Legislature(2023 - 2024)DAVIS 106
02/01/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| Overview: 2021 Fiscal Policy Working Group Final Report | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
February 1, 2023
6:01 p.m.
MEMBERS PRESENT
Representative Ben Carpenter, Chair
Representative Jamie Allard
Representative Tom McKay
Representative Kevin McCabe
Representative Cliff Groh
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Mike Shower
Senator Robert Myers
Senator Scott Kawasaki
Representative Andrew Gray
Representative Dan Ortiz
Senator Shelley Hughes
Representative Cathy Tilton
Senator Jesse Kiehl
Representative David Eastman
COMMITTEE CALENDAR
OVERVIEW: 2021 FISCAL POLICY WORKING GROUP FINAL REPORT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JONATHAN KREISS-TOMKINS
Former Alaska State Representative
Sitka, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
SENATOR MIKE SHOWER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
SENATOR SCOTT KAWASAKI
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
SENATOR SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
SENATOR JESSE KIEHL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
SENATOR ROBERT MYERS
Alaska State Legislature.
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on the 2021
Fiscal Policy Working Group Final Report.
ACTION NARRATIVE
6:01:12 PM
CHAIR BEN CARPENTER called the House Special Committee on Ways
and Means meeting to order at 6:01 p.m. Representatives
Carpenter, Allard, Groh, and McKay were present at the call to
order. Representative McCabe arrived as the meeting was in
progress.
^Overview: 2021 Fiscal Policy Working Group Final Report
Overview: 2021 Fiscal Policy Working Group Final Report
6:02:25 PM
CHAIR CARPENTER announced that the only order of business would
be the 2021 Fiscal Policy Working Group Final Report Overview.
CHAIR CARPENTER stated that the Fiscal Policy Working Group was
created during the Thirty-Second Alaska State Legislature as a
bicameral and bipartisan group to work on a long-term solution
for the State of Alaska's fiscal policy. He stated that the
group had found the following pieces necessary to a long-term
fiscal solution: constitutional certainty for the PFD, a
spending cap, a Permanent Fund Dividend (PFD) based on a
percentage of market value cap, a healthy capital budget, budget
reductions, and new revenues. He said that the findings were a
framework without any specific findings. He added that the
group found that an "all of the above" approach would be needed
to overcome the political challenges the solutions would face.
CHAIR CARPENTER asked former Alaska state representative
Jonathan Kreiss-Tomkins if he believes that the findings of the
Fiscal Policy Working Group are still relevant.
6:06:58 PM
JONATHAN KREISS-TOMKINS, Former Alaska State Representative,
said that he believes a mixture of the recommendations made by
the group would be necessary to gain enough support to pass in
both Houses of the legislature. He stated that agreement with
the findings made by the group constituted an overall agreement
and not necessarily agreement with any particular item, and
compromise would be required to resolve any of the findings.
6:10:04 PM
MR. KREISS-TOMKINS continued that he believes that no fiscal
plan will work long term unless it has constitutional certainty,
which would require at least one constitutional amendment. He
stated that compromise would be required because neither caucus
has enough votes on its own to make any constitutional
amendments.
CHAIR CARPENTER asked Senator Mike Shower if he believes that
the findings of the Fiscal Policy Working Group are still
relevant.
6:12:15 PM
SENATOR MIKE SHOWER, Alaska State Legislature, stated that he
believes the findings of the group are both relevant and have to
happen in order to solve Alaska's fiscal challenges. He said
that businesses would need tax certainty to invest in Alaska and
families need to know that there is opportunity for them in
Alaska for them to stay in Alaska. He continued that Alaska
currently lacks stability and that without stability there will
be less investment in the state. He stated that he believes
that solving the fiscal problem has to be done all at once and
not one part at a time.
6:15:55 PM
REPRESENTATIVE MCCABE stated that his position at the time of
the Fiscal Policy Working Group starting was for a full
permanent fund dividend. He stated that he realized through his
conversations with Jonathan Kreiss-Tomkins that he would have to
compromise, and he said that Mr. Kreiss-Tomkins helped other
members of the group understand that his new position, along
with those of Senators Hughes and Shower, was a compromise and
not a starting point.
