Legislature(2021 - 2022)ANCH LIO SANFORD Rm

09/09/2021 10:00 AM House WAYS & MEANS

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10:03:49 AM Start
10:04:48 AM HB3007|| HB3008
11:15:44 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Location Change --
-- Testimony <Invitation Only> --
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                       Anchorage, Alaska                                                                                        
                       September 9, 2021                                                                                        
                           10:03 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Ivy Spohnholz, Chair                                                                                             
Representative Andy Josephson                                                                                                   
Representative Calvin Schrage                                                                                                   
Representative Andi Story                                                                                                       
Representative Mike Prax                                                                                                        
Representative David Eastman                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Adam Wool                                                                                                        
OTHER LEGISLATORS PRESENT                                                                                                     
Representative George Rauscher                                                                                                  
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 3007                                                                                                             
"An Act relating to nonrefundable tax credits against the oil                                                                   
and gas production tax; and providing for an effective date."                                                                   
     - HEARD & HELD                                                                                                             
HOUSE BILL NO. 3008                                                                                                             
"An Act relating  to use of income of the  Alaska permanent fund;                                                               
relating to the  amount of the permanent  fund dividend; relating                                                               
to the duties  of the commissioner of revenue;  and providing for                                                               
an effective date."                                                                                                             
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 3007                                                                                                                 
SHORT TITLE: OIL & GAS PER BARREL TAX CREDIT                                                                                    
SPONSOR(s): WAYS & MEANS                                                                                                        
08/30/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
08/30/21       (H)       W&M, RES, FIN                                                                                          
09/07/21       (H)       W&M AT 11:00 AM DAVIS 106                                                                              
09/07/21       (H)       -- MEETING CANCELED --                                                                                 
09/09/21       (H)       W&M AT 10:00 AM ANCH LIO SANFORD Rm                                                                    
BILL: HB 3008                                                                                                                 
SHORT TITLE: PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT                                                                          
SPONSOR(s): WAYS & MEANS                                                                                                        
08/30/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
08/30/21       (H)       W&M, STA, FIN                                                                                          
09/07/21       (H)       W&M AT 11:00 AM DAVIS 106                                                                              
09/07/21       (H)       -- MEETING CANCELED --                                                                                 
09/09/21       (H)       W&M AT 10:00 AM ANCH LIO SANFORD Rm                                                                    
WITNESS REGISTER                                                                                                              
ROSE FOLEY, Staff                                                                                                               
Representative Ivy Spohnholz                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented sectional  analyses of HB 3008 and                                                             
HB 3007 on behalf of Representative Spohnholz, prime sponsor.                                                                   
REPRESENTATIVE GEORGE RAUSCHER                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   During the hearing on HB 3008  and HB 3007,                                                             
provided comments.                                                                                                              
ACTION NARRATIVE                                                                                                              
10:03:49 AM                                                                                                                   
CHAIR IVY  SPOHNHOLZ called the  House Special Committee  on Ways                                                             
and  Means  meeting  to  order at  10:03  a.m.    Representatives                                                               
Eastman,  Josephson,  Schrage,  Story (via  teleconference),  and                                                               
Spohnholz were  present at  the call  to order.   Representatives                                                               
Prax arrived  as the meeting was  in progress.  Also  present was                                                               
Representative Rauscher.                                                                                                        
            HB 3007-OIL & GAS PER BARREL TAX CREDIT                                                                         
       HB 3008-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT                                                                    
10:04:48 AM                                                                                                                   
CHAIR SPOHNHOLZ announced that the  first order of business would                                                               
be HOUSE  BILL NO.  3007, "An Act  relating to  nonrefundable tax                                                               
credits against  the oil  and gas  production tax;  and providing                                                               
for  an  effective  date."  and  HOUSE BILL  NO.  3008,  "An  Act                                                               
