Legislature(2021 - 2022)SENATE FINANCE 532

06/11/2021 01:30 PM Senate FINANCE

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Audio Topic
01:33:13 PM Start
01:34:32 PM SJR6
03:41:17 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SJR 6 CONST. AM: PERM FUND & PFDS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       June 11, 2021                                                                                            
                         1:33 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:33:13 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Bishop called the Senate Finance Committee meeting                                                                     
to order at 1:33 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Co-Chair                                                                                                  
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof (via teleconference)                                                                                  
Senator Bill Wielechowski (via teleconference)                                                                                  
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator Peter  Micciche; Senator Mia Costello;  Senator Josh                                                                    
Revak;  Representative   Kelly  Merrick;   Lucinda  Mahoney,                                                                    
Commissioner, Department  of Revenue; Mike  Barnhill, Deputy                                                                    
Commissioner,   Department  of   Revenue;  Alexei   Painter,                                                                    
Director, Legislative Finance Division.                                                                                         
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SJR 6     CONST. AM: PERM FUND & PFDS                                                                                           
                                                                                                                                
          SJR 6 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SENATE JOINT RESOLUTION NO. 6                                                                                                 
                                                                                                                                
     Proposing amendments  to the Constitution of  the State                                                                    
     of  Alaska  relating  to  the  Alaska  permanent  fund,                                                                    
     appropriations  from   the  permanent  fund,   and  the                                                                    
     permanent fund dividend.                                                                                                   
                                                                                                                                
1:34:32 PM                                                                                                                    
                                                                                                                                
Co-Chair Bishop  reviewed the meeting agenda.  He recognized                                                                    
the senators in the room.                                                                                                       
                                                                                                                                
1:36:01 PM                                                                                                                    
                                                                                                                                
LUCINDA  MAHONEY,   COMMISSIONER,  DEPARTMENT   OF  REVENUE,                                                                    
asserted that the  governor had developed a  plan that would                                                                    
protect the  Permanent Fund and enshrine  the Permanent Fund                                                                    
Dividend  (PFD) in  the State  Constitution, along  with the                                                                    
Power  Cost Equalization  Fund (PCE),  protecting the  funds                                                                    
for  future  generations.  She hypothesized  that  with  the                                                                    
proposed  50/50  split  would  result  in  an  estimated  $3                                                                    
billion  draw  from the  ERA,  and  the generation  of  $300                                                                    
million  in additional  revenues, which  would position  the                                                                    
state for a balanced budget within 5 years.                                                                                     
                                                                                                                                
Co-Chair Bishop  asked the presenter  to hold  for questions                                                                    
at the end of each slide.                                                                                                       
                                                                                                                                
1:38:16 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney  provided  a  PowerPoint  presentation                                                                    
titled   "Constitutional  Amendment:   Permanent  Fund   and                                                                    
Permanent Fund Dividends" (copy on file).                                                                                       
                                                                                                                                
Commissioner Mahoney showed slide 2 titled "Goals":                                                                             
                                                                                                                                
     1. Protect the Permanent Fund and Permanent Fund                                                                           
     Dividend (PFD)                                                                                                             
     2. Determine Consistent PFD for Alaskans                                                                                   
     3. Establish Strong Reserves                                                                                               
     4. Achieve a Sustainable Balanced Budget                                                                                   
                                                                                                                                
Commissioner Mahoney spoke to  slide 3 titled "Comprehensive                                                                    
Fiscal Plan Steps":                                                                                                             
                                                                                                                                
     Step One - First Special Session                                                                                           
       Permanent Fund Structural Fix  Permanent Fund, ERA,                                                                      
     PCE Protected                                                                                                              
     ? Establish Strong Reserves w/Bridge Funding                                                                               
     ?    Consensus    on    Deficit   Size         Required                                                                    
     Spending/Revenue Targets                                                                                                   
                                                                                                                                
     Step Two - Second Special Session                                                                                          
     ? Revenue/Reduction Initiatives to Achieve Balanced                                                                        
     Budget                                                                                                                     
                                                                                                                                
Commissioner Mahoney  clarified that "bridge  funding" meant                                                                    
a  one-time draw  from the  Permanent Fund  Earnings Reserve                                                                    
Account (ERA). She spoke of  landing on targets to determine                                                                    
necessary  revenues  for  support.   She  said  achieving  a                                                                    
balanced budget would require further  cuts to the operating                                                                    
budget.                                                                                                                         
                                                                                                                                
1:41:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman noted  that the committee had  a process to                                                                    
go through which  it would maintain. He  considered that one                                                                    
operation  would not  fix all  problems. He  thought clearly                                                                    
step one  would not be  successful as the  legislature would                                                                    
be adjourning the following week  and there was much work to                                                                    
be  done.  He  thought  it  would be  helpful  to  have  the                                                                    
Department  of   Revenue  (DOR)  to  come   back  with  more                                                                    
structure  detailed for  the  different  phases outlined  on                                                                    
slide 3. He expressed concern  over the timing of the events                                                                    
listed on the  slide. He noted that there  were issues other                                                                    
than   the  PFD   that   Alaskans  wanted   constitutionally                                                                    
protected such as, education and public safety.                                                                                 
                                                                                                                                
1:43:17 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney referenced  slide 4,  "Permanent Fund:                                                                    
Endowment Structure":                                                                                                           
                                                                                                                                
     ? It's time for a true Permanent Fund endowment.                                                                           
     ? Endowment approach is an internationally accepted                                                                        
     best practice.                                                                                                             
     ? Stabilizes both revenues and the PFD with a smoothed                                                                     
     five-year average.                                                                                                         
     ? Limits government spending at 50% of the 5% POMV                                                                         
     draw.                                                                                                                      
     ? Protects Power Cost Equalization (PCE) by depositing                                                                     
    the PCE endowment (~$1.1B) into the Permanent Fund.                                                                         
     ? Constitutionally protects Permanent Fund & PCE for                                                                       
     future generations.                                                                                                        
                                                                                                                                
Commissioner  Mahoney  emphasized  that  that  the  trustees                                                                    
supported the endowment plan.                                                                                                   
                                                                                                                                
1:45:10 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman wanted further  definition of why 5 percent                                                                    
had been  chosen. He referenced projections  from Callan and                                                                    
Associates indicated that  the rate of return  was lower for                                                                    
following decade.                                                                                                               
                                                                                                                                
Commissioner  Mahoney  deferred  the  question  to  the  DOR                                                                    
deputy commissioner.                                                                                                            
                                                                                                                                
1:46:05 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:46:32 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
MIKE BARNHILL,  DEPUTY COMMISSIONER, DEPARTMENT  OF REVENUE,                                                                    
addressed Co-Chair Stedman's question  with respect to the 5                                                                    
percent  distribution. He  stated  that  the Permanent  Fund                                                                    
Board  of Trustees  supported  5 percent  being  put in  the                                                                    
constitution.  He explained  that the  5 percent  number had                                                                    
been  controversial. He  said that  for the  past few  years                                                                    
there had  been a bull  market and there were  concerns that                                                                    
it would  not persist  into the  next 10  years. He  noted a                                                                    
market  crash   in  2020,   which  recovered   rapidly,  and                                                                    
currently  the fund  was experiencing  positive returns.  He                                                                    
said that it was premature to  reduce the 5 percent rate and                                                                    
that the fund  would grow at the rate of  inflation. He said                                                                    
that inserting "not more than"  before 5 percent in the bill                                                                    
language  would allow  the legislature  to  choose a  lesser                                                                    
number.                                                                                                                         
                                                                                                                                
1:49:29 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman recalled that  the initial figure when POMV                                                                    
was  established  was  5.25  percent,  which  dropped  to  5                                                                    
percent. He  expressed concern  about declining  returns for                                                                    
the  next decade,  which could  result in  a 5  percent draw                                                                    
rate  taking the  potential  for growth  from  the fund.  He                                                                    
thought there would  be years with lower  returns and before                                                                    
the  rate was  set as  proposed,  it was  important to  have                                                                    
conversations  about  setting  the   rate  to  maximize  the                                                                    
outflow. He  was leery of  locking in a number  that allowed                                                                    
for no  margin and could stifle  the growth of the  fund. He                                                                    
thought more modeling  should be done to  determine the best                                                                    
interest of  the fund and  not the spending appetite  of the                                                                    
legislature.                                                                                                                    
                                                                                                                                
Senator  von  Imhof  understood Co-Chair  Stedman's  concern                                                                    
about the 5  percent rate. She thought  currently the choice                                                                    
was  more of  an academic  exercise since  there was  such a                                                                    
long way to  go to implement a plan such  as proposed in SJR
6.  She thought  that taking  50 percent  of the  percent of                                                                    
market value  (POMV) draw would  yield more than  a billion-                                                                    
dollar  deficit, which  she believed  what a  more immediate                                                                    
issue.                                                                                                                          
                                                                                                                                
1:53:59 PM                                                                                                                    
                                                                                                                                
Co-Chair Bishop asked about the  proposal to deposit the PCE                                                                    
Fund into  the Permanent Fund  and the earnings used  on the                                                                    
50/50 calculation.  He asked whether  the change  meant that                                                                    
half of PCE earnings would be used for PFDs.                                                                                    
                                                                                                                                
Commissioner  Mahoney stated  that the  intent was  that the                                                                    
PCE  would become  part of  the  Permanent Fund  and the  50                                                                    
percent would be drawn from the fund total.                                                                                     
                                                                                                                                
