04/01/2019 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SJR6 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 35 | TELECONFERENCED | |
| + | SJR 4 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SJR 6 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
April 1, 2019
1:30 p.m.
MEMBERS PRESENT
Senator Shelley Hughes, Chair
Senator Lora Reinbold, Vice Chair
Senator Mike Shower
Senator Peter Micciche
Senator Jesse Kiehl
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 6
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit; relating to the budget
reserve fund and establishing the savings reserve fund; and
relating to the permanent fund.
- MOVED CSSJR 6(JUD) OUT OF COMMITTEE
SENATE JOINT RESOLUTION NO. 4
Proposing amendments to the Constitution of the State of Alaska
prohibiting the establishment of, or increase to, a state tax
without the approval of the voters of the state; and relating to
the initiative process.
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 35
"An Act eliminating marriage as a defense to certain crimes of
sexual assault; relating to enticement of a minor; relating to
harassment in the first degree; relating to harassment in the
second degree; relating to indecent viewing or production of a
picture; relating to the definition of 'sexual contact';
relating to assault in the second degree; relating to
sentencing; relating to prior convictions; relating to the
definition of 'most serious felony'; relating to the definition
of 'sexual felony'; relating to the duty of a sex offender or
child kidnapper to register; relating to eligibility for
discretionary parole; and providing for an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: SJR 6
SHORT TITLE: CONST AM:APPROP. LIMIT; RESERVE FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/30/19 (S) READ THE FIRST TIME - REFERRALS
01/30/19 (S) STA, JUD, FIN
03/21/19 (S) STA AT 1:30 PM BUTROVICH 205
03/21/19 (S) Heard & Held
03/21/19 (S) MINUTE(STA)
03/25/19 (S) STA AT 5:00 PM BUTROVICH 205
03/25/19 (S) Heard & Held
03/25/19 (S) MINUTE(STA)
03/26/19 (S) STA AT 1:30 PM BUTROVICH 205
03/26/19 (S) Moved SJR 6 Out of Committee
03/26/19 (S) MINUTE(STA)
03/27/19 (S) STA RPT 2DP 1NR 2AM
03/27/19 (S) DP: SHOWER, REINBOLD
03/27/19 (S) NR: MICCICHE
03/27/19 (S) AM: COGHILL, KAWASAKI
03/27/19 (S) JUD AT 1:30 PM BELTZ 105 (TSBldg)
03/27/19 (S) Heard & Held
03/27/19 (S) MINUTE(JUD)
03/29/19 (S) JUD AT 1:30 PM BELTZ 105 (TSBldg)
03/29/19 (S) Scheduled but Not Heard
04/01/19 (S) JUD AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
MEGAN WALLACE, Director
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
SJR 6.
CORI MILLS, Senior Assistant Attorney General
Civil Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
SJR 6.
BRUCE TANGEMAN, Commissioner Designee
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions on behalf of the
administration during the discussion of SJR 6.
ED KING, Chief Economist
Office of Management and Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
SJR 6.
DEBORAH HOLLAND, representing herself
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SJR 6 for a
sustainable budget and to cut the budget.
ALLEN HIPPLER, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to balance
spending, revenues, and expenditures and still retain the
permanent fund.
TIM ROBINSON, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 because the
governor's budget is short sighted, ill advised, and sure to
wreak havoc on Alaska.
LESLIE HVAMASHAD, representing herself
Houston, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
JOHN MORIN, representing himself
Soldotna, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
SAM ALBANESE, representing himself
Eagle River, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because the
state needs a cap to curb its spending.
CHARLES SIMON, representing himself
Hooper Bay, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
BARBARA HANAY, representing herself
North Pole, Alaska
POSITION STATEMENT: Testified in support of SJR 6 and the
governor's package.
LYNN LOWRY, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in favor of the PFD but not for a
cap.
BRIDGET SMITH, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 because
Alaska has one of the best constitutions in the U.S. and she has
concerns with Section 16.
KEN FREDERICO, representing herself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because the
state needs to rein in spending.
OLIVIA FELLERS, representing herself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to rein in
legislators, implement efficiencies, and to leave the PFD alone.
EDWARD MORAN, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 and the
governor's budget.
KEN BROWN, representing himself
Soldotna, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
CAROLYN PORTER, representing herself
Palmer, Alaska
POSITION STATEMENT: Urged members not to cut dividends or
implement taxes, and to reduce spending.
FRANK GOLDTHWAITE, representing himself
Sterling, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
MARILYN MENISHNUCHE, representing herself
Petersburg, Alaska
POSITION STATEMENT: Strongly opposed SJR 6 because she does not
support amendments to the constitution.
DARREN FIDLER, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
MARIETTA DAVIS, representing herself
Petersburg, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
NORMAN CLARK, representing himself
Kotzebue, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 to oppose
reductions to the permanent fund dividend.