relating to use of income  of the Alaska permanent fund; relating                                                               
to the  amount of  the permanent fund  dividend; relating  to the                                                               
duties  of the  commissioner  of revenue;  and  providing for  an                                                               
effective date."                                                                                                                
CHAIR  SPOHNHOLZ  provided  introductory remarks  concerning  the                                                               
fiscal  instability   in  Alaska   and  the   different  proposed                                                               
legislation currently before the legislature.                                                                                   
10:09:50 AM                                                                                                                   
CHAIR SPOHNHOLZ, as prime sponsor,  presented HB 3007 and HB 3008                                                               
by means of  a PowerPoint presentation.  She began  with HB 3008,                                                               
which proposes an updated permanent  fund percent of market value                                                               
(POMV) split of  25/75 percent.  She directed  attention to slide                                                               
3, which shows  updated information on the  projected deficits of                                                               
various  split formulas  that  had been  presented  to the  House                                                               
Special Committee on Ways &  Means by the Division of Legislative                                                               
Finance  on   9/1/21.     [The  chart  on   slide  3   shows  the                                                               
surplus/deficit  for various  formulas for  fiscal year  2022 (FY                                                               
22) through FY  30.]  A category for "before"  the permanent fund                                                               
dividend  (PFD)  shows  numbers  in  the  black;  however,  Chair                                                               
Spohnholz said  she does not think  anyone wants to do  away with                                                               
the PFD  completely.  She said  the 50/50 POMV split  proposed by                                                               
the governor would  widen the fiscal gap.  She  advised that a 33                                                               
percent POMV to [67 percent] PFD  plan would produce a fiscal gap                                                               
in FY  22-FY 26, but  various revenue measures could  solve that,                                                               
including a 1 percent income tax.                                                                                               
CHAIR  SPOHNHOLZ  said  the  option for  a  25/75  percent  split                                                               
proposed under  HB 3008, would  result in  [diminishing] deficits                                                               
in FY  22-24 and  then a  surplus starting  FY 25.   As  shown on                                                               
slide 4,  she specified that  HB 3008 would rewrite  the dividend                                                               
formula such  that the 5 percent  POMV will be split  as follows:                                                               
25 percent to  dividends and 75 percent to "all  else."  She then                                                               
highlighted information  shown on  slide 5, which  indicates that                                                               
under HB  3008, the amount  of the PFD  for a recipient  would be                                                               
$1,248 in FY 23 and increasing  incrementally to $1,575 in FY 28.                                                               
She introduced her staff to present the sectional analysis.                                                                     
10:13:17 AM                                                                                                                   
ROSE  FOLEY, Staff,  Representative Ivy  Spohnholz, Alaska  State                                                               
Legislature, presented a sectional analysis  of HB 3008 on behalf                                                               
of Representative Spohnholz,  prime sponsor.  She  said Section 1                                                               
amends AS 37.13.140, and she  clarified that the amount available                                                               
for  appropriation may  not exceed  the balance  of the  earnings                                                               
reserve  account   (ERA).    She   said  this   language  existed                                                               
previously in  statute, and  there is "a  repealer" in  Section 8                                                               
relocating  this  language.    She   said  Section  2  amends  AS                                                               
37.13.145(b) to  allow appropriation  from the ERA  in accordance                                                               
with the POMV  statute, AS 37.13.140(b), as follows:   25 percent                                                               
to the PFD and 75 percent to  the state's general fund (GF).  She                                                               
said  Section  3  amends  AS  37.13.145(c)  to  clarify  that  an                                                               
appropriation  is required  to move  funds  from the  ERA to  the                                                               
principle  of  the  Alaska  permanent fund  for  the  purpose  of                                                               
inflation-proofing.   She explained that currently  the statutory                                                               
language  refers to  a  transfer, and  Wielechowski  v. State  of                                                             
Alaska identifies that an appropriation is required.                                                                          
MS.  FOLEY said  Section 4  amends AS  37.13.145(d) to  stipulate                                                               
that the funds associated with  "the Amerada Hess settlement" are                                                               
not included  in the calculation of  the POMV.  Section  5 amends                                                               
AS 37.13.300(c)  to specify  that income  from the  Alaska Mental                                                               
Health  Trust Fund  is not  included  in the  calculation of  the                                                               
POMV.   She  related that  Section  6 amends  AS 37.14.031(c)  to                                                               
require the  Alaska Permanent Fund  Corporation to  calculate the                                                               
net income  of the  Alaska Mental Health  Trust Fund  annually on                                                               