6:17:43 PM
SENATOR SHOWER stated that while some parts of findings made by
the Fiscal Policy Working Group would work if they were
statutory, others would work only if they were enshrined in the
state constitution. He said that the constitutional changes
were necessary for the public to trust that the state government
would do what it said it would do.
CHAIR CARPENTER asked Senator Scott Kawasaki if he believes that
findings of the Fiscal Policy Working Group are still relevant.
6:20:21 PM
SENATOR SCOTT KAWASAKI, Alaska State Legislature, stated that
the group set its policy differences aside in order to formulate
a plan that would move the said forward. He said that yearly
debates over the PFD were not working and a permanent solution
had to be found. He said that he hopes the House Special
Committee on Ways and Means can continue the work done by the
group and finish a working fiscal policy plan for Alaska.
CHAIR CARPENTER asked Senator Shelley Hughes if she believes
that the findings of the Fiscal Policy Working Group are still
relevant.
6:23:22 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, stated that
she believes that the findings are still relevant. She said
that the mission of the group was to create a plan to give
Alaska fiscal stability, including for the PFD, and that the
work was not yet complete. She said that the numbers the group
were working with came from "highly capable" staff and were not
just numbers grabbed by the legislators. She stated that 2023
is the eighth year of the PFD being in dispute, and finding a
sustainable fiscal plan has been a concern for around 20 years.
She said that the origin of the PFD dispute was the decreasing
amount of oil in the Alaska Pipeline.
6:26:55 PM
SENATOR HUGHES stated that prior to being a member of the Fiscal
Policy Working Group, she was a member of the Permanent Fund
Working Group in 2019. She said that the findings of that group
were limited to "don't overdraw the Permanent Fund." She stated
that the numbers opened her mind to having a smaller draw but
the 50/50 "Hammond principle" should still be applied. She said
that in 2019, using the original statutory PFD formula while
respecting the 5 percent draw would have resulted in 80 percent
of the draw going to the PFD while leaving 20 percent for the
state government, and that some opponents wanted to use only 20
percent of the draw for the PFD and leave 80 percent for the
state government. She stated her belief that meeting in the
middle and using 50 percent of the draw for the PFD and state
government is what needs to be done.
6:30:46 PM
SENATOR HUGHES stated that when the Fiscal Policy Working Group
released its original report in August 2021, there was broad
support for the findings of the group, but the legislature was
unable to move forward with the plan at the time. She said that
with there being many new legislators, it is worth bringing the
plan up again to gauge support. She noted that in addition to
needing broad support within the legislature, the plan needs to
have broad support in the public arena. She stated that items
such as a constitutional spending cap have a broad amount of
support from the public, and the challenge lies with gathering
enough support from within the legislature to pass it.
6:34:21 PM
SENATOR HUGHES stated the time spent figuring out what the PFD
should be each year has taken away from the time that could have
been used to work on other issues facing the legislature and the
state. She said that she witnessed disagreements on the PFD
cause members of the legislature to stop unrelated bills, and
that with a high number of new members, it would be important to
see which committee chairs would be open to moving forward with
the plan created by the Fiscal Policy Working Group.
6:36:00 PM
CHAIR CARPENTER commented that his two greatest takeaways from
Senator Hughes' testimony were the effort it takes to compromise
and the cost of allowing other issues to wait while the
legislature continues to focus on a single issue.
SENATOR HUGHES stated that the Institute of Social and Economic
Research gave testimony in a hearing that stated that Alaska is
losing half a billion dollars a year in capital investments
because of the uncertainty.
6:37:50 PM
REPRESENTATIVE MCCABE asked Senator Hughes if the Fiscal Policy
Working Group designed a plan that was meant to last a single
year or "for the ages."
SENATOR HUGHES answered that the plan was designed to be long-
lasting, even if some of the numbers would have to be adjusted.
REPRESENTATIVE MCCABE asked Senator Hughes to provide some
explanation on the models and spreadsheets used by the group to
make their recommendations.