JOAN TRUITT, representing herself
Big Lake, Alaska
POSITION STATEMENT: Testified in support of SRJ 6 to reduce
spending.
GREGORY WHITE, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to have a
spending limit and prevent legislators from overspending.
JACK JOHNSON, representing himself
North Pole, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to reduce
spending.
EMILY MESCH, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 because it
would limit the legislature's ability to deal with unforeseeable
problems.
LYNDA MYERS, representing herself
Anchorage, Alaska
POSITION STATEMENT: Supported SJR 6 due to her concern that the
legislature has overspent.
DAVE DANEZINE, representing himself
Kasilof, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
SHOSHANA KUEN, representing herself
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 since it
would be difficult to change or remove the cap.
GREG GARRIS, representing himself
Talkeetna, Alaska
POSITION STATEMENT: Testified in favor of SJR 6.
BRIDGETTE VAUGHN, representing herself
North Pole, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to cap
government spending.
TANYA LANGE, representing herself
Kenai, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because the
state needs to cut spending and should not take the PFD.
ARTIS SELLIERE, representing himself
Big Lake, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
GUY WHITNEY, representing himself
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SJR 6 and echoed the
previous testifier.
TIM STATON, representing himself
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because a
spending cap is long overdue.
COLLEEN BAGOT, representing herself
Palmer, Alaska
POSITION STATEMENT: Testified in support of SJR 6 in order to
limit government spending and prevent government from taking
money from Alaskans.
LINN MCCABE, representing herself
Big Lake, Alaska
POSITION STATEMENT: Testified in support of the constitutional
spending cap in SJR 6.
LARRY BEACH, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 and cautioned
legislators to follow the will of the people.
JERRY BAGNESCHI, representing himself
Wasilla Alaska
POSITION STATEMENT: Testified in support of SJR 6 and expressed
concern that the legislature spent its reserves and now wants to
take the people's money.
ROSEMARY LEBOWITZ, representing herself
Hoonah, Alaska
POSITION STATEMENT: Testified in strong support of SJR 6 to
avoid taxes and conserve state spending.
MICHAEL GERENDAY, representing himself
Wasilla Alaska
POSITION STATEMENT: Testified in support of SJR 6 to create a
spending cap and protect the permanent fund.
JARED JORGENSEN, representing himself
Soldotna, Alaska
POSITION STATEMENT: Testified in full support of SJR 6.
KATIE BOTZ, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 because the
state needs to budget wisely, reduce the PFD, and institute an
income tax.
ELIZABETH SWEET, representing herself
North Pole, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to reduce
spending.
JOHN MILLER, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because he
supports the governor's financial plan.
STACEY SEEGERS, representing herself
Eagle River, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
JAMES SQUYERS, representing himself
Rural Deltana, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
PAMELA GOODE, representing herself
Rural Deltana, Alaska
POSITION STATEMENT: Testified in support of SJR 6 to limit state
spending.
FRANK WHITESIDES, representing himself
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
DAVID AUSTIN, representing himself
Hoonah, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
RONALD HOWARD, representing himself
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
KIRSA HUGHES-SKANDIS, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6.
GAIL LIMBAUGH-MOORE, representing herself
Soldotna, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
KAREN PERRY, representing herself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
JUDITH CLARK, representing herself
Hoonah, Alaska
POSITION STATEMENT: Offered conditional support of SJR 6.
JASON DUNN, representing himself
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SJR 6 because people
rely on the PFD.
RALPH VERNACHIO, representing himself
Chugiak, Alaska
POSITION STATEMENT: Testified in full support of SJR 6.
RON GILLHAM, representing himself
Soldotna, Alaska
POSITION STATEMENT: Testified in support of SJR 6 since the
spending cap will keep the government in check.
DONNA AUSTIN, representing herself
Hoonah, Alaska
POSITION STATEMENT: Testified in support of SJR 6.
DOUGLAS LOWRY, representing himself
Fairbank, Alaska
POSITION STATEMENT: Testified in support of the spending cap in
SJR 6 and to retain the PFD.
CAROLINE MALSEED, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SJR 6 to allow
elected officials to make short-term fiscal decisions and not
imbed appropriations in the constitution.
ACTION NARRATIVE
1:30:40 PM
CHAIR SHELLEY HUGHES called the Senate Judiciary Standing
Committee meeting to order at 1:30 p.m. Present at the call to
order were Senators Shower, Reinbold, Kiehl, Micciche and Chair
Hughes.
SJR 6-CONST AM:APPROP. LIMIT; RESERVE FUND
1:30:59 PM
CHAIR HUGHES announced that the first order of business would be
SENATE JOINT RESOLUTION NO. 6, Proposing amendments to the
Constitution of the State of Alaska relating to an appropriation
limit; relating to the budget reserve fund and establishing the
savings reserve fund; and relating to the permanent fund.