the last day of the  fiscal year, "excluding any unrealized gains                                                               
or  losses."   She  said  Section  7  amends AS  43.23.025(a)  to                                                               
clarify  that funds  must be  appropriated to  the dividend  fund                                                               
rather  than  transferred, as  she  had  previously noted.    She                                                               
stated  that Section  8 repeals  AS 37.13.145(e)  and (f);  these                                                               
sections  restricted appropriations  from the  ERA to  the GF  to                                                               
"not more than  is available for appropriation."   She noted that                                                               
similar language is now found in Section 1 of the bill.                                                                         
10:16:10 AM                                                                                                                   
REPRESENTATIVE  JOSEPHSON  asked  whether  the  bill  includes  a                                                               
repeal of the 1982 dividend formula.                                                                                            
MS. FOLEY  answered that it dedicates  25 percent of the  POMV to                                                               
be  paid  to  dividends;  "it  does  not  repeal  the  underlying                                                               
10:17:00 AM                                                                                                                   
REPRESENTATIVE  PRAX noted  that because  of the  Wielechowski v.                                                             
State  of Alaska  decision, statutes  require appropriation  "and                                                             
the legislature  doesn't have  to follow  them."   He recommended                                                               
repealing the preexisting dividend  formula to clarify that "it's                                                               
an annual fight and not any sort of a predictable formula."                                                                     
CHAIR  SPOHNHOLZ  conveyed  her  intent  was  to  propose  a  new                                                               
dividend  formula law  for adoption,  one that  would reduce  the                                                               
fiscal gap, allow  for transparency, and offer  certainty for the                                                               
people of  Alaska.  She opined  that HB 3008 could  "go in tandem                                                               
with" HJR 1,  to which she shared she had  supported an amendment                                                               
that  would have  included a  dividend that  is provided  by law,                                                               
thus creating an obligation to follow the law.                                                                                  
10:20:13 AM                                                                                                                   
REPRESENTATIVE PRAX said he appreciated  the intent [of HB 3008];                                                               
however,  he opined  that the  unfortunate reality  was that  the                                                               
political pressure would continue,  and the legislature would run                                                               
out of money to spend, putting it back where it was in 2016.                                                                    
CHAIR  SPOHNHOLZ pointed  to  previously shown  slide  3, to  the                                                               
information  from  the Division  of  Legislative  Finance that  a                                                               
25/75 split would create a surplus by  FY 25.  Based on that, she                                                               
countered that  this plan would  create fiscal certainty  for the                                                               
state and  reduce the likelihood  of revisiting this  decision in                                                               
the future.                                                                                                                     
10:22:03 AM                                                                                                                   
REPRESENTATIVE SCHRAGE  said he  thinks the legislature  has been                                                               
following  the  law  technically,  but proffered  that  from  the                                                               
public's perception it is an issue  when "you have two statues in                                                               
conflict,  and you  choose to  ignore one."   He  said he  thinks                                                               
there is a strong desire  to change the formula, but disagreement                                                               
on how  to do so.   He indicated  that the  25/75 split is  a law                                                               
that could be followed, but there  would still be a conflict with                                                               
the prior statute; therefore, he  suggested repealing the statute                                                               
and letting "this be the new dividend statute."                                                                                 
CHAIR SPOHNHOLZ said she agrees and  thinks HB 3008 would need to                                                               
be amended such that the 1982 statute is repealed.                                                                              
10:23:44 AM                                                                                                                   
REPRESENTATIVE  JOSEPHSON asked  Representative  Prax whether  he                                                               
would support the governor's  50/50 constitutional amendment and,                                                               
if so, why he would not support [HB 3008].                                                                                      
CHAIR  SPOHNHOLZ  clarified that  HB  3008  was not  proposing  a                                                               
constitutional amendment; it is a statutory formula.                                                                            
REPRESENTATIVE JOSEPHSON then  asked if there was  any reason why                                                               
this statute couldn't be constitutionalized;  he posited that the                                                               
math involved would not change.                                                                                                 
CHAIR SPOHNHOLZ  expressed her concern  about constitutionalizing                                                               
the dividend  formula because it  would create "an  equal playing                                                               