SENATOR HUGHES answered that the group had to come to an
agreement about assumptions being made for revenues and
projections. She said that the Legislative Finance Director,
Alexi Painter, asked each of the legislators in the group to
come up with a list of possible reductions in order to create
the formulas that were used.
6:40:36 PM
REPRESENTATIVE GROH asked Senator Hughes to describe the process
of group members creating their own budget ideas.
SENATOR HUGHES answered that the members of the group submitted
their ideas to Mr. Painter and he informed them of the possible
effectiveness of their ideas.
CHAIR CARPENTER added that he believes that the project would
have been "simple for an economist" but required more attention
to details for the legislators.
REPRESENTATIVE MCCABE added that it was a "fascinating" look
into what would happen when one added or cut certain programs,
and he mentioned that he also changed some of the formulas to
see what effect it would have on the budget.
6:42:36 PM
CHAIR CARPENTER asked Senator Jesse Kiehl if he believes that
the findings of the Fiscal Policy Working Group are still
relevant.
6:42:55 PM
SENATOR JESSE KIEHL, Alaska State Legislature, answered that he
believes that the findings made by the group are still relevant.
He stated that the long-term position of the state's budget is
insecure due to the ever-changing price of oil. He said that
there were parts of the plan that he "hates" but are necessary
for the long-term stability of Alaska. He stated that without a
new source of revenue, a growing economy and population would be
negative for the state budget; he described this as a "perverse
incentive."
6:46:12 PM
SENATOR KIEHL stated that the idea of constitutional spending
limits is risky, describing the idea that the current generation
knows the "proper" amount of government spending as "hubris".
He said that there are ways of mitigating the risk and that
Senator James Kaufman has a proposal that he believes is "not
insane." He said that it was a difficult process that was
necessary to create a plan to give a better future to the state
of Alaska.
6:48:14 PM
MR. KREISS-TOMKINS stated that a significant amount of time was
spent agreeing on the set of fiscal assumptions needed to begin
the process of group members creating their own idea of a
possible budget. He said that it is unusual for the legislature
to use the same set of assumptions across the body, because
members of the legislature use their own set of assumptions that
may make sense to them but may not make sense to other members.
He said that each of the proposals were checked by Mr. Painter
to ensure that the numbers made sense and added that he believes
it is an exercise that all members of the legislature should
undertake.
6:51:48 PM
SENATOR ROBERT MYERS, Alaska State Legislature, stated that
while he was not a member of the Fiscal Policy Working Group,
many of the issues raised by the group are why he ran for
office. He said that he is concerned about the legislature's
focus on a short-term budget that does not account for the long-
term effects on the state's economy. He questioned whether it's
a good idea to have most of the state's budget come from the
permanent fund and said that the state government will pay the
most attention to its source of revenue. He said that the
result of this was the government paying more attention to its
investments rather than the industries and people of Alaska.
6:54:21 PM
SENATOR MYERS stated that the permanent fund grew at a faster
rate than the economy over the course of the twenty years prior
to the COVID-19 pandemic. He expressed concern that the
"government is growing 50 percent faster than the economy." He
stated that he believes that this could result in harm to
resource development and small businesses. He said that he
believes the legislature needs to give more thought to how the
budget will affect Alaska in the future and not just the short-
term.
6:56:32 PM
CHAIR CARPENTER asked Senator Myers if the recommendations made
by the Fiscal Policy Working Group alleviated his concerns.
SENATOR MYERS answered that he believes "we will be going down a
very dark road in Alaska" if the recommendations were not
followed. He added that without following the recommendations
or something similar, his family would have to consider leaving
the state.
6:57:37 PM
CHAIR CARPENTER stated that he appreciates the fact that such a
candid conversation about the fiscal issues facing Alaska could
be had given the political climate of the legislature.
6:58:26 PM
REPRESENTATIVE GROH stated that he wants to work on and build
off of the findings made by the Fiscal Policy Working Group.
6:58:59 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
[6:59] p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2021_Fiscal_Policy_Working_Group-Final_Rep.pdf |
HW&M 2/1/2023 6:00:00 PM |