  when the amount of  the CBRF                                                                    
     falls below zero, realistically,  it wouldn't show that                                                                    
     sort  of significant  decline.   What that's  trying to                                                                    
     reflect is the amount of  money we would have to obtain                                                                    
     from  other  sources,  bonding,   or  taxes,  or  other                                                                    
     revenues,  in order  to fill  that  margin between  the                                                                    
     negative and the zero.                                                                                                     
CHAIR HAWKER  agreed.   "We are  not constitutionally  allowed to                                                               
deficit  spend," he  said.   He  noted  that when  Representative                                                               
Weyhrauch  cross-referenced the  year  2010,  that was  presuming                                                               
$300 million a  year in additional revenues.   He emphasized that                                                               
[the charts] were benchmark models from last year's files.                                                                      
CHAIR HAWKER  announced the arrival of  Representatives Gruenberg                                                               
and Seaton.                                                                                                                     
Number 0616                                                                                                                     
REPRESENTATIVE  WEYHRAUCH moved  to adopt  HB 493  for discussion                                                               
CHAIR HAWKER  noted Version 23-LS1765\D  [the original  bill] was                                                               
before the committee.                                                                                                           
REPRESENTATIVE  GRUENBERG, speaking  as cosponsor,  introduced HB
493 as  a vehicle requiring the  state to adopt, now,  and in the                                                               
future, a long-term,  medium-range fiscal plan.  He said  it is a                                                               
simple bill, favored  by a large number of  people, that provides                                                               
a benchmark from  which to work, a goal for  which to strive, and                                                               
a  series of  road marks,  missions, and  measures in  the fiscal                                                               
area.    He  expressed  surprise   that  there  is  no  statutory                                                               
requirement,  already, to  have a  fiscal  plan.   He noted  that                                                               
future  legislation can't  be  bound, but  could  be directed  to                                                               
[have a fiscal plan].                                                                                                           
Number 0901                                                                                                                     
REPRESENTATIVE   GRUENBERG   explained   that  Section   1   adds                                                               
provisions in the  uncodified law because it is  the statement of                                                               
the current situation.   The codified laws  are titled "temporary                                                               
and special  acts," he  noted.  [Reading  through Section  1], he                                                               
pointed out  on page  1, the disparity  noted in  paragraphs (1),                                                               
(2), and  (3).  He  said that  paragraph (3) doesn't  provide the                                                               
only reason  [to develop a fiscal  plan], but does point  out the                                                               
urgency.  In paragraph (4)  he emphasized the words "balance" and                                                               
"properly  planned."   He continued  to read  paragraph (5),  and                                                               
then added  that a variety of  tools will be needed  to achieve a                                                               
fiscal  plan.   He said  the  key in  paragraph (5)  is that  the                                                               
[fiscal] plan is "balanced and fair to all Alaskans."                                                                           
REPRESENTATIVE  GRUENBERG  explained  that  Section 2  is  a  new                                                               
section, entitled "Long-term  fiscal plan."  He  said this public                                                               
finance  section  would add  a  new  provision to  the  Executive                                                               
Budget Act, immediately  after the statement of policy.   He read                                                               
subsection (a) and  opined it was the most important  part of the                                                               
bill.   He noted that five  years seems like a  reasonable period                                                               
of time.                                                                                                                        
REPRESENTATIVE  GRUENBERG read  [Section 2,  subsection (b)]  and                                                               
pointed  out five  points the  legislative plan  should consider.                                                               
He  defined  "real  economic  growth" [in  paragraph  (1)]  as  a                                                               
healthy,  growing economy  that provides  business opportunities,                                                               
jobs, and the  means to support families and  the necessary state                                                               
services.    He  said  "maintains  a high  quality  of  life"  is                                                               
probably the most  important [point].  He said he  did not intend                                                               
environmental issues to  be overlooked, but that  the emphasis is                                                               
on developing natural  resources.  He noted  paragraph (2) sounds                                                               
like  the mission  of the  House  Special Committee  on Ways  and                                                               
Means.   Representative  Gruenberg  explained  that in  paragraph                                                               
(4), specific  means to  raise revenues were  not noted  and were                                                               
purposely left for  the legislature to decide.   The language [in                                                               
paragraph (5)]  "prudent minimum balance  in the fund"  came from                                                               
the Fairbanks  Conference [Conference  of Alaskans,  February 10-                                                               
12, 2004], he concluded.                                                                                                        
Number 1702                                                                                                                     
REPRESENTATIVE OGG  wondered if  the intent  of the  bill implies                                                               
that  [the state]  does not  have a  balanced budget  and is  not                                                               
living within its means.                                                                                                        
REPRESENTATIVE GRUENBERG  opined that [the state]  has a balanced                                                               
budget in  the sense that it  is able to fund  the appropriations                                                               
each year, but, in the sense that  money has to be drawn from the                                                               
savings account, there  is not a long-term  balance because [that                                                               
money] is going to run out.                                                                                                     
REPRESENTATIVE  OGG  responded that  in  the  last 10  years  the                                                               
legislature has  made fairly frugal  decisions with  the incoming                                                               
revenues,  and has  made  choices  about what  to  do with  those                                                               
revenues.   Over this  period of  time, there  has always  been a                                                               
balanced budget and excess revenues, he said.                                                                                   
REPRESENTATIVE  GRUENBERG said  the bill  is intended  to provide                                                               
for a future set of goals.                                                                                                      
REPRESENTATIVE OGG asked  if that is the case,  what would change                                                               
at this time.                                                                                                                   
Number 1850                                                                                                                     
REPRESENTATIVE GRUENBERG  replied that  when he looks  at whether                                                               
the budget is  balanced, "I'm looking at it, not  just whether we                                                               
have the ability to meet the  bills in the current year, but what                                                               
we're  doing in  the  sense of  providing for  the  future."   He                                                               
called the  current situation a  "period of  transition"; cutting                                                               
state services  and reducing state  spending which can't  be done                                                               
indefinitely.    He  said  that  Alaska  has  been  traditionally                                                               
dependant on  resources, most  notably oil,  with a  finite life.                                                               
He  stressed that,  for  stability, a  long-term  fiscal plan  is                                                               
Number 2009                                                                                                                     
REPRESENTATIVE OGG maintained that there  was a plan, long before                                                               
he was  elected, which has  allowed [the  state] to come  quite a                                                               
ways.  He said the money has been  used in a variety of ways: for                                                               
a permanent fund, inflation-proofing $7  billion over a period of                                                               
time, and  for excess  earnings available  for the  general fund.                                                               