field  for the  payment  of  a dividend  with  our obligation  to                                                               
provide for the health, education,  and safety of Alaskans."  She                                                               
stated her  belief in following the  law but that the  law should                                                               
be statutory.  She reiterated  her desire for more flexibility to                                                               
meet  the state's  fiscal  responsibility, as  well  as meet  the                                                               
needs  of  Alaskans,  and  she  said  a  statute  rather  than  a                                                               
constitutional amendment offers that flexibility.                                                                               
10:27:25 AM                                                                                                                   
REPRESENTATIVE JOSEPHSON  discussed finding  a "sweet  spot" upon                                                               
which  60 legislators  can agree.    He said  he would  entertain                                                               
"constitutionalizing   this  sort   of  thing,"   especially  "in                                                               
combination of new  revenue."  He questioned the idea  of a 50/50                                                               
10:28:52 AM                                                                                                                   
REPRESENTATIVE SCHRAGE expressed his  appreciation for the desire                                                               
to constitutionalize  the formula so  that it would  be followed,                                                               
and  he believed  ad  hoc  draws were  made  because the  formula                                                               
wasn't compatible  with the state's fiscal  reality; however, the                                                               
legislature  would  not  have  the same  need  to  disregard  the                                                               
statute if it  were updated, and that would  give the legislature                                                               
more  incentive  to follow  the  law,  which would  provide  more                                                               
public trust.   He expressed  hesitancy in  constitutionalizing a                                                               
formula  because  he  doesn't  know   what  the  state's  [fiscal                                                               
situation] will look like in 100 years.                                                                                         
10:30:53 AM                                                                                                                   
REPRESENTATIVE  STORY  opined  that  a 25/75  split  would  still                                                               
produce a healthy  dividend and echoed the  ideas expressed about                                                               
public  trust.    She  said   she  hoped  there  would  be  "more                                                               
discussion about this going forward with more legislators."                                                                     
10:32:25 AM                                                                                                                   
REPRESENTATIVE  EASTMAN sought  to  confirm  that the  certainty,                                                               
confidence, and  consistency previously  mentioned is  resting on                                                               
the ability to garner a three-quarters vote in the legislature.                                                                 
CHAIR  SPOHNHOLZ  clarified that  HB  3008  proposes a  statutory                                                               
change, which would require a  majority vote rather than a three-                                                               
quarters vote.   In further  response to  Representative Eastman,                                                               
she explained that  her intention was to  introduce a sustainable                                                               
formula that the state could afford  to pay on a regular basis to                                                               
make it easy  to follow the law.   She said the  problem has been                                                               
that the state has had structural  fiscal gaps for the last seven                                                               
or eight years and has been  unable to balance the budget without                                                               
"spending down"  the capital budget  reserve (CBR).  She  said HB
3008 would  still provide a robust  dividend, as well as  get the                                                               
state back on track to fund a backlog of needed services.                                                                       
10:35:32 AM                                                                                                                   
REPRESENTATIVE GEORGE RAUSCHER,  Alaska State Legislature, stated                                                               
that he  has spent more  time arguing about  the size of  the PFD                                                               
than arguing  about health  care, education, or  the budget.   He                                                               
emphasized  that  he is  neither  for  nor against  the  proposed                                                               
legislation  but believes  "something in  the past"  needs to  be                                                               
fixed  and  the legislature  needs  to  "come up  with  something                                                               
moving forward."                                                                                                                
10:38:20 AM                                                                                                                   
REPRESENTATIVE   JOSEPHSON   said   he  partially   agrees   with                                                               
Representative  Rauscher; however,  he  characterized the  debate                                                               
this  year  as "out  of  control."    He  said he  believed  that                                                               
Representative Prax' position  [regarding the legislature finding                                                               
itself back  where it  was in 2016]  was reasonable;  however, he                                                               
opined that  the governor's  plan will  create a  massive deficit                                                               
and  relies on  hope.   He mentioned  the governor's  borders and                                                               
said  he,  too,  has  a  border.   He  said  serious  vetting  is                                                               
necessary beyond FY 30.                                                                                                         
10:41:09 AM                                                                                                                   