CHAIR HUGHES reviewed the calendar items and action on SJR 6 to
date.
1:32:19 PM
SENATOR KIEHL said he read the legal memo [from Megan A.
Wallace, Director, Legal Services, Division of Legal and
Research Services, Legislative Affairs Agency dated March 29,
2019]. He said he was satisfied with the memo. He wondered if
the committee would hear from Ms. Wallace and the Department of
Law on the legal issues.
CHAIR HUGHES remarked that the Senate Judiciary Standing
Committee has responsibility for the constitutionality of
matters that come before it. She indicated that the Department
of Law indicated it felt confident that it could defend the
constitutionality of the constitutional amendment in SJR 6. She
directed attention to Ms. Wallace's memo of March 29, 2019, and
to page 2. She said that Ms. Wallace brought up the preliminary
opinion, which does give some insight. However, what matters is
the final decision since the final opinion sets precedent.
Although the preliminary opinion mentioned the Florida factors,
the final decision did not use them, she said. She asked for
further clarification on whether the preliminary opinion would
set precedent.
1:34:22 PM
MEGAN WALLACE, Director, Legislative Legal Services, Legislative
Affairs Agency, Juneau, stated that the preliminary opinion
gives the parties insight in terms of the court ruling and the
grounds it is using for that ruling. In Bess v. Ulmer, the
[Alaska Supreme Court] issued a preliminary opinion. The final
opinion issued by the court reaffirms that prior opinion. Thus,
the preliminary opinion is included in totality along with the
final opinion that was rendered by the court, she said. As she
articulated in the follow-up memo on members' desks, her office
has historically included the Florida analysis as part of the
quantitative analysis as to whether a constitutional amendment
before the legislature amounts to a revision or an amendment.
Those factors are part of the balance between the quantitative
and qualitative analysis. That is the reason her agency has
continued to look to that case and the factors used in Bess v.
Ulmer to determine the quantitative part of the court's hybrid
analysis.
1:36:05 PM
CHAIR HUGHES said that she appreciated that Ms. Wallace's job is
to bring these things to light. She reminded members that "we
were read from that final opinion that they did not use the
factors, that they referred to California's way of doing it in
that final opinion."
She directed members' attention to page 3 of the memo from Ms.
Wallace dated March 29, 2019. She explained that she reviewed
each item separately to be certain that SJR 6 would pass
constitutional muster. She shared her response to each of the
five items listed in paragraph two of the memo. She referred to
item (1), which read, "renaming it" and responded that is a
minor change. She turned to item (2), which read, "changing the
requirements for deposits of the settlement proceeds;" and said
that she looked at the [resolution] and it added "directly" as
an adjective, which seemed pretty minor.
CHAIR HUGHES turned to item (3), which read, "changing the
withdrawal requirements;" and responded that the current
Constitution [of the State of Alaska] has withdrawal
requirements. She paraphrased [Section 3 of SJR 4], " ? cannot
exceed the amount of the previous year's appropriations." She
said [SJR 6] would change this language to "cannot exceed the
gap up to the spending limit." That did not seem extremely
significant to her, although she agreed someone might argue
otherwise, she said.
She turned to item (4), which read, "repealing and eliminating
the provision authorizing withdrawals for any public purpose
with a three-fourths vote of each house of the legislature;"
which is changed to a simple majority [in SJR 6]. She
acknowledged that this change has some significance. However,
the reality is that in the Senate it would be the difference of
four votes and in the House, it would be a difference of nine
votes. She said she thought of this in the context of the
reapportionment case, in which some of the executive branch's
power was assigned to the legislative branch through the
appointment of the reapportionment board members. She said she
concluded that was much more significant than changing the
number of votes. Yet, the reapportionment case was found to be
an amendment rather than a revision [to the Constitution of the
State of Alaska], she said. She said that she considered the
totality of the changes in SJR 6, as listed in the memo, which
initially seemed like a lot. However, when she considered each
change separately, the changes did not seem to rise to the level
of major changes.
1:39:09 PM
CHAIR HUGHES said the memo went on to say, "This mandatory
deposit is especially restrictive of the legislature's
appropriation power since the legislature may not appropriate
from the principal of the Alaska permanent fund and SJR 6
provides limited access to the savings reserve fund." She said
that Ms. Wallace pointed out that SJR 6 is restricting the
legislative power of appropriation. However, she said she
realized that is what a spending cap or an appropriation limit
does. It does restrict the appropriation ability to some extent.
This is already in the [Constitution of the State of Alaska],
she said. The restriction of the legislative power of
appropriation occurred when the language was added in 1982. Now
the legislature is making some adjustments, she said. She
offered her belief that the legislature is not "all of sudden"
changing that restriction. Instead, the legislature is making
some adjustments and "moving some levers."