1:55:00 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney turned  to  slide  5, "Permanent  Fund                                                                    
Dividend: Consistency":                                                                                                         
                                                                                                                                
     Current Challenge:                                                                                                         
    ? Public Mistrust: Too much spending on Government                                                                          
     ? Political Impasse: Results in a PFD Based on                                                                             
     Politics  Not Laws                                                                                                         
                                                                                                                                
     Solution:                                                                                                                  
     ? Restore Public Trust: Consistent PFDs and Spending                                                                       
     Limits                                                                                                                     
     ? Establish a Fair Resolution: 50/50 Split                                                                                 
     ? Constitutionalize PFD                                                                                                    
                                                                                                                                
Commissioner   Mahoney   addressed    the   graph   entitled                                                                    
"Historical  Dividend Payments,"  which showed  PFD payments                                                                    
since the first dividend in  1982. She drew attention to the                                                                    
green line, which represented  the statutory calculation for                                                                    
the PFD.  She said that  the red line was  representative of                                                                    
the  diverging  from  the  statute   that  occurred  in  the                                                                    
determination  for  the   dividend  amount.  The  governor's                                                                    
proposal was  signified by  the dashed  line. She  said that                                                                    
there  were   many  schools   of  thought   surrounding  the                                                                    
dividend.  She  contended  that there  was  public  mistrust                                                                    
surrounding the  use of the  fund's earnings. She  said that                                                                    
the   governor's   proposal   was  representative   of   his                                                                    
philosophy.                                                                                                                     
                                                                                                                                
Co-Chair Bishop  referenced public mistrust and  pointed out                                                                    
that individuals  did not have the  information that members                                                                    
had.  He referenced  the $4.9  billion  the legislature  had                                                                    
moved  into the  corpus  of the  fund,  which protected  the                                                                    
money for  future generations.  He highlighted  the proposed                                                                    
transfer of  $4 billion  into the corpus  currently included                                                                    
in  the   budget  under  consideration  by   the  conference                                                                    
committee.  He  noted  that the  legislature  had  moved  $7                                                                    
billion total into  the corpus for protection  and had never                                                                    
drawn from the fund for  government use until the passage of                                                                    
the POMV.                                                                                                                       
                                                                                                                                
1:58:23 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  recalled  that when  the  Permanent  Fund                                                                    
started, the asset allocation was  different. He stated that                                                                    
in the  beginning when 50  percent went to dividends  and 50                                                                    
percent  went to  the state,  the state  had reinvested  its                                                                    
percentage.  He asked  Commissioner Mahoney  to discuss  the                                                                    
history of the fund surrounding the state reinvestment.                                                                         
                                                                                                                                
Mr. Barnhill offered to provide  a quick history. He relayed                                                                    
that first Permanent Fund statute  had been enacted in 1980,                                                                    
limiting  investment   of  fund  assets  to   fixed  income.                                                                    
Unfortunately,  the interest  rates  were skyrocketing,  and                                                                    
trustees were  concerned about  eroding principal  value, so                                                                    
they requested  permission to invest  in equities.  Also, in                                                                    
1980, the only cash that went  out of the Permanent Fund was                                                                    
for  bonds  and PFDs.  There  was  no transfer  of  realized                                                                    
capital gains from sale of  assets. In 1982, the legislature                                                                    
had amended the statute,  which enabled net realized capital                                                                    
gains  to  move  to  the undistributed  income  account.  He                                                                    
stated  that with  the change  came  the understanding  that                                                                    
anything  in the  form of  capital  gains would  potentially                                                                    
erode  the inflation  adjusted value  of  the assets,  which                                                                    
lead   to  an   inflation  proofing   adjustment.  Inflation                                                                    
proofing of the fund began in 1982.                                                                                             
                                                                                                                                
Mr.  Barnhill continued  his remarks.  He related  that over                                                                    
the period of 1982 to  2006, the legislature gave the Alaska                                                                    
Permanent  Fund  Corporation  (APFC) more  latitude  on  the                                                                    
types of investments it could  invest in; however, there was                                                                    
always  a legal  list until  the early  2000s. In  the early                                                                    
2000s  institutional  funds  began  discarding  their  legal                                                                    
lists  and  embracing  the "prudent  investment  rule."  The                                                                    
legislature  adopted  the rule  in  2006  and the  fund  had                                                                    
maintained  full control  of investment  choices since  that                                                                    
time.  Since  1982,  there  had  always  been  an  inflation                                                                    
appropriation back to the fund  to ensure the fund principal                                                                    
kept up with inflation.                                                                                                         
                                                                                                                                
2:02:30 PM                                                                                                                    
                                                                                                                                
Mr.  Barnhill  continued  discussing   the  history  of  the                                                                    
Permanent Fund.  He stated  that the enactment  of SB  26 in                                                                    
2018 nearly  converted the  fund into  a full  endowment. He                                                                    
explained endowment methodology and  the current practice of                                                                    
the fund.                                                                                                                       
                                                                                                                                
Co-Chair  Stedman reiterated  that the  state had  not taken                                                                    
its 50  percent out for  nearly 40 years but  had reinvested                                                                    
the money in the portfolio of  the fund, which had grown the                                                                    
fund  and  increased  the  size of  dividends  paid  out  to                                                                    
residents.                                                                                                                      
                                                                                                                                
Co-Chair Stedman  requested numbers that reflected  what the                                                                    
fund and  dividend stream would  have been if the  state had                                                                    
never  reinvested  the  50 percent.  He  asserted  that  the                                                                    
dividend stream on the chart  was grossly distorted when the                                                                    
state's reinvestment was considered.                                                                                            
                                                                                                                                
2:05:14 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill  offered to  bring back  any data  requested by                                                                    
Co-Chair Stedman.  He stated  that the  legislature intended                                                                    
for  some portion  of  the  50 percent  to  go to  inflation                                                                    
proofing.  He   recognized  that  there  was   excess  after                                                                    
inflation  proofing that  the state  never appropriated  for                                                                    
another  purpose, which  had allowed  for the  fund to  grow                                                                    
over-time.                                                                                                                      
                                                                                                                                
Senator  Wielechowski understood  that  under the  proposal,                                                                    
the  PFD  in  2021  would  be  $2,354.  He  asked  what  the                                                                    
statutory dividend would be.                                                                                                    
                                                                                                                                
Commissioner Mahoney responded that  under the proposal, the                                                                    
PFD would be $2,354 in FY  22; the statutory amount would be                                                                    
$3,064.                                                                                                                         
                                                                                                                                
Senator  Wielechowski  asked how  much  money  from the  ERA                                                                    
would be needed to bridge  the gap between the proposed plan                                                                    
and statute. He considered $700 million.                                                                                        
                                                                                                                                
Commissioner Mahoney replied $700 million sounded correct.                                                                      
                                                                                                                                
Mr.   Barnhill  interjected   that   in   the  most   recent                                                                    
projection,  there   was  an  estimated  $2.3   billion  for                                                                    
statutory dividends, which meant  the figure would be closer                                                                    
to $800 million.                                                                                                                
                                                                                                                                
2:08:03 PM                                                                                                                    
                                                                                                                                
Senator  Wielechowski understood  that the  projected amount                                                                    
for oil tax credits was $762 million.                                                                                           
                                                                                                                                
Commissioner Mahoney affirmed that the number was correct.                                                                      
                                                                                                                                
Senator  Wielechowski observed  that if  the deductible  oil                                                                    
tax credits were eliminated there  would be funds to pay out                                                                    
a statutory dividend.                                                                                                           
                                                                                                                                
Commissioner Mahoney replied in the affirmative.                                                                                
                                                                                                                                
Senator  von  Imhof  wanted  to   address  a  comment  about                                                                    
inflation. She said  that the fund was invested  as a whole,                                                                    
so inflation was  being invested the same whether  it was in                                                                    
the  corpus  or the  ERA.  She  stated  the reason  to  move                                                                    
inflation from the ERA into  the fund corpus was because the                                                                    
legislature  did   not  have   the  ability   to  withdrawal                                                                    
inflation or annual  earnings from the ERA.  She remarked it                                                                    
was  inaccurate  to say  the  fund  would  be less  or  more                                                                    
because inflation had not been moved.                                                                                           
                                                                                                                                
Co-Chair Bishop  recognized Representative Kelly  Merrick in                                                                    
the room.                                                                                                                       
                                                                                                                                
2:10:19 PM                                                                                                                    
                                                                                                                                
Senator Wielechowski spoke  of the Ballot Measure  1 oil tax                                                                    
debate. He had not seen any  bills on behalf of the governor                                                                    
to fix the oil tax structure.  He asked why the governor had                                                                    
not proposed  any legislation to eliminate  oil tax credits,                                                                    
which would free up funds for dividends.                                                                                        
                                                                                                                                
Commissioner Mahoney stated that  for 2022, the governor had                                                                    
proposed  payment  for  the  statutory  amount  of  oil  tax                                                                    
credits.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman clarified  that  the $114  million in  the                                                                    
governor's proposed  budget was  to pay  a liability  on the                                                                    
books of  approximately $730 million.  He thought  the state                                                                    
needed to parse liability  from previous credits created and                                                                    
put  against the  treasury compared  to  future credits.  He                                                                    
remarked there was  a per barrel credit that  was an ongoing                                                                    
issue in  the profit side  of the severance tax.  He thought                                                                    
the  liability issue  related  to the  ~$730  million was  a                                                                    
different issue.                                                                                                                
                                                                                                                                