CHAIR SPOHNHOLZ said her priorities  are for a balanced plan; she                                                               
said she could support a 50/50  split if there was enough revenue                                                               
to fill the  gap, which is a  massive amount.  She  said it would                                                               
essentially increase  taxes on Alaskans by  refusing to introduce                                                               
a fiscal plan now.   She offered her understanding that committee                                                               
members' positions  have evolved  through discussions,  which she                                                               
REPRESENTATIVE JOSEPHSON  recollected that  a spreadsheet  he had                                                               
seen from  the governor's plan  did not show  a deficit in  FY 29                                                               
and 30.                                                                                                                         
CHAIR  SPOHNHOLZ explained  that  the  governor's 10-year  fiscal                                                               
plan includes "unspecified revenue  in the future and unspecified                                                               
cuts."     Conversely,   the  analysis   from  the   Division  of                                                               
Legislative Finance "does  ... not do that,"  and the projections                                                               
shown on  the presentation  are from  assumptions derived  by the                                                               
Fiscal  Policy  Working Group.    She  observed that  no  revenue                                                               
measures  have been  proposed by  the  governor, and  it is  week                                                               
three of the Third Special Session.                                                                                             
REPRESENTATIVE JOSEPHSON underlined  that legislators were called                                                               
to the Third Special Session by the governor.                                                                                   
10:45:04 AM                                                                                                                   
CHAIR  SPOHNHOLZ resumed  the presentation  at slide  6 to  speak                                                               
about HB  3007, which is the  second part of the  proposed fiscal                                                               
plan  to balance  the state's  budget  and would  reduce the  per                                                               
barrel  oil  tax credit.    She  highlighted  a sampling  of  the                                                               
numbers on  the chart on slide  7 that [shows current  oil values                                                               
and tax credits  compared to oil values and  tax credits proposed                                                               
under  HB 3007],  a bill  that proposes  a reduction  of the  per                                                               
barrel  oil tax  credit.    She explained  that  the current  oil                                                               
values  and tax  credits  range from  an $8  tax  credit for  oil                                                               
valued at less  than $80 to a  $1 credit for oil  valued at [$140                                                               
or less  than $150].   The proposed legislation would  remove tax                                                               
credits  for oil  valued at  $110 or  higher and  give a  smaller                                                               
scale of credits for oil valued  under $110.  She discussed slide                                                               
8,  which  provides a  chart  showing  a comparison  of  proposed                                                               
fiscal plan elements.   The numbers forecasted under  HB 3007 are                                                               
$174  million in  FY 23,  [$297.7 million]  in FY  24, a  peak of                                                               
[$460.6 million] in FY 25, and  [$386.7 million] in FY 26 and 27.                                                               
She  said  HB 3007  proposes  a  modest  change  to the  oil  tax                                                               
structure that would  allow for a higher PFD  while balancing the                                                               
state's  budget.   She noted  that slide  8 shows  the cumulative                                                               
effect  of adopting  four  bills:   HB  3007;  HB  3008; HB  189,                                                               
employment  tax for  education; and  HB 104,  motor fuel  tax and                                                               
vehicle registration  fees.   The amounts would  be a  deficit of                                                               
approximately  $70  million in  FY  23,  and changing  to  $322.8                                                               
million in the black by FY  24, [with modest increases showing in                                                               
FY  25,  26,  and 27].    She  asked  Ms.  Foley to  present  the                                                               
sectional analysis for HB [3007].                                                                                               
10:48:21 AM                                                                                                                   
MS. FOLEY explained  that Section 1 of HB 3007  is illustrated in                                                               
the aforementioned  chart on slide  7.   Section 2, she  said, is                                                               
the effective date [of 1/1/22].                                                                                                 
10:49:17 AM                                                                                                                   
REPRESENTATIVE  JOSEPHSON  said  he   thinks  the  industry  will                                                               
question the policy call and  compare the proposed legislation to                                                               
Senate  Bill 21  [passed  during the  Twenty-Eighth Alaska  State                                                               
Legislature].  He opined that the  authors of Senate Bill 21 made                                                               
the mistake  of using the  term "per barrel credit,"  because the                                                               
phrase  suggests  that  the state  is  incentivizing  production,                                                               
which  he  said  was  not  the  intent.   Much  of  oil  and  gas                                                               
production  is "legacy"  production,  and he  questioned why  the                                                               