He said the  budget is balanced, but that [the  state] is looking                                                               
down  the  road.    He asked  Representative  Gruenberg  what  he                                                               
thought should be changed.                                                                                                      
REPRESENTATIVE GRUENBERG  suggested producing a  publicly debated                                                               
plan so  people in  the state, and  elsewhere, "would  know where                                                               
we're going and how we're going to get there."                                                                                  
Number 2210                                                                                                                     
CHAIR HAWKER  asked Representative  Gruenberg what his  vision is                                                               
for the work product.                                                                                                           
REPRESENTATIVE GRUENBERG answered it could  be any one of several                                                               
things:  a  temporary or special act that would  be in effect for                                                               
five years, something  permanent and amended as time  went on, or                                                               
a concurrent  resolution.  He  said he has left  it intentionally                                                               
discretionary in the  legislature.  He added  that Congress, each                                                               
year,  has an  omnibus resolution  that  is passed  early in  the                                                               
session,  the amount  [of  money] is  generally  known, and  then                                                               
individual appropriation bills are worked on.                                                                                   
CHAIR   HAWKER  asked   if   Representative  Gruenberg's   vision                                                               
interrelated to the  missions and measures statutes,  and if that                                                               
might be the place to integrate it.                                                                                             
REPRESENTATIVE HAWKER answered that is  possible, but the bill is                                                               
more of an aspirational statement  for the budgeting process.  He                                                               
said  the missions  and measures  legislation reach  down to  the                                                               
individual departments,  but [HB 493] provides  a macro approach.                                                               
He agreed that the two go together.                                                                                             
Number 2524                                                                                                                     
REPRESENTATIVE SAMUELS  referred to  the findings in  [Section 1]                                                               
and said  they suggest a significant  disparity between available                                                               
revenues.   He stated that  is incorrect because  the legislature                                                               
could appropriate  the earnings of  the permanent fund  and there                                                               
would be plenty  of money.  He asked  if Representative Gruenberg                                                               
is entertaining corrections or amendments.                                                                                      
REPRESENTATIVE  GRUENBERG  said  he  has  no  problem  [accepting                                                               
amendments]  because [the  bill]  is simple  a  vehicle for  [the                                                               
legislature] to  make policy statements.   He said the  intent is                                                               
to keep  [the bill] fairly  neutral and broad-brushed so  it does                                                               
not become an advocacy statement.                                                                                               
Number 2704                                                                                                                     
REPRESENTATIVE WILSON  said she is  trying to envision  what kind                                                               
of process this bill would involve.   She indicated that in other                                                               
states there are  two strong standing committees,  one that would                                                               
do  the appropriating,  and  the  other that  would  look at  the                                                               
financial status  of the state.   She said  in Alaska there  is a                                                               
strong  finance committee  that  decides how  the  money will  be                                                               
spent.   There  is not  a standing  committee that  looks at  the                                                               
finances  of   the  state,  the  income,   and  makes  adjustment                                                               
decisions.     She  asked  Representative  Gruenberg   if  he  is                                                               
intending to  make a change  in the  structure of the  way things                                                               
are currently run.                                                                                                              
REPRESENTATIVE  GRUENBERG said  absolutely, and  that he  is glad                                                               
Representative Wilson  asked the question.   He posited  that the                                                               
creation of  the [House Special  Committee on Ways and  Means] is                                                               
an  extremely  important step,  and  that  there  needs to  be  a                                                               
standing ways  and means committee  to look at planning  and ways                                                               
to  raise  revenue.   He  said  that  over  30 states  have  such                                                               
committees.  He remarked that he  has plans to draft a resolution                                                               
which ensures continuance  of the current committee as  well as a                                                               
second standing ways and means committee.                                                                                       
REPRESENTATIVE  WILSON thanked  Representative Gruenberg  for his                                                               
answer and stated that she has strong feeling about the issue.                                                                  
Number 3033                                                                                                                     
REPRESENTATIVE OGG  referred to page  2, line 11, and  asked what                                                               
the intention  of "the  means" is,  and how  it differs  from the                                                               
powers the legislature presently has.                                                                                           
REPRESENTATIVE   GRUENBERG  replied   that  it   is  within   the                                                               
legislature's powers and does not  intend to give the legislature                                                               
new  powers.    He  said  "the  means"  is  policy,  suggestions,                                                               
legislation, appropriations,  or anything  that would  assist the                                                               
REPRESENTATIVE  OGG  paraphrased,  "the  plan  must  include  the                                                               
following:  the  means."  He said his understanding  of the means                                                               
is  "the  authority"  or  "the  power."   He  asked  for  further                                                               
REPRESENTATIVE  GRUENBERG   replied  that  he  is   leaving  [the                                                               
wording]  intentionally  vague.     [The  legislature]  can  pass                                                               
statutes,   appropriations,    taxing   legislation,   interstate                                                               
contracts, or any other traditional legislative tools, he said.                                                                 
REPRESENTATIVE  OGG   responded  that  he   heard  Representative                                                               
Gruenberg saying  something different than his  own understanding                                                               
of "the means."   He said the legislature already  has the power,                                                               
or  the means.   He  said he  heard Representative  Gruenberg say                                                               
[the legislature should] go one  step farther and "identify those                                                               
tools  and  focus  them  on   fostering  a  stable  economy  that                                                               
encourages economic  growth."  He asked  if the plan was  to have                                                               
the  legislature  address  funds  or  direction  to  agencies  to                                                               
accomplish these goals.                                                                                                         
Number 3354                                                                                                                     
REPRESENTATIVE GRUENBERG  said that might  be one way, but  it is                                                               
not  only "direction  to agencies."    For example,  it could  be                                                               
taxes or permanent  fund dividends, which deal  directly with the                                                               
people themselves.   He said it could also be  a joint resolution                                                               
or a request to Congress -  anything that might be appropriate at                                                               
the time.                                                                                                                       
CHAIR HAWKER  suggested the word  "means" might be  replaced with                                                               
the word "ways."                                                                                                                
REPRESENTATIVE GRUENBERG said absolutely,  he has no problem with                                                               
any of the suggestions.                                                                                                         
REPRESENTATIVE OGG agreed with Representative Hawker.                                                                           
REPRESENTATIVE OGG asked  for clarity on line  17, paragraph (3),                                                               