2:12:26 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney considered  slide 6  titled "Permanent                                                                    
Fund Dividend: Consistency":                                                                                                    
                                                                                                                                
     ?  Alaskans  deserve  certainty concerning  annual  PFD                                                                    
     payment.                                                                                                                   
     ?  State   needs  PFD  consistency  to   attain  budget                                                                    
     stability and sustainability.                                                                                              
     ?  Absent  certainty,   determining  future  achievable                                                                    
     revenues/reductions  is  difficult  and may  result  in                                                                    
     over/under collecting/taxing.                                                                                              
     ?  50% POMV  dividend is  an equitable  distribution of                                                                    
     Alaska's wealth between its citizens and government.                                                                       
     ?  Resolving the  PFD allows  a discussion  of required                                                                    
     revenues/reductions to  close the remaining  budget gap                                                                    
     (Fall Special Session)                                                                                                     
     ?  Redirects the  legislative  conversation to  growing                                                                    
     Alaska vs. debating PFD.                                                                                                   
                                                                                                                                
Commissioner Mahoney stated that the  point of the slide was                                                                    
to illustrate  the need for  consistency with regard  to the                                                                    
PFD.                                                                                                                            
                                                                                                                                
Co-Chair  Bishop asked  whether  the state  would be  better                                                                    
served to  take a $1  billion draw  per year rather  than $3                                                                    
billion all at once.                                                                                                            
                                                                                                                                
Commissioner  Mahoney  stated  that  while there  was  a  $3                                                                    
billion  bridge requested  to solve  the  fiscal issue,  the                                                                    
funds could  be drawn  as needed so  that the  dollars could                                                                    
remain invested in the fund.                                                                                                    
                                                                                                                                
2:15:55 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney  displayed   slide  7  titled  "Bridge                                                                    
Funding":                                                                                                                       
                                                                                                                                
      ? One-time  use of  our strong  financial asset    the                                                                    
     Permanent Fund - positions Alaska  for long term fiscal                                                                    
     sustainability                                                                                                             
     ? With $3.0  billion in bridge funding from  the ERA, a                                                                    
     forecasted  FY25 fiscal  gap of  ~$300M can  be managed                                                                    
     with  a combination  of revenue  measures and  spending                                                                    
     reductions                                                                                                                 
     ? Other  endowments are considering  one-time increases                                                                    
     in   draws   to   capitalize  on   exceptional   market                                                                    
     performance:                                                                                                               
     ? Harvard's $42 billion  endowment increased from 5% to                                                                    
     7.5% on one-time basis                                                                                                     
           https://www.thecrimson.com/article/2021/5/3/draw                                                                     
          -further-endowment-fy22/                                                                                              
           https://www.nytimes.com/2020/06/02/arts/endowmen                                                                     
          ts-coronavirus.html                                                                                                   
     ? This plan avoids the need for a new broad-based tax                                                                      
     ? Constitutionalizing  a 5% POMV prevents  overdraws in                                                                    
     the future                                                                                                                 
                                                                                                                                
Commissioner Mahoney  pointed out  that with the  deposit of                                                                    
$1.1 billion  from PCE into  the fund, the net  reduction to                                                                    
the  fund  would  be  $1.9  billion.  She  spoke  of  fiscal                                                                    
challenges due to COVID-19.                                                                                                     
                                                                                                                                
Commissioner  Mahoney relayed  that  Mr.  Barnhill had  some                                                                    
research to share regarding COVID-19 and the economy.                                                                           
                                                                                                                                
2:17:52 PM                                                                                                                    
                                                                                                                                
Senator  Wilson  asked whether  the  state  would need  $300                                                                    
million or  $500 million total  to bridge the  state through                                                                    
FY 26.                                                                                                                          
                                                                                                                                
Commissioner Mahoney replied that  the $300 million had been                                                                    
developed  based  on  the  10-year   fiscal  plan  that  was                                                                    
submitted  with  the budget.  The  10-year  fiscal plan  had                                                                    
incorporated  $200 million  in reductions  to the  operating                                                                    
budget in  FY 23 and  FY 24. The administration  had assumed                                                                    
that those reductions were a  given, but not everyone looked                                                                    
at  it that  way.  She said  that the  model,  based on  the                                                                    
governor's philosophy and  policy decisions, recognized that                                                                    
an additional  $300 million in revenues  or reductions would                                                                    
be needed in  addition to what was presented  in the 10-year                                                                    
plan.                                                                                                                           
                                                                                                                                
2:19:32 PM                                                                                                                    
                                                                                                                                
Senator Wilson considered the idea  of a broad-based tax. He                                                                    
thought that each  working person in the state  would end up                                                                    
paying $2,100 in tax to fill the $500 million gap.                                                                              
                                                                                                                                
Commissioner  Mahoney  was  not familiar  with  the  thought                                                                    
exercise.                                                                                                                       
                                                                                                                                
Senator Wilson explained a broad-based  tax would need to be                                                                    
paid  by  each  working  Alaskan,  ranging  from  $1,300  to                                                                    
$2,100, in  order to fill the  gap and provide for  a $2,300                                                                    
dividend.                                                                                                                       
                                                                                                                                
Commissioner  Mahoney stated  that the  governor's plan  did                                                                    
not incorporate  a broad-based  tax of  any sort,  and there                                                                    
had  been no  calculations  such as  the  ones suggested  by                                                                    
Senator Wilson. She said that  the governor's plan assumed a                                                                    
different approach to fill the gap.                                                                                             
                                                                                                                                
Co-Chair  Bishop asked  when the  governor  might share  his                                                                    
plan with the legislature.                                                                                                      
                                                                                                                                
Commissioner  Mahoney  believed  the plan  would  be  shared                                                                    
during the August 2021 special session.                                                                                         
                                                                                                                                
2:21:17 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  considered the $300  million to be  a raid                                                                    
on the Permanent Fund. He  referenced the statutory spending                                                                    
cap that allowed a draw of  only 5 percent from the fund. He                                                                    
was  cautious  about  overdrawing  the  Permanent  Fund.  He                                                                    
contended that taking $3 billion  from the fund would affect                                                                    
future generations of  Alaskans and the future  of the fund.                                                                    
He  hoped to  have  further conversation  on  the issue.  He                                                                    
emphasized  the  need  to protect  the  Permanent  Fund  and                                                                    
reminded the committee that it  had saved and spent billions                                                                    
of dollars from the  Constitutional Budget Reserve (CBR). He                                                                    
recognized that  the administration  was not  suggesting any                                                                    
broad-based tax.                                                                                                                
                                                                                                                                
Co-Chair  Stedman addressed  budgetary reductions  and noted                                                                    
that the  operating budget  had not  been reduced  since the                                                                    
second year  of the  former Walker administration.  He noted                                                                    
that the committee had struggled  with the operating budget,                                                                    
which was flat  funded. He was curious  where the reductions                                                                    
in the  governors  budget could  be found. He wanted  to see                                                                    
where  the proposed  budget reductions  were by  department,                                                                    
including   debt   service,    fund   capitalizations,   and                                                                    
retirement. He  did not  believe $500  million could  be cut                                                                    
from the budget or it would have already been done.                                                                             
                                                                                                                                
2:25:52 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman emphasized the  need to embrace reality. He                                                                    
explained that  budget reductions  made in  the past  to the                                                                    
University  and the  Alaska Marine  Highway System  had been                                                                    
added back  with retirement payments  and the  Department of                                                                    
Corrections. A net zero to the state.                                                                                           
                                                                                                                                
Co-Chair Stedman  was curious about the  governor's proposed                                                                    
revenue sources. He was not  excited about taxes. He thought                                                                    
operating  costs should  be flat.  He said  that there  were                                                                    
clear  structural problems  with the  state's oil  taxes. He                                                                    
discussed moving cash flows that  warranted review to assure                                                                    
sure that  the system was  as fair  as it was  before former                                                                    
President Trump  lowered corporate income taxes.  He was not                                                                    
interested  in legalizing  gambling or  sex-work. He  looked                                                                    
forward to  finding a  solution. He  stressed that  once the                                                                    
Permanent  Fund was  breached  for $3  billion  it would  be                                                                    
mined for more  funds in the future. He  reiterated the need                                                                    
to give  future Alaskans  an intact  Permanent Fund  and the                                                                    
importance of not  spending all the wealth of  the oil basin                                                                    
in  our lifetime.  He commented  that things  were improving                                                                    
financially.                                                                                                                    
                                                                                                                                
2:29:29 PM                                                                                                                    
                                                                                                                                
Senator  Olson acknowledged  Mr. Barnhill    credentials and                                                                    
experience. He echoed Co-Chair  Stedman's comments about the                                                                    
billions that  he, Co-Chair Stedman, and  a previous finance                                                                    
committee had  worked to reinvest  in the CBR, only  to have                                                                    
it  spent by  a finance  committee  of a  different make  up                                                                    
during  a  past session.  He  thought  the proposed  "bridge                                                                    
funding" was a  non-starter and that there was  little to no                                                                    
support for the idea at the table.                                                                                              
                                                                                                                                
Mr. Barnhill discussed the workings  of endowment funds; how                                                                    
endowment funds worked, how popular  they were, and how they                                                                    
had  weathered  COVID-19  in   terms  of  spending  increase                                                                    
percentages.  He said  that  the 5  percent  rule was  being                                                                    
examined   elsewhere   and    discussions   were   occurring                                                                    
concerning  limited or  one-time adjustments  being made  to                                                                    
meet the challenges presented by COVID-19.                                                                                      
                                                                                                                                