state would  incentivize legacy  production, because  "it's going                                                               
to happen."  He said that  in that respect, the reform under this                                                               
proposal  makes sense;  however, he  predicted that  the industry                                                               
would see this as random.                                                                                                       
10:51:46 AM                                                                                                                   
REPRESENTATIVE  EASTMAN asked  for  confirmation  of whether  his                                                               
understanding  is correct  that the  sale of  oil and  gas should                                                               
coincide  with  a  high  market;  therefore,  it  doesn't  matter                                                               
whether it is a legacy field.                                                                                                   
CHAIR  SPOHNHOLZ explained  that  the  major capital  investments                                                               
have  already been  expended and  recouped in  the legacy  fields                                                               
which  she described  as being  in "harvest  mode."   Whereas, in                                                               
newer fields,  there is still  the need  to pay back  the massive                                                               
investment that  has been made to  produce the oil.   She said HB
3007  does  not  propose  a  total restructure  of  the  oil  tax                                                               
structure;  other bills  are being  introduced for  that purpose.                                                               
She said  the existing tax credit  structure was added in  at the                                                               
last  minute to  Senate  Bill 21,  and the  state  can no  longer                                                               
afford that level  of subsidy, especially for fields  that are in                                                               
harvest  mode.    In  response   to  a  follow-up  question  from                                                               
Representative  Eastman,  she said  in  harvest  mode, the  North                                                               
Slope field  produces a profit  after $40 per  barrel; therefore,                                                               
continuing to provide a per barrel  tax credit at the [lower] oil                                                               
prices  rather than  the [higher]  ones  makes more  sense.   She                                                               
added that when  Senate Bill 21 was passed, the  price of oil was                                                               
high; now  the spring  forecast is  $71 per  barrel, and  HB 3007                                                               
would result in a $4 per barrel tax credit under this scenario.                                                                 
10:56:32 AM                                                                                                                   
REPRESENTATIVE PRAX remarked  that HB 3007 is a  simple bill with                                                               
a complex  and unpredictable impact.   He mentioned a  seminar on                                                               
government  tax policy  and his  experience in  investing in  oil                                                               
production, as well  as working in the oil industry.   He advised                                                               
speaking  with those  in the  industry.   He  clarified that  the                                                               
companies  must keep  reinvesting in  wells in  legacy fields  to                                                               
produce as  much as they  can, and that that  investment decision                                                               
is  made based  on  projected return;  increasing  the tax  would                                                               
affect  their  decision whether  to  invest  in more  development                                                               
wells in  the legacy fields.   He indicated that [HB  3007] would                                                               
reduce the  initial returns  of those  companies, and  he offered                                                               
his understanding  that the primary  concern of oil  companies is                                                               
in recovering  their initial investments as  quickly as possible.                                                               
He stated  that HB 3007  will affect the  decision to spend.   He                                                               
said with  Alaska's Clear and  Equitable Share (ACES),  the State                                                               
of Alaska  received a windfall  from the wells that  were already                                                               
drilled, but  it "killed investment  in new  wells"; subsequently                                                               
there was "a  precipitous drop in revenue  because production was                                                               
declining even  though prices were  high."  He  expressed concern                                                               
that the  same thing is likely  to happen and that  in five years                                                               
the  state would  lose  more money  in  royalties and  production                                                               
taxes than it  will gain "in the short run  by increasing the tax                                                               
on the industry."  He warned that  HB 3007 would result in a loss                                                               
of money  for the state and  reiterated his advice to  speak with                                                               
members of the industry.                                                                                                        
11:02:22 AM                                                                                                                   
CHAIR  SPOHNHOLZ emphasized  that HB  3007 was  not proposing  "a                                                               
massive increase in oil taxes."   She noted that the oil industry                                                               
has expressed a desire for  fiscal certainty, and she opined that                                                               
resolving the  state's fiscal situation  is critical  in creating                                                               
that  certainty, not  only  for  the oil  companies  but for  all                                                               
Alaskans.  She said the plan  outlined in HB 3007 should not come                                                               
as a surprise to oil  companies, because there have been "behind-                                                               
the-scenes"  conversations about  this model,  including her  own                                                               
