Legislature(2021 - 2022)SENATE FINANCE 532
05/07/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Legislative Finance Division - Alaska's Cash Position and Era Scenarios | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 69 | TELECONFERENCED | |
| += | HB 71 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
May 7, 2021
9:03 a.m.
9:03:00 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:03 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof (via teleconference)
Senator David Wilson
MEMBERS ABSENT
Senator Bill Wielechowski
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division.
SUMMARY
CSHB 69(FIN)am
APPROP: OPERATING BUDGET/LOANS/FUNDS
CSHB 69(FIN)was SCHEDULED but not HEARD.
CSHB 71(FIN)
APPROP: MENTAL HEALTH BUDGET
CSHB 71(FIN) was SCHEDULED but not HEARD.
^LEGISLATIVE FINANCE DIVISION - ALASKA'S CASH POSITION and
ERA SCENARIOS
9:06:06 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed, "Responses to Questions Posed in May 5th
Hearing" (copy on file). He looked at slide 2, "Permanent
Fund Performance in FY21":
? Callan median forecast for FY21 was for 6.48 percent
total return ($4,010 million) and 5.45 percent
realized return ($3,328 million)
? Actual total income through March 31 was $13,903
million and statutory net income was $5,272 million
? Even assuming no total income from April 1-June 30,
APFC would likely realize at least an additional $350
million due to interest and rental income
? LFD will compare three scenarios: the Callan median
forecast, actual returns through 3/31, and actual
returns plus the $350 million baseline for the
remainder of the year
9:09:55 AM
Mr. Painter pointed to slide 3, "Realized ERA Balance by
FY21 Return Assumption ($millions)." He stressed that the
gains must be "realized in order to be spendable."
Co-Chair Stedman surmised that that the $2 billion
inflation proofing referenced was about the $2 billion
appropriation bill the day prior for the operating budget.
Mr. Painter agreed.
Co-Chair Stedman remarked that the issue was brought
forward in order for the committee members to discuss the
additive to the corpus. He felt that it might not be
considered "inflation proofing", but rather simply an
addition to the Permanent Fund. He requested a history of
inflation proofing to the fund.
Mr. Painter replied that there was not a slide related to
inflation proofing, but there was a slide on additional
appropriations beyond inflation proofing.
Senator Wilson wondered whether the assumptions on slide 3
included the capital budget.
Mr. Painter replied that the slide assumed that the only
draw out of the fund was for the percent of market value
(POMV) draw. He stated that additional draws to pay for
other costs would reduce the numbers.
Senator Wilson surmised that the assumptions did not
include the permanent fund dividend (PFD).
Mr. Painter replied that is assumed that the PFD would be
paid for through a source other than an additional draw
from the Earnings Reserve Account (ERA).
Co-Chair Stedman stated that the assumption would be
considered an "ad hoc draw."
9:14:21 AM
Senator Hoffman remarked that the dividend was often
"blamed for the ad hoc draw", because it was usually the
last to receive appropriation.
Co-Chair Stedman remarked that, because of the comingling
of the draw, it could not be isolated.
Senator von Imhof stressed that a $1600 PFD check across
the state would total approximately $1 billion.
Co-Chair Stedman queried the market value date.
Senator von Imhof replied that it was as of March 31.
Co-Chair Stedman queried the difference between the slide
and the Permanent Fund website.
Mr. Painter explained that the difference was the
unrealized gains.
Senator von Imhof replied that the issue was similar to
real estate.
9:20:09 AM
Senator Wilson noted that the website had an asterisk that
addressed some of the unencumbered dedicated funds, and
wondered whether that was related to some of the POMV
discussion.
Mr. Painter agreed. He stated that the Permanent Fund
statement showed the amount of POMV, which had been
transferred to the general fund to date. He furthered that
the entirety was appropriated, as a result the entirety
would be considered "gone."
9:21:24 AM
Mr. Painter looked at slide 4, "Statutory PFD Calculation
by FY21 Return Assumption." He noted that the number used
when the governor's budget was prepared was a transfer of
just over $2 billion. He estimated that it would pay a PFD
of approximately $3100 per person. That number was based
on the same number of recipients of the PFD as received the
previous summer. He stated that the Permanent Fund Dividend
Division had received a similar number of applicants.