2:33:30 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  stated  that  one  could  always  justify                                                                    
spending money  for the  good of the  public. He  thought it                                                                    
came down to the prudency  factor. He understood that it was                                                                    
difficult to  say no to  the public. He recalled  the robust                                                                    
markets  in the  1990s  when shortsighted  choices had  been                                                                    
made  in  the  management of  Public  Employees'  Retirement                                                                    
System (PERS)  and Teachers' Retirement System  (TRS), which                                                                    
had resulted in  $10 billion in liability.  He remarked that                                                                    
when working  with long averages  in the financial  market -                                                                    
skimming  off the  top  in strong  years,  while the  return                                                                    
regresses to  the mean in the  slim years - would  destroy a                                                                    
portfolio.                                                                                                                      
                                                                                                                                
Co-Chair Stedman noted that the  $3 billion was not going to                                                                    
be set aside while the  market readjusted so the state could                                                                    
buy in  at a lower  rate. He  contended that the  $3 billion                                                                    
would be taken  out and spent. He reminded  the committee of                                                                    
the excessive  PERS and  TRS liability.  He did  not believe                                                                    
that turning the  Permanent Fund into an  endowment would be                                                                    
comparable  to  an endowment  of  an  ivy league  school  as                                                                    
suggested by Mr. Barnhill.                                                                                                      
                                                                                                                                
2:37:02 PM                                                                                                                    
                                                                                                                                
Senator  Olson  suggested  Mr. Barnhill  continue  with  his                                                                    
thoughts.                                                                                                                       
                                                                                                                                
Mr. Barnhill stated that the  sustainability of the fund was                                                                    
of  paramount consideration.  He  said  that the  governor's                                                                    
plan   managed   the  needs   of   the   present  with   the                                                                    
sustainability that protected the future.                                                                                       
                                                                                                                                
Co-Chair  Bishop noted  that  the  commissioner had  implied                                                                    
that people relied on the PFD  for basic needs. He said that                                                                    
everyone in the room agreed  on that point. The question was                                                                    
how to get to a sustainable solution.                                                                                           
                                                                                                                                
Commissioner   Mahoney  pointed   out   that  the   governor                                                                    
recognized that there were many  different opinions and more                                                                    
than one  way of  making the budget  work. She  offered that                                                                    
the governor  was open to  all suggestions. She  stated that                                                                    
the  current  presentation  was the  starting  point  for  a                                                                    
conversation.                                                                                                                   
                                                                                                                                
2:39:19 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney  highlighted  slide 8  titled  "Bridge                                                                    
Funding":                                                                                                                       
                                                                                                                                
     ? As the Permanent Fund grows, so does the POMV which                                                                      
     closes the deficit organically.                                                                                            
          ? 2022 POMV: $3,069.3                                                                                                 
          ? 2030 POMV: $4,171.8                                                                                                 
     ? The gap closes significantly due to increased POMV                                                                       
     revenues                                                                                                                   
                                                                                                                                
Commissioner  Mahoney looked  at slide  9 titled  "Establish                                                                    
Strong Reserves":                                                                                                               
                                                                                                                                
      ? Reserves are essential to manage State's revenue                                                                        
     volatility                                                                                                                 
     ? ~66% of UGF is POMV  Lagged five-year smoothing                                                                          
     reduces market risks                                                                                                       
     ? ~27% of UGF is Oil  Price volatility presents near                                                                       
    term risk. This 27% will decrease over time as the                                                                          
     Permanent Fund and POMV grow.                                                                                              
     ? $1.0 billion in reserves can assist near term                                                                            
     volatility over two fiscal years.                                                                                          
                                                                                                                                
Commissioner Mahoney  addressed the graph on  slide 9, which                                                                    
represented what the CBR would  look like in the future with                                                                    
the  bridge funding  only. The  dashed line  represented the                                                                    
minimum balance  of reserves that  were needed.  The circled                                                                    
area  represented the  timeframe in  which new  revenues and                                                                    
reductions  were needed  to be  sustainable. The  $1 billion                                                                    
had  been  developed by  examining  revenues  such as  POMV,                                                                    
which  was smoothed  over a  rolling  five-year average  and                                                                    
provided some  certainty. She highlighted the  volatility of                                                                    
oil  revenue, which  represented 27  percent of  the state's                                                                    
revenue.                                                                                                                        
                                                                                                                                
2:43:17 PM                                                                                                                    
                                                                                                                                
Commissioner   Mahoney  addressed   slide  10,   "Achievable                                                                    
Revenue/Reductions":                                                                                                            
                                                                                                                                
     ? $3.0 billion in bridge funding provides time to                                                                          
     transition into a sustainable fiscal plan.                                                                                 
     ? Revenues/Reductions of $300 million are needed by                                                                        
     FY24-25 to balance budget and maintain sufficient                                                                          
     reserves                                                                                                                   
     ? Absent new revenues/reductions the CBR balance will                                                                      
     fall below $1.0 billion                                                                                                    
                                                                                                                                
2:43:56 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman struggled with  the reality of the proposed                                                                    
expenditure reductions.  He asserted  that to  reduce agency                                                                    
costs statutory  changes had  to be  made. He  required more                                                                    
detail surrounding real expenditure reductions.                                                                                 
                                                                                                                                
Co-Chair   Bishop   stated   his  understanding   that   the                                                                    
expenditure  reduction  detail  would be  presented  in  the                                                                    
August special session.                                                                                                         
                                                                                                                                
Commissioner  Mahoney  relayed  that the  objective  of  the                                                                    
August  special session  was to  talk  about solutions.  She                                                                    
remarked   that  the   administration   was   open  to   the                                                                    
legislature's suggestions beforehand.                                                                                           
                                                                                                                                
Co-Chair  Stedman stressed  that the  legislature could  not                                                                    
come up with  solutions, that solutions needed  to come from                                                                    
the   administration.   He   expressed  concern   that   the                                                                    
administration did  not have  a plan,  or any  solutions, to                                                                    
bring  before  the  committee. He  shared  the  process  the                                                                    
legislature  had  gone  through  to  compose  a  transparent                                                                    
budget.                                                                                                                         
                                                                                                                                
2:47:28 PM                                                                                                                    
                                                                                                                                
Senator Wilson clarified his  understanding that anytime the                                                                    
presentation  referenced $300  million, it  really signified                                                                    
$500 million.                                                                                                                   
                                                                                                                                
Commissioner Mahoney  replied that if the  $200 million from                                                                    
the  10-year  plan  was  considered,  the  number  was  $500                                                                    
million.                                                                                                                        
                                                                                                                                
Senator    Wilson   asked    about   the    likelihood   the                                                                    
administration  would  provide   the  legislature  with  the                                                                    
information  it needed  by August.  He wondered  whether the                                                                    
administration  had   a  100  percent  certainty   that  all                                                                    
proposals and plans would be ready by August 1, 2021.                                                                           
                                                                                                                                
Commissioner Mahoney  thought the question was  difficult to                                                                    
answer  because  she  was  not  sure  what  the  legislature                                                                    
needed. She  said that she  could honor requests.  She could                                                                    
not identify a percent of certainty.                                                                                            
                                                                                                                                
Senator Wilson  commented that he thought  the committee was                                                                    
hearing the  fourth presentation from the  administration in                                                                    
which the same  questions and themes had  arisen. He related                                                                    
that he  had hoped for  more from the administration  in the                                                                    
way of solutions. He emphasized  that the legislature needed                                                                    
more  information  form  the administration  to  make  sound                                                                    
fiduciary  decisions for  the state.  He believed  that past                                                                    
use  of  the  ERA  had  been unnecessary  due  to  high  oil                                                                    
revenues. He  thought that there  were oil tax  credits that                                                                    
could  be changed  but that  previous  concepts and  statute                                                                    
changes had  taken years and not  30 days. He felt  that the                                                                    
sooner the  administration made details on  revenues or cuts                                                                    
available to the legislature, the better.                                                                                       
                                                                                                                                
2:51:16 PM                                                                                                                    
                                                                                                                                
Senator  von Imhof  wanted to  build  upon Senator  Wilson's                                                                    
comments. She reiterated that  approximately $300 million in                                                                    
revenue was needed, and $500 million in reductions.                                                                             
                                                                                                                                
Commissioner Mahoney stated that amounts were not correct.                                                                      
                                                                                                                                
Senator  von  Imhof  asked whether  the  commissioner  could                                                                    
provide  clarification on  the  numbers needed  in terms  of                                                                    
budget cuts and new revenue.                                                                                                    
                                                                                                                                
Commissioner   Mahoney   stated   that  the   10-year   plan                                                                    
expenditure  component included  $200 million  in reductions                                                                    
to  the budget.  As the  fiscal plan  was developed,  it had                                                                    
been  determined that  an additional  $300 million  would be                                                                    
needed  to  close  the  fiscal  gap.  The  $200  million  in                                                                    
expenditures and the $300 million  in either expenditures or                                                                    
revenue was a combined $500 million.                                                                                            
                                                                                                                                