discussions with  members of the  Alaska Oil and  Gas Association                                                               
(AOGA).  She  emphasized that the oil in the  North Slope belongs                                                               
to Alaska, and  under Article 6 of the Constitution  of the State                                                               
of Alaska,  the state is  obligated to  seek the best  value from                                                               
all its natural  resources for the maximum benefit  of the people                                                               
of Alaska.                                                                                                                      
11:04:53 AM                                                                                                                   
REPRESENTATIVE  JOSEPHSON pointed  out  that  there was  evidence                                                               
against the  suggestion that ACES  caused a slowdown  in interest                                                               
in  exploration and  development.   He offered  his understanding                                                               
that prior  to the  state's fiscal  crisis, it  had paid  over $1                                                               
billion  in tax  credits, and  that started  prior to  ACES.   He                                                               
stated, "If it  were true that this reform would  slow growth, it                                                               
would suggest that we should  ... increase the per barrel credit,                                                               
because  that   should  increase  growth  and   expansion."    He                                                               
reiterated his  point that  [the legislature]  is looking  for "a                                                               
reasonable sweet spot."                                                                                                         
11:06:43 AM                                                                                                                   
REPRESENTATIVE PRAX responded that  he doesn't disagree with that                                                               
theory  and stated  that he  would not  be surprised  if "they're                                                               
willing to  trade some money  for stability."  He  indicated that                                                               
[the committee]  was "arguing in  a vacuum," and  he reemphasized                                                               
the importance of having a conversation with the industry.                                                                      
CHAIR SPOHNHOLZ noted  that this was the initial  hearing on both                                                               
bills  and  there would  be  opportunities  for public  testimony                                                               
moving forward.                                                                                                                 
11:08:13 AM                                                                                                                   
REPRESENTATIVE JOSEPHSON expressed  appreciation for the creation                                                               
of the  House Special  Committee on  Ways and  Means and  for the                                                               
work the committee  has done.  He opined that  the 50/50 proposal                                                               
[of  the  governor] is  unrealistic  and  would require  a  large                                                               
income  and sales  tax to  pay for  it.   He speculated  there is                                                               
probably a way to constitutionalize  a dividend and give people a                                                               
guarantee,  and  he   said,  "I'm  starting  to   see  that  it's                                                               
CHAIR SPOHNHOLZ  expressed appreciation  for the comment  and for                                                               
the involvement of  other committee members in the  process.  She                                                               
said there  could be other elements  of a fiscal plan  that could                                                               
be considered.   She  remarked that  after hearing  Mr. Painter's                                                               
presentation on 9/1/21, she thinks  there is "a pretty clear path                                                               
forward"  in  creating fiscal  stability.    She said  she  could                                                               
support a larger  PFD formula if there is revenue  to support it,                                                               
but at this  time, "this particular plan  provides some certainty                                                               
moving forward  for the State  of Alaska" to  support businesses,                                                               
local jurisdictions,  and the state  constitution.  She  spoke of                                                               
the  hardship on  Alaskans  due to  fiscal  uncertainty and  that                                                               
uncertainty being the  cause of outward migration  from the state                                                               
and business instability within the state.                                                                                      
11:12:56 AM                                                                                                                   
REPRESENTATIVE EASTMAN  thanked Representative Prax for  his work                                                               
on the Fiscal Policy Working Group.                                                                                             
CHAIR SPOHNHOLZ echoed that appreciation.                                                                                       
11:13:49 AM                                                                                                                   
REPRESENTATIVE STORY said she thinks  HB 3007 would bring revenue                                                               
to the state  with a modest change that she  said she thinks will                                                               
be affordable for oil companies.                                                                                                
[HB 3008 and HB 3007 were held over.]                                                                                           
11:15:44 AM                                                                                                                   
There being no  further business before the  committee, the House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
[11:16] a.m.                                                                                                                    

Document Name Date/Time Subjects
HB 3007 Fiscal Note.pdf HW&M 9/9/2021 10:00:00 AM
HB 3008 Fiscal Note.pdf HW&M 9/9/2021 10:00:00 AM
HB 3008 and 3007 Presentation.pdf HW&M 9/9/2021 10:00:00 AM