where  it   says  [paraphrasing],  "policies  that   protect  the                                                               
principal of  the Permanent Fund  while using the earnings."   He                                                               
remarked that there  presently is a mechanism in  place that does                                                               
exactly  that.   He  requested  a  concrete explanation  of  what                                                               
[those lines] mean.                                                                                                             
Number 3611                                                                                                                     
REPRESENTATIVE GRUENBERG  replied that these are  the issues that                                                               
the legislature should  continue to examine.  He did  not mean to                                                               
say, in  every case, that  the legislature's not doing  them now.                                                               
He said  he is  suggesting a formal  and continuing  process, not                                                               
just an ad hoc  process.  He added he is not  saying there has to                                                               
be changes in any given example, or in the collective process.                                                                  
REPRESENTATIVE  OGG  said  he  didn't  find  much  "concrete"  in                                                               
Representative   Gruenberg's  answer,   and  remarked   that  the                                                               
committee has  been having this  kind of discussion for  the past                                                               
year and  a half.  He  said he didn't  want to hear, "We  have to                                                               
keep working on that issue."                                                                                                    
Number 3707                                                                                                                     
REPRESENTATIVE GRUENBERG  responded, "That is the  essence of the                                                               
purpose of the bill."   He said Representative Wilson pointed out                                                               
one  aspect of  the  bill, that  there needs  to  be a  committee                                                               
structure that  allows and encourages  [work] to be done  as part                                                               
of  the  fiscal policy  basis,  the  revenue raising  basis,  and                                                               
looking at  ways to stabilize  and grow the  state.  He  said the                                                               
bill is not  attempting to point a finger to  say the legislature                                                               
is doing things  wrong at the present time, it  is to ensure that                                                               
the process  continues in an  established framework on  a regular                                                               
basis.  He opined that subsection  (a), page 2, lines 7-9, is the                                                               
heart of the bill.                                                                                                              
CHAIR  HAWKER  clarified  procedures  for the  remainder  of  the                                                               
Number 3905                                                                                                                     
REPRESENTATIVE  SEATON  said the  biggest  question  mark in  the                                                               
budget is the price  of oil.  He said he is  trying to figure out                                                               
how "fuzzier  and fuzzier projections  going out year  after year                                                               
for  a 5-year  oil projection  gets us  to a  more finite  fiscal                                                               
REPRESENTATIVE GRUENBERG  replied that the 5-year  figure is only                                                               
a  suggestion, and  he isn't  wedded to  it.   He stated  his own                                                               
views on oil fluctuations and suggested more planning be done.                                                                  
REPRESENTATIVE  SEATON referred  to the  extreme fluctuations  in                                                               
oil  price and  said  the  range of  the  5-year  plan cannot  be                                                               
REPRESENTATIVE GRUENBERG  agreed and listed other  variables that                                                               
could affect the plan.                                                                                                          
CHAIR  HAWKER pointed  out that  the next  two speakers  would be                                                               
talking about those variables.                                                                                                  
REPRESENTATIVE   GRUENBERG   thanked   the  committee   for   the                                                               
discussion of the bill.                                                                                                         
Number 4444                                                                                                                     
DAVID  TEAL, Director,  Legislative Finance  Division, said  that                                                               
[revenue  projection] models  such  as those  from the  Permanent                                                               
Fund  Division Department  (PFDD), DOR,  and Legislative  Finance                                                               
Division, typically  hold expenditures constant because  they are                                                               
hard  to  predict.     He  noted  that   there  were  unavoidable                                                               
expenditures such  as Public Employees' Retirement  System (PERS)                                                               
and Teachers'  Retirement System (TRS) cost  increases at roughly                                                               
$34 million  a year in general  funds.  He said  such an increase                                                               
was not a  one-time occurrence, but occurs this year  and for the                                                               
next  two  years.    After  that  the  increase  stops,  but  the                                                               
expenditure stays, he added.                                                                                                    
CHAIR HAWKER  surmised that in three  years it is a  $100 million                                                               
increase that year.                                                                                                             
MR. TEAL said yes, the increase remains from then on.                                                                           
Number 4646                                                                                                                     
MR.  TEAL  explained  that Medicaid  is  increasing,  nationwide,                                                               
approximately 15 percent  per year.  He said it  was difficult to                                                               
change how much  the state spends on Medicaid, but  the state has                                                               
tried to contain costs and has  lower rates than some states.  He                                                               
said Alaska  can expect increases in  the cost of Medicaid  if it                                                               
follows the national average, which  would mean about $40 million                                                               
to $50 million more a year.                                                                                                     
CHAIR HAWKER remarked, "That's general funds [increase]."                                                                       
MR. TEAL replied  yes, but even if [the state]  was lucky to hold                                                               
the  increase   to  one-third  of  the   nationwide  increase  in                                                               
Medicaid, it would still mean in  excess of $20 million a year in                                                               
added costs.                                                                                                                    
TAPE 04-7, SIDE B                                                                                                             
Number 4618                                                                                                                     
MR. TEAL  discussed education funding  and said it is  a question                                                               
of what [the legislature] wants to  spend.  It is known that PERS                                                               
and TRS  [increases] have affected  education very  strongly this                                                               
year in the form of teacher  layoffs.  The school districts' cost                                                               
increase is expected to be 5  percent over the next four years in                                                               
a row.   That would be about $34-5 million,  annually, up to $100                                                               
million in three years, which remains from then on.                                                                             
Number 4509                                                                                                                     
MR. TEAL  explained that the  cost for university  spending, like                                                               
education, asks  the question, "How  much do you want  to spend?"                                                               
The university would like an  increase of $10-20 million to their                                                               
MR.  TEAL indicated  that,  "Those were  the  main drivers,"  and                                                               
would increase  [budget spending] to  $300 million over  where it                                                               
is now.   He emphasized that  [the expenses mentioned so  far] do                                                               
not  address the  non-formula  portion of  the  budget, which  is                                                               
approximately $1  billion in general funds.   He said to  keep up                                                               
with  inflation,  "You're  looking  at  another  $20-$40  million                                                               
Number 4406                                                                                                                     
MR. TEAL cautioned:                                                                                                             
     When you  look at these  graphs of the  CBR end-of-year                                                                    
     balance, and you  see that even with POMV  in place and                                                                    