Senator von  Imhof thought  she was  looking at  the numbers                                                                    
differently. She  considered the current budget  prepared by                                                                    
the  legislature,  which  was  balanced  before  paying  out                                                                    
dividends. She  said that  as soon  as dividends  were added                                                                    
the state went into deficit  spending. She related that with                                                                    
the governor's numbers, half of  the POMV draw was taken for                                                                    
the  PFD. She  thought that  the  current draw  would be  $3                                                                    
billion, half of which was  $1.5 billion. She asserted that,                                                                    
using  the governor's  numbers,  if $1.5  billion was  taken                                                                    
from the $3  billion the state was left with  a $1.5 billion                                                                    
deficit. She summarized  that taking 50 percent  of the POMV                                                                    
off the top would yield a  $1.5 billion deficit. She did not                                                                    
understand  how $500  million total  could close  the fiscal                                                                    
gap,  particularly when  the  governor's  numbers had  shown                                                                    
otherwise.                                                                                                                      
                                                                                                                                
2:56:00 PM                                                                                                                    
                                                                                                                                
Commissioner   Mahoney   advanced   to   slide   11   titled                                                                    
"Achievable  Revenue/Reductions."  She   thought  the  slide                                                                    
could help  with Senator von  Imhof's questions.   She noted                                                                    
that  the following  slide provided  the numbers  to support                                                                    
the  graph shown  on slide  11. She  stated that  the orange                                                                    
bars on  the graph  illustrated the anticipated  POMV growth                                                                    
thorough 2030.                                                                                                                  
                                                                                                                                
Commissioner  Mahoney  explained  that the  following  slide                                                                    
would provide numbers to support  the graph. She pointed out                                                                    
to   the  committee   that   the   blue  lines   represented                                                                    
traditional revenues, which grew  small into the future. The                                                                    
revenues that drove  the success of the model  were the POMV                                                                    
revenues, which  were projected  to grow  significantly over                                                                    
time due  to the  larger starting balance  of the  fund. The                                                                    
yellow on  the graph  represented the  CBR draw  proposed by                                                                    
the governor.  The funds would  be used over time  to bridge                                                                    
the  state  through  anticipated  deficits.  The  gray  area                                                                    
represented  new revenues  and  reductions.  The green  line                                                                    
represented expenditures.                                                                                                       
                                                                                                                                
2:59:06 PM                                                                                                                    
                                                                                                                                
Co-Chair Bishop  asked how  much analysis  was put  into the                                                                    
scenario depicted on the graph.                                                                                                 
                                                                                                                                
Commissioner Mahoney affirmed that  a Monte Carlo simulation                                                                    
had been  run. She  wanted to  confirm the  information with                                                                    
Dan Stickel,  the department's chief economist,  who had run                                                                    
the scenarios.                                                                                                                  
                                                                                                                                
Co-Chair Bishop asked if he was online for questions.                                                                           
                                                                                                                                
Commissioner Mahoney  replied in  the negative.  She offered                                                                    
to get back to the committee.                                                                                                   
                                                                                                                                
3:00:00 PM                                                                                                                    
                                                                                                                                
Commissioner Mahoney  looked at  slide 12  titled "Financial                                                                    
Details":                                                                                                                       
                                                                                                                                
     ? $3.0 billion in bridge funding provides time to                                                                          
     establish achievable revenues/reductions.                                                                                  
     ? Beginning in FY2024, $150 million to $300 million in                                                                     
     revenues/reductions balances the budget and begins to                                                                      
     grow reserves.                                                                                                             
                                                                                                                                
Commissioner Mahoney noted that  slide 12 showed the numbers                                                                    
that correlated  with the  graph on  slide 11.  She asserted                                                                    
that  mathematically, the  model worked.  She said  that the                                                                    
difference between  the model  and those  done by  LFD, were                                                                    
different assumptions and different  inputs. She shared that                                                                    
what  was  represented  on  the  slide  was  the  governor's                                                                    
philosophy   and  policy   measures  related   to  how   the                                                                    
structural deficit would be fixed.                                                                                              
                                                                                                                                
Commissioner Mahoney  said that  the POMV  in a  50/50 split                                                                    
environment  was  reflected in  FY  22  as 50  percent.  She                                                                    
stated  that the  $4.6  billion  represented the  governor's                                                                    
proposed budget.  She noted that  the CBR grew  overtime and                                                                    
stayed  above the  $1 billion  target throughout  the model.                                                                    
The plan supported  a 50/50 dividend for  Alaskans of $2,354                                                                    
in FY22,  growing to $3,000  in FY30.   She added  that FY24                                                                    
and  FY  25   reflected  the  need  for   new  revenues  and                                                                    
reductions.  The  necessary  additional revenues  were  $150                                                                    
million in FY  24, increasing to $300 million in  FY 25. The                                                                    
graph incorporated  the bridge funding  in FY 22,  which was                                                                    
why the  CBR balance  increased. She  relayed that  the last                                                                    
line assumed the starting point  for determining the POMV at                                                                    
the end  of FY 21  of $77.6  billion of the  Permanent Fund.                                                                    
She said  that the fund  balance was currently  $81 billion.                                                                    
She stated  that when  the model was  updated the  June 2021                                                                    
balance would be used to  recalculate what the POMV revenues                                                                    
would be in the future.  She thought that the revenues would                                                                    
increase due to the increased starting point.                                                                                   
                                                                                                                                
3:03:25 PM                                                                                                                    
                                                                                                                                
Co-Chair  Bishop asked  whether the  proposal included  a $2                                                                    
billion draw from the ERA and  $1 billion from PCE to get to                                                                    
the $3 billion total.                                                                                                           
                                                                                                                                
Commissioner  Mahoney  stated that  the  net  effect to  the                                                                    
Permanent Fund was $2 billion  in regard to a reduction. She                                                                    
said  that  $3  billion  would be  drawn  to  enable  fiscal                                                                    
sustainability but  $1 billion  would be deposited,  the net                                                                    
reduction to the fund would be $2 billion.                                                                                      
                                                                                                                                
3:04:12 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman observed  that when  looking back  on flat                                                                    
budget  since  FY 17,  the  legislature  had struggled  with                                                                    
budget  reductions. He  thought  the  proposed 10-year  plan                                                                    
would be a  flat budget when considering the  numbers on the                                                                    
slide,  which  he felt  was  unrealistic.  He remarked  that                                                                    
there were  salary increases and contract  negotiations that                                                                    
pushed the  budget up.  He thought  a flat  operating budget                                                                    
over 13  years was hard  to imagine.  He wanted to  see more                                                                    
agency detail in the forecasts.                                                                                                 
                                                                                                                                
Co-Chair Stedman expressed concern  about a projected linear                                                                    
balance  for the  Permanent Fund.  He wanted  adjustments to                                                                    
the models  to incorporate  real market returns.  He thought                                                                    
that if  budget reduction  or tax  increases did  not happen                                                                    
the Permanent  Fund would  be in  jeopardy. He  worried that                                                                    
the proposal  could result in  a tax burden that  would fall                                                                    
on state residents.                                                                                                             
                                                                                                                                
3:08:00 PM                                                                                                                    
                                                                                                                                
Commissioner   Mahoney  thought   Co-Chair  Stedman   raised                                                                    
several good points.  She asserted that there  were ebbs and                                                                    
flows  related to  debt from  year-to-year.  She thought  it                                                                    
would be important  to discuss budget details  in the August                                                                    
special session.                                                                                                                
                                                                                                                                
Co-Chair Bishop whether Commissioner  Mahoney could have Mr.                                                                    
Stickel provide  the failure rate  from the  model analysis.                                                                    
He noted  that the capital  budget had yet to  be discussed.                                                                    
He looked  at the  numbers on  the slide  and felt  that the                                                                    
numbers failed  to approach the  1 percent  replacement rule                                                                    
for the deferred maintenance on the state's assets.                                                                             
                                                                                                                                
3:09:54 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney  showed  slide  13  titled  "Financial                                                                    
Considerations":                                                                                                                
                                                                                                                                
     Upside Fiscal Benefits:                                                                                                    
     ?  Increased   PERS  &   TRS  investment   earnings  of                                                                    
     approximately   $5.0   billion  may   reduce   unfunded                                                                    
     liabilities  ($6.5 billion)  and  decrease the  State's                                                                    
     future  assistance  payment   (FY22  payment  =  $336.2                                                                    
     million).                                                                                                                  
    ? Gains will be smoothed over five years per policy                                                                         
     ?  Potential  for  decreased state  assistance  in  the                                                                    
     future use  of Federal stimulus to  offset Unrestricted                                                                    
     General Fund (UGF).                                                                                                        
     ? Lapsing  funds are not  taken as savings    the state                                                                    
     lapses  tens of  millions of  unused funding  back into                                                                    
     the general fund every year                                                                                                
     ?  Maintaining  downward   budget  pressure  to  reduce                                                                    
     programmatic formulas                                                                                                      
     ? Market returns in excess of 6.25% projection                                                                             
                                                                                                                                
     Downside Risk:                                                                                                             
     ? Inflation increases                                                                                                      
     ?  Market  correction  decreasing  Permanent  Fund  and                                                                    
     Retirement Trust values                                                                                                    
     ? Failure to realize downward pressure on budgets                                                                          
     ? Oil price and volume volatility                                                                                          
                                                                                                                                
     This  presentation  presumes   a  "mid-case"  scenario.                                                                    
     There are  multiple events that  are not  considered in                                                                    
     these numbers  that could drive increases  or decreases                                                                    
     in  the  state's  budget  position.  For  this  reason,                                                                    
     several  hundred  million  in expected  budget  savings                                                                    
     have not been included before they are realized.                                                                           
                                                                                                                                