Co-Chair Stedman surmised that the targeted rate per
individual was $3400 to $3500, if there was an
appropriation of the statutory PFD.
Mr. Painter agreed.
9:25:58 AM
Senator Hoffman queried a thumbnail sketch of a fifty-fifty
dividend.
Mr. Painter replied that a PFD based on 50 percent of the
POMV draw would be approximately $1.5 billion, which would
pay a PFD of approximately $2400 per person. He stated that
a $1000 PFD would cost just under $680 million. He
explained that the year prior had appropriated $680
million, which was only slightly insufficient for $1000. He
felt that, based on the changes in the PFD calculation, a
$680 million would now be sufficient.
Senator von Imhof wondered whether there was a current
model of the different changes.
Co-Chair Stedman stated that LFD would provide a
sensitivity chart addressing the different amounts.
Senator von Imhof requested a sensitivity analysis of the
consequences of each PFD draw amount.
9:30:09 AM
Senator Hoffman felt that there could be an analysis and
discussion around the potential savings in other areas of
the state by reducing the statutory PFD amount.
Co-Chair Bishop stressed that the more money taken from the
Permanent Fund requires raising revenue in other areas of
the state.
Co-Chair Stedman recalled that several years prior, the
committee sent a proposal at a 26 percent PFD.
9:35:00 AM
Mr. Painter highlighted slide 5, "Special Appropriations to
Permanent Fund Beyond Statutory Inflation Proofing
($millions)." He noted the number the legislature had
inflation proofed beyond the statutory amount.
Co-Chair Stedman reflected in past appropriations, and felt
that the committee should consider the $2 billion, and
whether that was a comfortable number.
Senator von Imhof wanted to discuss inflation and the price
of consumer products. She asserted that inflation was real
and believed that the committee should keep it at the
forefront.
Senator Olson requested confirmation that transfers from
the ERA did not affect individual PFDs.
Co-Chair Stedman replied in the affirmative.
9:40:34 AM
Senator Hoffman remarked that the legislature had supported
that appropriation, and stressed that there should be a
consideration of a long-term solution to avoid the
conversation with "greedy legislators."
Co-Chair Stedman agreed.
Mr. Painter discussed slide 6, "Permanent Fund Balance by
Source as of 6/30/20." He stated that there was sometimes
confusion around the source of money. He explained each
source in the fund.
9:45:04 AM
Co-Chair Stedman wondered whether appropriation from the
general fund was 43 percent of the POMV.
Mr. Painter replied in the affirmative.
Co-Chair Bishop felt that lawmakers had recently used
fiduciary ethic in protecting the fund.
Co-Chair Stedman acknowledged the previous members of the
legislature in supporting 43 percent of POMV.
Mr. Painter discussed slide 7, "Fiscal Summary Assuming $70
per Barrel ANS Price." He stated that the Department of
Revenue (DOR) Spring Forecast was based on a $61 per barrel
price, which left a roughly balanced budget without a PFD.
Co-Chair Stedman stressed that starting in July there could
be an increase to the treasury with a $70 per barrel
assumption.
Senator Hoffman queried the vehicle of the payment of the
PFD.
Co-Chair Stedman stated that those discussions would take
place in caucus meetings. He stated that he would like to
see it in the operating budget bill.
CSHB 69(FIN) AM
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making capital appropriations,
supplemental appropriations, and reappropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
CS FOR HOUSE BILL NO. 71(FIN)
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making
supplemental appropriations; and providing for an
effective date."
CSHB 69 (FIN)was SCHEDULED but not HEARD.
CSHB 71 (FIN) was SCHEDULED but not HEARD.
ADJOURNMENT
9:52:39 AM
The meeting was adjourned at 9:52 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 49 SFIN Fiscal Position Responses 5-7-21.pdf |
SFIN 5/7/2021 9:00:00 AM |
SB 49 |