     the  several-hundred million  dollars  a  year that  it                                                                    
     would generate  for state government, assuming  that we                                                                    
     got a  40 or  50 or  60 percent  split, and  built into                                                                    
     this thing is a $300-million  tax of some sort, whether                                                                    
     it is sales or income or  any other source of revenue -                                                                    
     it doesn't  make any difference -  there's $300 million                                                                    
     worth of  revenue built into  this chart, and  there is                                                                    
     no  spending increase  built into  this chart.  You can                                                                    
     see that if  you want to build in  a spending increase,                                                                    
     call it  $300 million, by  2008, and you take  away the                                                                    
     $300 million  in tax revenue that  we haven't achieved,                                                                    
     ... you can see that that surplus is gone.                                                                                 
MR.  TEAL  pointed  out  that  in  2006  [in  the  2003  hearings                                                               
document], the bars  are close together, but  they rapidly spread                                                               
apart.  Change  is based only on the dividend  split and makes it                                                               
difficult  to see  what the  fiscal gap  is.   He emphasized  the                                                               
differences between the  various dividend splits.   That makes it                                                               
difficult  to add  $300 million  of additional  spending to  this                                                               
chart, he added.                                                                                                                
Number 4131                                                                                                                     
MR. TEAL  said the Legislative  Finance Division graph  takes the                                                               
revenue forecast  and the flat  budget and shows what  the fiscal                                                               
gap is in each  of those years.  He noted by  2006 there would be                                                               
an  $800  million  fiscal gap,  without  the  approximately  $300                                                               
million just  mentioned in "unavoidable  increases."   That comes                                                               
to  a $1  billion fiscal  gap  by 2008.   The  graphs and  models                                                               
reviewed typically look at flat  expenditures and he does not see                                                               
them as being flat, he concluded.                                                                                               
Number 4012                                                                                                                     
REPRESENTATIVE WILSON asked  how long it would take to  get a tax                                                               
in place and get the revenues back.                                                                                             
MR. TEAL  answered that is a  question for [DOR], but  he guessed                                                               
one and a half years.                                                                                                           
Number 3929                                                                                                                     
CHAIR HAWKER  mentioned that the  first statutory mission  in the                                                               
bill  that  created the  [House  Special  Committee on  Ways  and                                                               
Means,] charged  the committee  with controlling  state spending.                                                               
He  asked  Mr.  Teal  to reemphasize  the  inevitability  of  the                                                               
committed obligations  which would  increase state spending.   He                                                               
asked what it would require, in  Mr. Teal's opinion, to achieve a                                                               
level budget.                                                                                                                   
MR. TEAL replied that it is a judgment call.  He related:                                                                       
     The simple way  to do it is to look  at inflation alone                                                                    
     because then you could say,  well, we just keep up with                                                                    
     inflation.  Doing that is  something we haven't done in                                                                    
     education.    Medicaid,  of   course,  is  a  different                                                                    
     formula.   It doesn't depend  on inflation.   There are                                                                    
     parts  of   the  budget  that  would   be  affected  by                                                                    
     inflation, and parts that wouldn't  be.  I think that's                                                                    
     it's safe  to say  that approximately $1  billion would                                                                    
     be directly  affected by inflation.   If  inflation's 3                                                                    
     percent a year,  that's $60 million a year  in what you                                                                    
     might call, unavoidable.                                                                                                   
     Certainly the  PERS/TRS cost  increases, which  are the                                                                    
     major  drivers   for  the   next  several   years,  are                                                                    
     unavoidable.  This year the  state - of the $34 million                                                                    
     -  funded approximately  $20 million.   To  say they're                                                                    
     unavoidable is not  exactly true, but I  don't know how                                                                    
     long state agencies  can continue to avoid  a 5 percent                                                                    
     increase  in personal  services.   The alternative,  of                                                                    
     course, is that, say in  three years, we've got a 15-20                                                                    
     percent increase  in personal  service costs.   You can                                                                    
     look at  that as,  you either reduce  personal services                                                                    
     expenditures    some   other    way,   through    union                                                                    
     negotiations,  or you  have fewer  people working.   In                                                                    
     order  to  absorb this  20  percent  increase in  cost,                                                                    
     you're  talking  about  laying  off  one  out  of  five                                                                    
     people.  So, I don't see how you can avoid that.                                                                           
     You  can do  some things  legislatively to  affect your                                                                    
     PERS/TRS  increases  and  that  may reduce  them  to  -                                                                    
     instead of 23 percent - to  17 or 15 percent.  But, the                                                                    
     way  the PERS  increases work  ... it's  going to  be 5                                                                    
     percent this year, 5 percent  next year, and probably 5                                                                    
     percent  the following  year ....   The  actuaries have                                                                    
     determined  that we're  horribly under  funded in  PERS                                                                    
     and we  should have a  15-20 percent increase  in cost,                                                                    
     but we're  limited to  a 5  percent increase  per year.                                                                    
     If you manage to reduce  the total cost, you will still                                                                    
     be  facing  5 percent  increase  for  the next  several                                                                    
Number 3520                                                                                                                     
REPRESENTATIVE WILSON  asked, whatever fix  is in place  for this                                                               
year's  [cost increase],  if next  year  [the legislature]  would                                                               
have to  find a  way to address  this year's cost  as well  as an                                                               
additional 5 percent.                                                                                                           
MR. TEAL said no, it is 5 percent  in a year, which is really one                                                               
out of  20.  In  TRS, for example,  it would  be four years  of 5                                                               
percent  increases,  or  20  percent,  or  one  out  of  every  5                                                               
teachers.  In any one year it is one out of 20.                                                                                 
REPRESENTATIVE WILSON said that is what she meant.                                                                              
MR. TEAL explained  that Medicaid is not  a contractual increase,                                                               
but a formula.  He said the  regulations are not in place to save                                                               
money.   All of  the money  the Department  of Health  and Social                                                               
Services has saved by having a  net zero supplemental is going to                                                               
Medicaid.   He said the bottom  line is, "I don't  see how you're                                                               
going to  avoid approximately  $300 million  in increases  in the                                                               
next three-to-four years."   He added that that  does not include                                                               
capital  costs;   $70  million   to  $100  million   in  deferred                                                               