Commissioner  Mahoney discussed  forecasts and  the inherent                                                                    
changeability  due to  unforeseen  circumstances. She  noted                                                                    
that  there were  lapsing funds  that were  not incorporated                                                                    
into the numbers.  She added that the downsize  risk was not                                                                    
incorporated  into the  model.  She noted  that the  state's                                                                    
retirement funds  had performed well and  maintained healthy                                                                    
balances. She  suggested that after actuarial  analysis, the                                                                    
state could  reduce its contribution rate  relating to those                                                                    
funds,  which would  be a  reduction of  state expenditures.                                                                    
She said that  the governor's philosophy was  to continue to                                                                    
seek  out budget  cuts. She  said  that when  the model  was                                                                    
updated in  August 2021, the  inflation assumption  would be                                                                    
changed if necessary.  She asserted that the  forecast was a                                                                    
starting point for conversation.                                                                                                
                                                                                                                                
3:13:24 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney  referenced  slide 14,  "$3.0B  Bridge                                                                    
Funding, 50/50 PFD":                                                                                                            
                                                                                                                                
     ?  The above  graphs depict  the impact  of the  bridge                                                                    
     fund  distribution  ($3.0  billion CBR  transfer,  $1.1                                                                    
     billion PCE deposit, $1.9 billion  net) on the POMV and                                                                    
     the Permanent Fund Balance                                                                                                 
                                                                                                                                
Commissioner  Mahoney  stated  that   the  slide,  with  two                                                                    
graphs, was a  representation of what the  POMV impact would                                                                    
be as a result of the  $2 billion draw. She pointed out that                                                                    
the graph on  the right represented the  change in Permanent                                                                    
Fund   balance.  She   shared   that   the  department   had                                                                    
reformatted  their  graphs  to  mirror  Legislative  Finance                                                                    
Division (LFD) graphs.                                                                                                          
                                                                                                                                
3:14:32 PM                                                                                                                    
                                                                                                                                
Commissioner  Mahoney turned  to slide  15 titled  "Summary,                                                                    
Governor's Plan: Financial and Political Solution":                                                                             
                                                                                                                                
     Constitutionally protect Permanent Fund and PFD                                                                         
          o Limit annual draw to 5% POMV                                                                                        
          o Dedicate 50% of POMV to PFDs                                                                                        
          o Combine Principal and Earnings Reserve Account                                                                      
             into one endowment                                                                                                 
    Constitutionally protect Power Cost Equalization                                                                         
          o Deposit PCE endowment ($ into Permanent Fund                                                                        
          o Dedicate revenue to equalize power costs in                                                                         
             Alaska                                                                                                             
    Provide bridge to balance budgets through FY2025                                                                         
          o Transfer $3 billion from ERA to CBR                                                                                 
      Discuss achievable revenues/reductions in Second                                                                       
        Special Session                                                                                                         
                                                                                                                                
3:14:55 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:15:09 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Bishop  shared that the committee  would abbreviate                                                                    
the  presentation in  the interest  of time.  He moved  to a                                                                    
presentation by the Legislative Finance Division (LFD).                                                                         
                                                                                                                                
ALEXEI  PAINTER,  DIRECTOR,  LEGISLATIVE  FINANCE  DIVISION,                                                                    
provided  a  PowerPoint  presentation  titled  "Analysis  of                                                                    
Governor's Fiscal Plan" (copy on file). He began on slide 2                                                                     
titled "Review of LFD Baselines":                                                                                               
                                                                                                                                
     ? In  LFD's Overview of  the Governor's Budget  back in                                                                    
     January,  we presented  two  budget baselines:  current                                                                    
     law and  current policy. These are  designed to provide                                                                    
     a  neutral   starting  point  for  the   year's  budget                                                                    
     discussions, separate  from any policy choices  made in                                                                    
     the Governor's budget request.                                                                                             
     ? Our  fiscal modeling  is currently based  on versions                                                                    
     of the                                                                                                                     
     FY22 budget that are very similar to those baselines.                                                                      
     ?  Legislative Finance's  fiscal model  is designed  to                                                                    
     show  policy makers  the  longer-term impact of  fiscal                                                                    
     policy decisions.                                                                                                          
     ?  The   baseline  assumptions  are   essentially  that                                                                    
     current  budget  levels  are maintained,  adjusted  for                                                                    
     inflation.                                                                                                                 
                                                                                                                                
Mr. Painter reviewed the division's budget baselines.                                                                           
                                                                                                                                
3:17:10 PM                                                                                                                    
                                                                                                                                
Mr. Painter turned to slide 3 titled "Review of LFD                                                                             
Baselines (cont.)":                                                                                                             
                                                                                                                                
     Revenue Assumptions                                                                                                        
     ? LFD's baseline revenue assumptions are the                                                                               
     Department of Revenue's Spring Revenue Forecast.                                                                           
            This assumes $61 oil in FY22, growing with                                                                          
          inflation in future years.                                                                                            
             DNR  oil   production  forecast  projects  that                                                                    
          Alaska North  Slope production will  increase from                                                                    
          459.7 thousand  barrels per day  in FY22  to 565.5                                                                    
          thousand barrels per day in FY30.                                                                                     
     ?  For  the  Permanent  Fund,  we  assume  actual  FY21                                                                    
     returns through the April 30 APFC statement and                                                                            
     Callan's 6.20% assumption for FY22 and beyond.                                                                             
                                                                                                                                
3:18:05 PM                                                                                                                    
                                                                                                                                
Mr. Painter addressed slide 4 titled "Review of LFD                                                                             
Baselines (cont.)":                                                                                                             
                                                                                                                                
     Spending Assumptions                                                                                                       
     ?  For agency  operations, we  are currently  using the                                                                    
     Senate's  first committee  substitute  as our  baseline                                                                    
     ($3,872.7  million  UGF),  growing  with  inflation  of                                                                    
     2.0%.                                                                                                                      
            This budget  is used because it  did not include                                                                    
          any  one-time  fund   sources  present   in  other                                                                    
          versions  of  the  budget,   so  it  represents  a                                                                    
          reasonable starting point.                                                                                            
            This  number is  very close  to our  Current Law                                                                    
          and Current Policy baselines from January.                                                                            
     ? For statewide  items, our baseline is  to assume that                                                                    
     all items are funded to their statutory levels.                                                                            
             This includes  School  Debt Reimbursement,  the                                                                    
          REAA Fund,  Community Assistance, oil and  gas tax                                                                    
          credits, and the PFD.                                                                                                 
             We  also  include  a  baseline  Fund  Transfers                                                                    
          amount that  represents the ongoing cost  of DEC's                                                                    
          Spill Prevention and Response program.                                                                                
     ? For the capital budget,  we assume the Senate's first                                                                    
     committee substitute ($176.7  million UGF) growing with                                                                    
     inflation of 2.0%.                                                                                                         
            This  budget is  used because it  represents the                                                                    
          Governor's   original   amended  request   without                                                                    
          one-time fund sources.                                                                                                
     ? For  supplementals we assume $50.0  million per year.                                                                    
     This  is based  on the  average amount  of supplemental                                                                    
     appropriations minus lapsing funds each year.                                                                              
                                                                                                                                
3:20:39 PM                                                                                                                    
                                                                                                                                
Mr. Painter reviewed slide 5 titled "Comparison of                                                                              
Governor's 10-Year Plan to LFD Baselines":                                                                                      
                                                                                                                                
     ?  The Governor's  10-Year Plan  for  the budget  makes                                                                    
     several policy choices to reduce spending:                                                                                 
             50% funding  of school  debt reimbursement  and                                                                    
          REAA Fund capitalization;                                                                                             
             $65.7 million  less  UGF  agency operations  in                                                                    
          FY22 than original Senate budget;                                                                                     
            $100  million of  additional reductions  in each                                                                    
          of FY23 and FY24;                                                                                                     
            Grows agency operations  in FY24+ at 1.5% rather                                                                    
          than with inflation; and                                                                                              
            Supplementals  and lapse are assumed  to balance                                                                    
          out.                                                                                                                  
     ?  See  handout  entitled  "OMB and  LFD  Fiscal  Model                                                                    
     Assumption                                                                                                                 
     Comparison."                                                                                                               
     ? This level of budget reductions is not unattainable,                                                                     
     but these are significant policy choices.                                                                                  
                                                                                                                                
Mr. Painter noted that the  $65.7 million less in UGF agency                                                                    
operation  in the  governor's budget  consisted of  one-time                                                                    
fund source changes that were  reversed in subsequent years,                                                                    
which  meant the  ongoing impact  was less.  He stated  that                                                                    
there  were some  policy  choices made  by  the governor  to                                                                    
reduce the budget, that were  not reflected in the baseline.                                                                    
He  remarked  that  the  governor's  proposed  $100  million                                                                    
reductions  in  FY  23  and   FY  24  did  not  account  for                                                                    
inflation.  He  referenced a  handout  titled  "OMB and  LFD                                                                    
Fiscal Model  Assumption Comparison" (copy on  file) showing                                                                    
the difference in  the LFD baseline assumptions  and the OMB                                                                    
10-year plan with an item-by-item  comparison. He noted that                                                                    
the proposed level of budget  reductions was not necessarily                                                                    
unattainable,  but  the  proposals were  significant  policy                                                                    
choices. There  had been annual  debates in  the legislature                                                                    
over  how to  fund school  debt reimbursement,  the Regional                                                                    
Educational Attendance  Area (REAA)  Fund, and  other items.                                                                    
He relayed it was not the  default or baseline to assume the                                                                    
reductions would happen.                                                                                                        
                                                                                                                                
3:23:14 PM                                                                                                                    
                                                                                                                                
Mr.  Painter  looked  at  slide   6  titled  "Comparison  of                                                                    
Governor's 10-Year Plan to LFD Baselines  (cont.)." He noted                                                                    
the  negative  numbers  in the  table  reflected  where  the                                                                    
governor's  10-year  plan was  below  the  LFD baseline  and                                                                    
positive numbers  (appearing only in FY  22) reflected where                                                                    
the governor's plan  was higher. He pointed to  the top line                                                                    
showing agency  operations and noted  it contained  the bulk                                                                    
of the  difference between the  governor's plan and  the LFD                                                                    
analysis. He highlighted  -$65.7 million in FY  22 that grew                                                                    
over  subsequent years  due to  the $100  million reductions                                                                    
versus  LFD's  assumption  of  growth  with  inflation.  The                                                                    
number continued  to grow  with inflation  over time  due to                                                                    
the difference in the lower  base and the different rates of                                                                    
inflation (2  percent versus 1.5  percent). He pointed  to a                                                                    
$3.1  billion   difference  in  total   (agency  operations)                                                                    
spending [through FY 30].                                                                                                       
                                                                                                                                
Mr. Painter moved  to the second line in the  table on slide                                                                    
6 showing  the statewide  difference between  the governor's                                                                    
proposal  and the  LFD baselines.  He  highlighted that  the                                                                    
governor's  numbers were  approximately  $1.1 billion  below                                                                    
the LFD  baseline. He explained  much of the  difference was                                                                    
reflected  in the  governor's 50  percent funding  of school                                                                    
debt  reimbursement and  the REAA  Fund as  well as  reduced                                                                    
funding  for community  assistance  in the  first couple  of                                                                    
years of the  plan. He detailed that part  of the difference                                                                    
was  a  technical  difference   in  retirement  funding.  He                                                                    
elaborated that  the governor was using  the official Alaska                                                                    
Retirement  Management  Board  (ARMB) numbers,  while  LFD's                                                                    
analysis  used  the  board's draft  numbers  from  December,                                                                    
which were  slightly higher.  He noted  ARMB would  meet the                                                                    
following  week to  adopt the  official numbers.  He assumed                                                                    
that  after  the numbers  had  been  adopted OMB  and  LFD's                                                                    
numbers should align.                                                                                                           
                                                                                                                                
Mr.  Painter  addressed  the capital  budget  difference  on                                                                    
slide 6.  The governor's proposed capital  budget was higher                                                                    
by  $56.5  million [for  FY  22].  In subsequent  years  the                                                                    
governor's plan  used $150  million growing  with inflation,                                                                    
while  LFD  used $176  million  growing  with inflation.  He                                                                    
moved to the fund transfer line  of the table and noted that                                                                    
after  FY 22  the governor's  plan  and LFD  agreed on  fund                                                                    
transfers.   He   briefly   mentioned  the   difference   in                                                                    
supplementals  at  the  bottom   of  the  table.  The  total                                                                    
difference  between   LFD's  baseline  and   the  governor's                                                                    
proposed numbers  was relatively  minor in the  first couple                                                                    
of years  and grew significantly as  the governor's proposed                                                                    
cuts  compounded.  The governor  was  proposing  a total  of                                                                    
$4.856 billion lower spending than  the LFD baseline for the                                                                    
current budget growing with inflation [through FY 30].                                                                          
                                                                                                                                
3:26:04 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  remarked that it  was hard to  project ten                                                                    
years  in the  future with  any accuracy.  He looked  at the                                                                    
projected  $591 million  difference  in FY  25. He  reasoned                                                                    
that  even if  the actual  spread  was half  the number,  it                                                                    
would still  be $300  million the state  would need  to make                                                                    
up.  He remarked  the number  was significant.  He suggested                                                                    
that  LFD include  agency and  statewide  growth rates  with                                                                    
more detail  on a  slide in  the future.  He wanted  to hear                                                                    
where  the cuts  would  be if  someone  talked about  agency                                                                    
reductions  in  the  hundreds of  millions  of  dollars.  He                                                                    
remarked that the legislature had  struggled at the table on                                                                    
every single agency.                                                                                                            
                                                                                                                                
Mr. Painter showed slide 7  titled "Fiscal Model: Governor's                                                                    
PF  Plan  with  LFD's Baseline  Spending  Assumptions."  The                                                                    
slide showed  the effect  of the  Permanent Fund  portion of                                                                    
the governor's  plan without the spending  reductions or new                                                                    
revenue to  illustrate the  importance of  the two  items to                                                                    
pay for the plan. The lines  in the top left chart reflected                                                                    
spending   assumptions  and   the  bars   reflected  revenue                                                                    
sources.  The   chart  on  the  bottom   left  showed  state                                                                    
reserves. He pointed  out that the LFD  analysis assumed the                                                                    
constitutionalizing  of the  Permanent Fund;  therefore, the                                                                    
ERA shown in green disappeared [in  FY 23]. The chart on the                                                                    
top  right showed  the  PFD check  compared  to the  current                                                                    
statutory  PFD. The  chart below  that showed  the Permanent                                                                    
Fund  and its  growth.  He highlighted  that  the fund  grew                                                                    
significantly  faster  than  inflation compared  to  FY  20,                                                                    
primarily due to  large market returns in  the current year.                                                                    
The next chart near the bottom  of slide on the right showed                                                                    
the impact of  the $3 billion draw on the  percent of market                                                                    
value  (POMV).  He detailed  that  taking  an additional  $3                                                                    
billion out  of the fund  would cause a reduction  of around                                                                    
$150 million  in POMV over  time as  it was worked  into the                                                                    
average.                                                                                                                        
                                                                                                                                
Mr.  Painter  continued  to  speak to  slide  7.  The  slide                                                                    
demonstrated  that  if  the plan  only  included  the  50/50                                                                    
dividend and  bridge funding, the  bridge funding  would run                                                                    
out quickly.  He noted the  result was a broken  model where                                                                    
[expenditure]  lines and  [revenue]  bars did  not match  up                                                                    
[shown in the top left chart  on slide 7], meaning there was                                                                    
not  sufficient  funding  to  pay  for  the  budget  due  to                                                                    
persistent deficits that could not  be filled. He noted that                                                                    
the slide  only included the  Permanent Fund portion  of the                                                                    
governor's  proposed plan.  Slide 8  showed the  same charts                                                                    
with the governor's assumptions built in.                                                                                       
                                                                                                                                
3:29:45 PM                                                                                                                    
                                                                                                                                
Mr.  Painter   spoke  to  slide  8   titled  "Fiscal  Model:                                                                    
Governor's  PF Plan  with Governor's  Spending Plan  and New                                                                    
Revenues." The  slide showed  the governor's  Permanent Fund                                                                    
plan  in addition  to the  proposed spending  plan and  $300                                                                    
million  in new  revenue.  He noted  the  numbers were  very                                                                    
close  to the  governor's  model. He  remarked  there was  a                                                                    
slight difference in  the growth rate of  the Permanent Fund                                                                    
[between the LFD analysis and  the OMB numbers]; the numbers                                                                    
were within a few million  dollars. He stated that the slide                                                                    
indicated  that  the differences  between  the  LFD and  OMB                                                                    
modeling  was  a  matter   of  the  administration's  policy                                                                    
choices. The slide  showed that state revenue  would go from                                                                    
deficits to  surpluses and a  CBR balance would  be retained                                                                    
and rebuilt  throughout the given  period as  surpluses were                                                                    
deposited into  the account. The model  demonstrated that if                                                                    
the proposed  reductions could be  made and the  new revenue                                                                    
came  in,  the  numbers  presented in  the  governor's  plan                                                                    
worked.                                                                                                                         
                                                                                                                                
Co-Chair  Bishop   highlighted  that  the   governor's  plan                                                                    
assumed  a 1.5  percent  inflation rate,  50 percent  school                                                                    
bond  debt reimbursement,  and an  REAA  reduction from  the                                                                    
current  amount. He  stated  the data  shown  in the  middle                                                                    
column [on slide 8] reflected the governor's numbers.                                                                           
                                                                                                                                
Mr. Painter agreed.                                                                                                             
                                                                                                                                
3:31:10 PM                                                                                                                    
                                                                                                                                
Mr. Painter briefly highlighted  slide 9 titled "Analysis of                                                                    
Governor's Comprehensive Fiscal Plan":                                                                                          
                                                                                                                                
     ? OMB 10-year plan for spending, which has $4.86                                                                           
     billion less spending over FY22-30 than current                                                                            
     policies reflected in the LFD baseline.                                                                                    
     ? Adds $300 million in new revenue (or additional                                                                          
     budget reductions) beginning midway through FY24.                                                                          
    ? Constitutionalizes PFD at 50% of POMV draw (about                                                                         
     $2,350 per recipient in FY22).                                                                                             
     ? Transfers PCE Fund to Permanent Fund and makes some                                                                      
     funding for power cost equalization a constitutional                                                                       
     mandate.                                                                                                                   
     ? One-time transfer of $3 billion from ERA to CBR as                                                                       
     "bridge."                                                                                                                  
                                                                                                                                