Number 3205                                                                                                                     
REPRESENTATIVE  OGG [looking  at the  bar graph  from Legislative                                                               
Finance] asked  what would be the  number added to the  bottom of                                                               
the bar graph for years 2005-2008.                                                                                              
CHAIR HAWKER requested that Mr.  Teal provide that information at                                                               
a later date.                                                                                                                   
MR.  TEAL  replied that  the  [2005  budget] is  pretty  accurate                                                               
because it  is based on  the governor's  budget and there  are no                                                               
new revenues built in.                                                                                                          
REPRESENTATIVE OGG asked if education is included.                                                                              
MR.  TEAL said  it includes  the PERS  cost, but  not bills  that                                                               
would   give   additional   funds    to   school   districts   or                                                               
municipalities.   It also  assumes that the  $98 million  to $100                                                               
million in  revenue that  the governor  expects, has  not passed.                                                               
"The governor  shows $400  million as  the projected  fiscal gap,                                                               
and  [Legislative Finance]  shows $565  [million].   He explained                                                               
that  increases in  funding for  school districts  have not  been                                                               
included [in the 2005] budget, and  he has heard that expense may                                                               
be up  to $80  million.   He said  if PERS/TRS  costs were  to be                                                               
included, the budget  could go up by $100 million  [in 2005].  In                                                               
2006 and in 2007 there would  be another [$100 million] added on,                                                               
he projected.   At that point there would no  longer be increases                                                               
in  PERS/TRS costs,  but  there  would be  $100  million to  $150                                                               
million annually for inflation and for Medicaid, he concluded.                                                                  
Number 2822                                                                                                                     
REPRESENTATIVE ROKEBERG said  his tallies add up  to $100 million                                                               
for  2005, and  asked  if that  amount should  be  added to  $565                                                               
MR. TEAL replied yes.                                                                                                           
REPRESENTATIVE  ROKEBERG continued  to figure  the costs  in 2006                                                               
and extended them out to an excess  of $400 million on top of the                                                               
structural  gap.   He concluded  it is  like adding  roughly $130                                                               
million to every  number.  He asked for a  one-page projection of                                                               
high/low ranges  for a  10-year forecast.   He remarked  that the                                                               
numbers Mr. Teal is talking about  are from the real world and no                                                               
one has faced  up to them yet.   He concluded that  trying to get                                                               
accurate  projections  based  on  the  real  world  is  what  the                                                               
committee is trying to do.                                                                                                      
CHAIR HAWKER  responded, "That absolutely  pins the tail  on this                                                               
donkey."  He thanked Mr. Teal for his testimony.                                                                                
Number 2430                                                                                                                     
DAN  DICKINSON, Director,  Tax  Division,  Department of  Revenue                                                               
(DOR), presented  information from a packet  about oil production                                                               
in  Alaska broken  down by  the fields  involved.   He said  that                                                               
today half  the number of  barrels are  being pumped as  in 1988.                                                               
Prudhoe  Bay  is only  producing  one-quarter  today of  what  it                                                               
produced in 1988, he added.  None  of the new fields are going to                                                               
compare  to what  happens when  a mature  field like  Prudhoe Bay                                                               
declines at 8 percent a year.                                                                                                   
MR. DICKINSON explained  how page 2 overlays price  on volume and                                                               
tells how much oil revenue the state  took in.  He said that when                                                               
the CBRF was  passed in 1990, the peaks were  chopped off and the                                                               
volatility was  smoothed out.   The most  that was put  back into                                                               
the CBRF  was $17 million.   He pointed out that  the "cash cow,"                                                               
Prudhoe  Bay, is  not going  to play  the same  role that  it has                                                               
played in the past.                                                                                                             
Number 2044                                                                                                                     
CHAIR HAWKER  pointed out that the  jagged line on the  left side                                                               
of the page,  the "Actual," smoothes out on  the "Projected" half                                                               
of the page.                                                                                                                    
MR.  DICKINSON said  it  was worth  reminding  everyone that  the                                                               
projected side represents the average.                                                                                          
REPRESENTATIVE GRUENBERG suggested gas revenues be factored in.                                                                 
MR.  DICKINSON  noted  that  page  14  of  the  packet  addresses                                                               
possible increases from future oil  and gas exploration.  He said                                                               
the starting date may move to the right.                                                                                        
Number 1826                                                                                                                     
REPRESENTATIVE ROKEBERG pointed out that  on the last chart [page                                                               
14] even  the best-case  scenario only  shows about  $1.9 million                                                               
[of possible  increases in revenue].   He said that  still leaves                                                               
[the  state] short  of  paying  the [fiscal]  gap  in  2016.   He                                                               
characterized that as "scary."                                                                                                  
REPRESENTATIVE WILSON characterized it as "a little terrifying."                                                                
Number 1715                                                                                                                     
MR. DICKINSON predicted  that gas revenues will  be more volatile                                                               
than oil revenues.   It is easy to conceive of  a gas price lower                                                               
than the tariff,  he said, or the gas price  could be three times                                                               
the tariff, making for hugely volatile revenues.                                                                                
MR.  DICKINSON referred  to [page  3] and  showed where  the CBRF                                                               
would eventually  close out to  zero.   He explained that  page 4                                                               
shows the  exhaustion of the CBRF  as early as December  2005 and                                                               
as late as May  2012.  He noted that predictions  for the CBRF to                                                               
run out  by now were  wrong because  the annual state  budget has                                                               
decreased,  and the  $18  range in  state  spending is  smoothing                                                               
things out.  Spending has gone down, he said.                                                                                   
Number 1303                                                                                                                     
CHAIR  HAWKER asked  if there  is inflation-adjusted,  per-capita                                                               
general  fund  spending  in  this state,  which  he  pointed  out                                                               
"today,  in fact,  is  less than  in 1975,  when  we started  the                                                               
MR. DICKINSON  suggested people look  at the  Legislative Finance                                                               
website for more information.   He continued to explain that page                                                               
6  plots  two trends  from  the  last  15 years:  oil  production                                                               
decreasing, and oil prices increasing.   He said, previously, his                                                               
department was  under forecasting the  price rise and  the amount                                                               
of revenue.   The gross value  of those two items  is roughly the                                                               
same, he  added.  He  said people  don't believe this  trend will                                                               
continue and that there will be a regression.                                                                                   