Co-Chair Stedman  remarked that the administration  had been                                                                    
talking about  taking $2 billion  out of the  Permanent Fund                                                                    
and liquidating  the Power Cost Equalization  (PCE) Fund. He                                                                    
thought it  would in essence  be transferring the  payout to                                                                    
the  Permanent Fund  and liquidating  and  spending the  PCE                                                                    
endowment.                                                                                                                      
                                                                                                                                
Mr.   Painter   explained   that   in   LFD's   models   and                                                                    
administration's models,  the PCE program had  been switched                                                                    
to  a UGF  expense, which  added to  spending. Additionally,                                                                    
the  community   assistance  program  would  become   a  UGF                                                                    
expense;  the program  was currently  funded primarily  with                                                                    
the PCE Fund.                                                                                                                   
                                                                                                                                
3:32:45 PM                                                                                                                    
                                                                                                                                
Mr.  Painter   addressed  slide   10  titled   "Analysis  of                                                                    
Governor's Comprehensive Fiscal Plan (cont.)":                                                                                  
                                                                                                                                
     ?  LFD's modeling  and the  Governor's modeling  do not                                                                    
     have  significant differences    the  numbers presented                                                                    
     by  the Governor  are technically  sound. The  question                                                                    
     for  the  legislature is  whether  you  agree with  the                                                                    
     policy choices in the plan.                                                                                                
     ? Currently,  the legislature has  four main  levers to                                                                    
     use  to  balance  the   budget:  drawing  from  savings                                                                    
     accounts  (including   the  ERA),  reducing   the  PFD,                                                                    
     reducing  the   budget,  or  increasing   revenue.  The                                                                    
     Governor's plan removes the  first two options, leaving                                                                    
     only the last two.                                                                                                         
            Over  the past nine  years of deficits,  we used                                                                    
          three of  the four levers: budget  reductions, PFD                                                                    
          reductions,   and  savings   draws.  We   are  now                                                                    
          essentially out of savings beyond the ERA.                                                                            
            If existing revenue sources do not meet DOR's                                                                       
          projections, the Governor's plan would require                                                                        
          additional budget reductions or new revenue.                                                                          
     ? The $3 billion "bridge"  allows time for increases to                                                                    
     existing  revenue  sources,  the $300  million  in  new                                                                    
     revenue,  and the  spending reductions  to balance  the                                                                    
     budget while  paying a 50/50  PFD. Without it,  the CBR                                                                    
     would  not  have  sufficient  funds  to  avoid  an  ERA                                                                    
     overdraw during the transition period under this plan.                                                                     
                                                                                                                                
Mr. Painter  elaborated on  the last  bullet point  on slide                                                                    
10. He communicated  that the CBR's current  balance was not                                                                    
sufficient  to   get  through  the  transition   period.  He                                                                    
explained that  for the administration's  plan to  work, the                                                                    
$3  billion was  an  essential component  of the  governor's                                                                    
overall plan to get to a balanced budget.                                                                                       
                                                                                                                                
3:34:45 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  was concerned  about the  opportunity cost                                                                    
of  the $3  billion  overdraw or  looting  of the  Permanent                                                                    
Fund.  He  wanted to  see  a  growth  projection on  the  $3                                                                    
billion  going forward  for  30 years  and  the payout  that                                                                    
would  come  out. He  wanted  to  see  the cost  for  future                                                                    
generations.                                                                                                                    
                                                                                                                                
Mr.  Painter agreed  to provide  the  information. He  noted                                                                    
that LFD's rule of thumb  associated with the 5 percent POMV                                                                    
was  that every  $1 billion  taken from  the Permanent  Fund                                                                    
reduced the  POMV by  $50 million.  The $3  billion transfer                                                                    
would  reduce the  POMV by  $150 million  in real  terms. He                                                                    
noted that  it would  take time  to take  effect due  to the                                                                    
five-year average and lag.                                                                                                      
                                                                                                                                
3:35:52 PM                                                                                                                    
                                                                                                                                
Mr.  Painter   spoke  to  slide   11  titled   "Analysis  of                                                                    
Governor's Comprehensive Fiscal Plan (cont.)":                                                                                  
                                                                                                                                
     ? Evaluating a fiscal plan requires clear goals and                                                                        
     metrics: what problems are we trying to solve?                                                                             
             We  can imagine  a  wide  variety of  goals  or                                                                    
          metrics the  Legislature may  have in  designing a                                                                    
          fiscal  plan.  Making   those  explicit  may  make                                                                    
          evaluating fiscal plans easier.                                                                                       
            For example,  is the goal to  balance the budget                                                                    
          at current prices, or are  current oil prices high                                                                    
          enough  that  we  should  be  trying  to  generate                                                                    
          surpluses  to   rebuild  the   CBR?  Is   it  more                                                                    
          important    to   avoid    taxes   or    to   have                                                                    
          distributional   equity?   Is  it   important   to                                                                    
          maintain  downward pressure  on spending,  or have                                                                    
          we cut too far already?                                                                                               
                                                                                                                                
Mr. Painter  elaborated on slide  11. He spoke to  the first                                                                    
bullet  point and  noted there  were many  ways to  approach                                                                    
designing  a fiscal  plan. He  added that  the success  of a                                                                    
plan  would depend  on  the goals  that  needed solving.  He                                                                    
stated  that depending  on whether  the legislature  thought                                                                    
current  oil prices  were  a  target, it  would  make a  big                                                                    
difference for  the spending  reductions and  revenue needed                                                                    
to make  a plan  work. He continued  to review  questions in                                                                    
the last  bullet on slide  11. A discussion  the legislature                                                                    
and public  had heard  frequently was about  whether certain                                                                    
options  were regressive  or progressive.  The governor  had                                                                    
stated the  goal was to avoid  broad-based taxes; therefore,                                                                    
he  speculated the  governor's $300  million in  new revenue                                                                    
would not include additional taxes.  He remarked that others                                                                    
would  say a  broad-based  tax was  acceptable. He  believed                                                                    
resolving  the conflict  would be  important  to creating  a                                                                    
plan that had majority support.                                                                                                 
                                                                                                                                
Mr. Painter addressed the final  question on slide 11. There                                                                    
had  been discussion  in the  other body  about the  various                                                                    
spending  needs of  the state  such as  deferred maintenance                                                                    
and other.  There could be  debate over  whether maintaining                                                                    
the downward  spending pressure was important  or whether it                                                                    
was no  longer really  possible. The differences  would make                                                                    
it difficult to say whether a  fiscal plan worked or did not                                                                    
work from  a policy standpoint  because the answer  would be                                                                    
different to different people.                                                                                                  
                                                                                                                                
3:38:36 PM                                                                                                                    
                                                                                                                                
Mr.  Painter  provided a  list  of  rhetorical questions  on                                                                    
slide  12  titled   "Analysis  of  Governor's  Comprehensive                                                                    
Fiscal Plan (cont.)":                                                                                                           
                                                                                                                                
     Some questions to consider:                                                                                                
     ? Which  elements of a  plan should  be constitutional,                                                                    
     and which should be statutory?                                                                                             
     ?  If   the  Legislature   does  not  agree   with  the                                                                    
     Governor's   spending   reduction  plan,   should   the                                                                    
     difference be made  up with more revenue  or with lower                                                                    
     PFDs?                                                                                                                      
            This question could be flipped around in any                                                                        
          direction.                                                                                                            
     ? If (when?) oil  revenue declines substantially in the                                                                    
     future, will this system still be sustainable?                                                                             
     ?  Would voters  approve this  constitutional amendment                                                                    
     (HJR  7, Permanent  Fund)? What  about HJR  6 (spending                                                                    
     limit) and  HJR 8  (voter approval  of taxes)?  Are all                                                                    
     necessary for the Governor's plan to work?                                                                                 
                                                                                                                                
Mr. Painter  elaborated on the  first question. He  asked if                                                                    
it  was  important   to  set  a  new  PFD   formula  in  the                                                                    
constitution versus in statute.  He asked whether PCE should                                                                    
be  in the  constitution or  statutory.  He asked  if a  new                                                                    
constitutional  spending  limit  was  needed  or  whether  a                                                                    
statutory limit was sufficient.  There were many differences                                                                    
of opinion  on what should  be included in  the constitution                                                                    
versus statute.  He noted that  the bill number in  the last                                                                    
bullet point  could be replaced  with SJR 6 rather  than HJR
7.                                                                                                                              
                                                                                                                                
SJR  6  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Bishop  provided  concluding  remarks.  There  was                                                                    
currently no future meeting scheduled.                                                                                          
                                                                                                                                
ADJOURNMENT                                                                                                                   
3:41:17 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:41 p.m.                                                                                          

Document Name Date/Time Subjects
SJR 6 OMB and LFD Fiscal Model Assumption Comparison 6.11.2021.pdf SFIN 6/11/2021 1:30:00 PM
SJR 6
SJR 6 Sectional Analysis ver. W 05.20.2021.pdf SFIN 6/11/2021 1:30:00 PM
SJR 6
SJR 6 DOR Presentation 06.11.2021.pdf SFIN 6/11/2021 1:30:00 PM
SJR 6
SJR 6 LFD Analysis of Gov Fiscal Plan Presenation 06.11.2021.pdf SFIN 6/11/2021 1:30:00 PM
SJR 6
SJR 6 Public Testimony Boutin.pdf SFIN 6/11/2021 1:30:00 PM
SJR 6