Number 0955                                                                                                                     
MR. DICKINSON  talked about the numbers  on page 8 which  look at                                                               
the big picture  from 2004-2020.  There are  two assumptions made                                                               
here:  oil is  at $22  a barrel  and there  are no  extraordinary                                                               
resource developments.   He maintained  that in the  future there                                                               
will  be   no  new  extraordinary  resource   developments.    He                                                               
continued to  explain that  there would be  a $1  billion deficit                                                               
over the next 15-year period.                                                                                                   
Number 0826                                                                                                                     
CHAIR HAWKER asked if that is a $22-a-barrel projection.                                                                        
MR. DICKINSON responded, "At an average."   He referred to page 9                                                               
to show how $1 billion could be  raised.  He said any fiscal tool                                                               
could be mocked,  so he used five of the  most commonly mentioned                                                               
revenue tools  to see what  kind of  effect they could  have with                                                               
minimal damage.   He opined that an income  tax withholding could                                                               
be implemented in  six months, but that a sales  tax would take a                                                               
little longer.                                                                                                                  
REPRESENTATIVE WILSON said, "You  probably could get something in                                                               
place in six  months, but before we get a  full year of revenues,                                                               
it would be a year and a half total, then."                                                                                     
MR. DICKINSON replied that his  department would start on January                                                               
1 of the  next year, which would produce half  of the revenues in                                                               
that first fiscal year.                                                                                                         
REPRESENTATIVE WILSON said it would  take a while to be reflected                                                               
in the budget.  She asked what year that would happen.                                                                          
MR.  DICKINSON  said  he  believes  it  would  be  2006,  if  the                                                               
legislature were  to act now.   He said the CBRF  could help ease                                                               
the transition.   He  discussed an income  tax; 1.5  percent flat                                                               
tax of  the adjusted gross  income (AGI) as  found on page  10 of                                                               
the packet.  He described how  that would work, reading from page                                                               
10.   People with  an AGI  of more that  $100,000 would  carry 33                                                               
percent of the tax.                                                                                                             
Number 0244                                                                                                                     
CHAIR HAWKER  asked Mr. Dickinson if  he has the ability  to come                                                               
up with  the same sort  of high-level analysis on  taxable income                                                               
as opposed to tax liability or AGI.                                                                                             
MR. DICKINSON replied  yes.  He said that  Mike Williams [Revenue                                                               
Auditor, Tax Division, Department  of Revenue, Anchorage, Alaska]                                                               
could  better  answer  that  question   because  he  has  a  more                                                               
sophisticated model.  He noted  that the information [on page 10]                                                               
is based  on 2002 data, which  he continued to explain.   He said                                                               
there are many different ways to generate the $200 million.                                                                     
CHAIR  HAWKER asked  what percent  of  Alaskan federal  taxpayers                                                               
have an AGI over $100,000.                                                                                                      
MR. DICKINSON said about 10 percent.                                                                                            
Number 0016                                                                                                                     
REPRESENTATIVE ROKEBERG said the cap  tax liability at the amount                                                               
of  dividend was  very similar  to former-Governor  Jay Hammond's                                                               
fallback plan.  He  said it looks like the tax  falls less on the                                                               
higher income people than the lower income people.                                                                              
TAPE 04-8, SIDE A                                                                                                             
Number 0030                                                                                                                     
MR. DICKINSON  replied that once  a person reaches a  ceiling, he                                                               
or she is "capped out."                                                                                                         
REPRESENTATIVE WILSON  asked Mr.  Dickinson what he  perceives as                                                               
the amount of the dividend.                                                                                                     
MR. DICKINSON said a flat $1000.                                                                                                
Number 0100                                                                                                                     
REPRESENTATIVE GRUENBERG asked what  percentage of Alaskan's have                                                               
incomes over $100,000.                                                                                                          
MR. DICKINSON  said he  thinks 10 percent  have AGI  greater than                                                               
REPRESENTATIVE  ROKEBERG  asked for  the  rationale  on the  $650                                                               
property  tax   credit  and  if   that  information   is  readily                                                               
MR. DICKINSON explained that the  amount is "a backed into number                                                               
based on what it  would take if there was a 3  percent AGI and we                                                               
wanted to raise $200 million."   He suggested Mike Williams could                                                               
provide more information about it.                                                                                              
Number 0235                                                                                                                     
REPRESENTATIVE ROKEBERG  asked about personal property  taxes and                                                               
said they complicate matters.                                                                                                   
MR. DICKINSON said his department  uses a document called Taxable                                                               
Alaska  from Department  of Community  & Economic  Development to                                                               
make some assumptions  to carry those number as  a credit against                                                               
the income tax numbers.                                                                                                         
REPRESENTATIVE WILSON asked  if someone's income level  has to be                                                               
$600 before needing to file for federal income tax.                                                                             
MR. DICKINSON said he believes that is correct.                                                                                 
REPRESENTATIVE  WILSON  asked  if   it  is  a  double  deduction.                                                               
Property  owners  would be  able  to  deduct their  property  tax                                                               
twice, once  at the federal  level and  once at the  state level,                                                               
she said.                                                                                                                       
MR. DICKINSON explained that the  property owner would be able to                                                               
deduct [property tax]  so it would lower the tax  that they owed,                                                               
and  then  they would  be  eligible  for  a credit  against  that                                                               
Number 0453                                                                                                                     
MR. DICKINSON  continued to  explain the packet.   Page  11 shows                                                               
how $200 million in sales tax could be raised, he said.                                                                         
CHAIR HAWKER offered, "Sales and use [tax]."                                                                                    
MR. DICKINSON  said yes,  sales and use,  and explained  that the                                                               
tax  would  become  an  1.8  percent add-on  to  local  taxes  in                                                               
communities  where  they  already  exist  and  a  stand-alone  in                                                               
communities where there  is not already a sales and  use tax.  He                                                               
said if food  and most services are excluded, the  tax rate would                                                               
raise to 3  percent.  He said  it would be important  to create a                                                               
single administrative entity, not  a state organization, that had                                                               
both state  and local representation.   He said it  was important                                                               
to  meet  the  criteria  specified in  a  streamlined  sales  tax                                                               
project which would  include collecting tax on  Internet and mail                                                               
order  sales.   He  opined that  a 1.8  percent  addition to  the                                                               
existing  sales   tax  in  communities   would  not  be   a  huge                                                               
distortion, as compared to higher rates.                                                                                        
Number 0700                                                                                                                     
REPRESENTATIVE ROKEBERG  asked whether Congress  had restrictions                                                               
on states' collecting sales tax on Internet retail sales.                                                                       
MR.  DICKINSON  said the  words  "could  move towards,"  indicate                                                               
steps need  to be taken.   Currently, taxing the  actual Internet                                                               
service itself is prohibited.   "If the entity you're buying from                                                               
has  nexus in  your  state,  you can  require  that they  collect                                                               
Internet  sales  tax."   He  said  it  would probably  require  a                                                               
federal law change.                                                                                                             
REPRESENTATIVE  ROKEBERG  mentioned  collecting  taxes  from  web                                                               
MR. DICKINSON cautioned about separate entity rules.                                                                            
Number 0908                                                                                                                     
MR. DICKINSON  pointed out  that page 12  shows how  $200 million                                                               
could be drawn  from the permanent fund.  He  read from the chart                                                               
to show 5  percent of $28 billion is  available for distribution,                                                               
which would equal  $1.4 billion, and 14 percent of  that would be                                                               
$200  million.   Page  13 refers  to how  $200  million could  be                                                               
garnered from  corporate income taxes,  he said.  He  mentioned a                                                               
letter  from  the  governor  dated February  2,  which  laid  out                                                               
reforms to the  net operating loses (NOL) to capital  gain and to                                                               
federal tax  credits.   He relayed that,  at the  moment, foreign                                                               
cruise ships  are exempted from  income tax, but  domestic cruise                                                               
ships  are not.   He  suggested several  ways to  collect revenue                                                               
from a head tax.   Another place changes could be  made is to the                                                               
oil and gas production taxes, he  said.  The corporate income tax                                                               
structure  could be  changed, he  opined, as  well as  S-corps at                                                               
corporate  and at  individual-owner  levels.   All  of these  are                                                               
tools  or ways  of looking  at corporate  income tax  to generate                                                               
more revenue for the state, he concluded.                                                                                       
Number 1333                                                                                                                     
REPRESENTATIVE  GRUENBERG  requested  more discussions,  such  as                                                               
this one,  where menus of  revenue-raising ideas are  brought up.                                                               
He suggested handouts be made of the various possibilities.                                                                     
CHAIR HAWKER noted that there were more such meetings scheduled.                                                                
MR.  DICKINSON  replied  that  twice  a year  [DOR]  puts  out  a                                                               
forecast  with   "think  pieces"  to   lay  out  menus   such  as                                                               
Representative Gruenberg suggested.                                                                                             
REPRESENTATIVE   GRUENBERG   specified    he   was   particularly                                                               
interested in the latest information on [page 13].                                                                              
MR.  DICKINSON  said  he  would  try  to  provide  more  specific                                                               
information about [corporate income tax].                                                                                       
CHAIR  HAWKER said  there would  be future  in-depth hearings  on                                                               
this topic.                                                                                                                     
Number 1600                                                                                                                     
REPRESENTATIVE ROKEBERG  wondered if "the  18 states that  tax S-                                                               
corps do  a double whammy  on those people,  and if they  have an                                                               
income tax  and a sales  tax."  He  also commented on  the cruise                                                               
ship head tax, saying a new  federal law prohibits the money from                                                               
going  into the  general  fund.   He wondered  if  there was  any                                                               
research on that topic, and if  that was why the governor went to                                                               
a "bed tax" instead.                                                                                                            
MR.  DICKINSON said  his understanding  is  that as  long as  the                                                               
spending  coming  from the  general  fund  directly supports  the                                                               
cruise ship  industry, it's permissible.   He said  general taxes                                                               
can't  be applied;  only those  that  go to  support [the  cruise                                                               
ship] industry  can be  applied.   He said, "If  you had  a broad                                                               
sales  tax, which  included, as  a portion  of the  use tax,  the                                                               
provision  of services  on  the cruise  ship,  Department of  Law                                                               
believes that would a belt-and-suspenders approach."                                                                            
Number 1747                                                                                                                     
REPRESENTATIVE ROKEBERG said,  "I was the author  of what's known                                                               
as the OSG  [Office of the Solicitor General]  corporate tax case                                                               
regarding international  trade and  its impacts  on international                                                               
trade and  the treaties with  over 175 countries  that proscribes                                                               
or  restricts   foreign-bottomed  vessels,   aircraft,  railcars,                                                               
satellites,  et cetera,  from  being  taxed by  the  state."   He                                                               
requested feedback from Mr. Dickinson  about a separate corporate                                                               
tax  exception  for cruise  ships  only,  thereby abrogating  the                                                               
international  treaties  and incurring  the  wrath  of the  State                                                               
Department,  Department  of  Commerce,  the  United  Nations,  et                                                               
cetera.  He  asked what impact a breach of  the treaty would mean                                                               
[to the state].                                                                                                                 
Number 1918                                                                                                                     
MR. DICKINSON  said he  could obtain that  information.   He said                                                               
that  imposing a  [head] tax  on passengers  may not  violate the                                                               
REPRESENTATIVE ROKEBERG replied that  most ports around the world                                                               
have  a  head  tax.    Even California  and  Florida  don't  have                                                               
corporate  taxes  on  foreign-bottomed cruise  ships  because  of                                                               
treaty implications, he  said.  California has its  own tax code,                                                               
not the United States code.                                                                                                     
MR.  DICKINSON,  in  answer to  Representative  Rokeberg's  first                                                               
question,  said all  [18  states] have  personal  income tax  and                                                               
treat [corporations] like C-corps, which  are subject to the same                                                               
double tax.                                                                                                                     
REPRESENTATIVE   ROKEBERG  asked   if  LLCs   [limited  liability                                                               
companies] and  sole proprietors are  treated the same way  as S-                                                               
corps [S corporations].                                                                                                         
MR. DICKINSON  responded that the  research [in the  packet] only                                                               
applies to the  S-corps.  He pointed out that  some are franchise                                                               
taxes and some are flat taxes.                                                                                                  
REPRESENTATIVE ROKEBERG said  there was a huge  shift in business                                                               
away from  S-corps and LLCs and  he wondered if the  other states                                                               
were following suit.                                                                                                            
MR. DICKINSON  said his predictions  were based on a  2002 model,                                                               
which has not started modeling the  changes.  He said page 14 has                                                               
already been  discussed, but  noted that  there may  be a  gap in                                                               
time before [future developments] come in.                                                                                      
Number 2246                                                                                                                     
REPRESENTATIVE ROKEBERG referred to page  4 and asked if a matrix                                                               
had been done  with a $1 billion  floor in the CBRF  and what the                                                               
dates would be.                                                                                                                 
MR.  DICKINSON said  he has  not  done a  matrix like  that.   He                                                               
pointed to page  3 and said if $1 billion  is subtracted from the                                                               
last two blue lines, it looks  like the "drop-dead" date would be                                                               
REPRESENTATIVE ROKEBERG  requested that  Mr. Dickinson  produce a                                                               
matrix with a $1 billion floor.                                                                                                 
MR. DICKINSON said he would.                                                                                                    
Number 2430                                                                                                                     
REPRESENTATIVE  ROKEBERG said  [the  legislature]  is looking  at                                                               
trigger mechanisms  and revenue-enhancement  packages and  such a                                                               
matrix  would be  helpful.   He  asked if  the budget  projection                                                               
chart  produced  by  Mr.   Corbus  [Commissioner,  Department  of                                                               
Revenue] in  Fairbanks at the  [Conference of Alaskans]  could be                                                               
obtained.  He asked how far out revenue projections go.                                                                         
MR. DICKINSON answered that the  [Department of Revenue] has many                                                               
projections, but the one on the web site goes through 2020.                                                                     
REPRESENTATIVE ROKEBERG  said [that information] is  important to                                                               
future discussions of enshrinement of  the dividend.  That debate                                                               
needs to  be in  the context of  revenue projections  because the                                                               
gap  is going  to  be  wider and  a  long-range  context will  be                                                               
needed, he said.                                                                                                                
Number 2704                                                                                                                     
MR. DICKINSON said he could find the material from Fairbanks.                                                                   
REPRESENTATIVE  ROKEBERG said  the model  [on page  7] is  a good                                                               
MR. DICKINSON said it is important  to focus on what happens with                                                               
growth and what kind of growth it is.                                                                                           
Number 2814                                                                                                                     
REPRESENTATIVE KOHRING  referred to  HB 493  and opined  that the                                                               
contents of the  bill are things that can already  be done by the                                                               
legislature  and  do not  need  to  be  formalized and  put  into                                                               
statutes.   He said he  appreciated the  intent of the  bill, but                                                               
suggested the  sponsors form  their own  caucus and  advocate for                                                               
the  proposed  measures  rather than  formalizing  it  and  going                                                               
through a time-consuming, expensive process.                                                                                    
REPRESENTATIVE KOHRING  spoke about the issue  of expected future                                                               
deficits and  the fear mentioned  [by the committee]  about where                                                               
the money  will come from.   He said [the committee]  should look                                                               
at  the positive  side and  use the  deficit as  an incentive  to                                                               
engage  in   further  reform  measures  and   further  efficiency                                                               
measures.   He said he  believes that what the  governor outlined                                                               
in Plan  B ought to be  looked at seriously, such  as the mergers                                                               
and consolidations of government  agencies.  He suggested further                                                               
exploration  of  greater efficiencies  in  the  bureaucracy.   He                                                               
repeated  that  the  deficit  may  be  an  opportunity  for  [the                                                               
legislature] to look at restructuring the bureaucracy.                                                                          
Number 3045                                                                                                                     
REPRESENTATIVE  GRUENBERG  said   he  appreciates  Representative                                                               
Kohring's  comments,   and  said   he  is   right  in   that  the                                                               
legislatures  of  the  future  could  do  the  planning  that  is                                                               
suggested in HB 493.   He said [the bill] will  make sure that it                                                               
is  done   and  provides   direction,  "marrying   the  voluntary                                                               
participation  concept with  the  concept that  there are  things                                                               
that  we could  do  even  today for  greater  efficiencies."   He                                                               
offered   Representative   Kohring   a  challenge   to   form   a                                                               
subcommittee with himself and one other member of the committee.                                                                
REPRESENTATIVE KOHRING  said, "No, on setting  up a subcommittee,                                                               
and, yes, I'd  be happy to work  with you."  He said  he has been                                                               
working  on his  own to  come up  with legislation,  but that  he                                                               
would be  happy to work  with Representative Gruenberg.   He said                                                               
he doesn't think a formal subcommittee is necessary.                                                                            
REPRESENTATIVE GRUENBERG said, "If you'd  be willing to be on it,                                                               
I'm  willing to  be on  it.   Let's  see if  we can  get a  third                                                               
person, and let's do it."                                                                                                       
CHAIR HAWKER  said he  would continue  to take  [that suggestion]                                                               
under advisement.                                                                                                               
Number 3409                                                                                                                     
REPRESENTATIVE  ROKEBERG  said  it  is interesting  to  note  the                                                               
testimony of this  morning in the context of Plan  B presented by                                                               
[Office of Management & Budget]  to the Conference of Alaskans in                                                               
Fairbanks.  He said [Plan B] is  a very shocking plan and it came                                                               
about   because  of   a   request  by   the   conferees  to   the                                                               
administration.   It wasn't done  to shock  people, he said.   He                                                               
said the amount of cuts totaled  $420 million, and it is shocking                                                               
to  see  the   impact  on  state  government.     He  noted  that                                                               
Representative  Kohring has  said, in  the past,  that even  more                                                               
cuts should  be made.   He emphasized  that it is  frightening to                                                               
see  the actual  cuts.   He  said  that what  he  has heard  this                                                               
morning  is,  even  if  Plan   B  is  implemented  with  all  the                                                               
structural  increases  because  of TRS/PERS,  inflation  and  the                                                               
other issues,  in three years  the $400 million in  savings would                                                               
be burned up.   "We're going nowhere.  That's  how frightening it                                                               
is when you look at it," he concluded.                                                                                          
Number 3630                                                                                                                     
REPRESENTATIVE MOSES said  he has enjoyed listening  to the wake-                                                               
up call.  He said he hopes  those who campaigned on "no taxes, no                                                               
touching  the  dividend, just  cut  the  budget," feel  a  little                                                               
Number 3737                                                                                                                     
[HB 493 was held over.]                                                                                                         
There being no further business  before the committee, the *House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
9:17 a.m.                                                                                                                       

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