CHAIR HUGHES said she tried to read Ms. Wallace's memo with an
open mind. If [SJR 6] were to be challenged, she wanted to
ensure that the committee had reviewed everything. She
reiterated that on the surface, someone might think a lot of
changes were being made, but when the language is parsed, and in
her review of the original amendment [to the Constitution of the
State of Alaska] adopted in 1982, she felt quite comfortable. In
addition, the Department of Law has remained confident that [SJR
6] would be upheld in court. This has given her a level of
confidence, she said.
1:40:55 PM
CHAIR HUGHES acknowledged that some adjustments would be made to
SJR 6. She said she has some concerns that if the growth is too
flat, the state might have trouble meeting some of its
constitutional obligations. However, she reviewed the analysis
in the memo and SJR 6, in terms of the overall structure and the
parts, and in her view the changes in SJR 6 "would be
constitutional." She wanted the record to reflect her reasoning
and process. She acknowledged that someone else may have a
different opinion than hers.
1:41:48 PM
SENATOR KIEHL said that to inform his opinion, he has a few
questions. He noted that the Alaska Supreme Court's decision
referenced a hybrid test. He said that the California [Supreme
Court] looked at the qualitative and quantitative change and the
Alaska Supreme Court mentioned a hybrid. He asked for further
clarification on whether this was a hybrid of California on
quantity and Florida on quality, or what else is hybridized.
MS. WALLACE interpreted the test to mean the Alaska Supreme
Court (ASC) took a hybrid approach. The ASC considered the court
cases from Florida and the series of cases that the California
Supreme Court has used to analyze constitutional amendments and
took a hybrid approach. She offered her belief that the ASC took
these factors and reviewed the Florida analysis specifically
with respect to the quantitative analysis. The ASC also
specifically looked at the California holdings and cited a few
of the California cases and went through the process of
analyzing each of the three constitutional amendments that came
before the court and used a hybrid approach. She characterized
it as a hybrid of this quantitative and qualitative analysis
from both the Florida and California cases.
1:43:26 PM
SENATOR KIEHL said it was useful to see how Florida was
incorporated into the final decision since he did not understand
what was being hybridized just using the California approach. In
considering whether this is an amendment or a revision [to the
Constitution of the State of Alaska], he related that the 1982
appropriation limit was an amendment. He asked whether it is
relevant that the constitutional budget reserve (CBR) did not
exist at the time.
MS. WALLACE answered that this is certainly one of several
components that a court would look at when determining whether
the proposal the governor submitted, [SJR 6], is a revision or
an amendment. She said that in her opinion it is difficult to
only use the argument that the appropriation limit is already in
the constitution. She said she was not aware that the Alaska
Supreme Court (ASC) has ever rendered an opinion on the
appropriation limit as introduced as an amendment in the
constitution.
1:44:42 PM
MS. WALLACE said:
So not only do we only have one supreme court ruling,
the Bess ruling, to give us this guidance, but we kind
of have to pull what we can from Bess to give you the
analysis of what we think a court might do the next
time that it has to decide whether a proposal is an
amendment or a revision. But the court hasn't ever
looked at the appropriation limit itself and made a
determination whether that limit as it went into the
constitution had an effect on the legislature's power
over appropriation or whether it was so restrictive.
Now, with that, it's obvious, and the reason the
appropriation limit itself is before you is that
regardless of whatever intent went into the
appropriation limit, there is no dispute that the
constitutional appropriation limit is not very
restrictive on the legislature right now, or not
restrictive at all in terms of the way that
inflation's been calculated and their starting number.
But what is left to be decided is that any
appropriation limit, no matter how flexible or how
restrictive, whether or not a court would say that
you're impinging too far on that foundational inherent
power of the legislature. And in my opinion, my
concern is not pointed just at the appropriation
limit.
1:46:16 PM
As I note in a footnote in my memo, the real concern
in the proposal in SJR 6, at least why I caution a
conservative review, is that it has a very significant
change in the flow of revenue and what is in the
general fund. And the changes that are proposed not
only affect the cap of what the legislature may
appropriate each year, but it also restricts the
leftover funds that are available to the legislature
and to the next legislature to appropriate. And the
provision itself requires that any revenue left over
in the general fund at the end of the fiscal year,
part of it goes to the permanent fund, which the
legislature cannot appropriate from at all. And any
leftover funds, part of that may go into the budget
reserve fund or what has been renamed as the savings
reserve fund.
And the amendment goes on to then change the
legislature's ability to appropriate from that savings
account. So right now, the legislature can appropriate
from the CBR for any public purpose, regardless of
what appropriation limit exists in the constitution
today. And by removing that public purpose, or
repealing the public purpose - the appropriation
option, you are significantly constraining the
appropriation power as it currently exists today in
our state constitution. And the more restriction that
you place on a legislature, and particularly a future
legislature's power to appropriate funds will require
that you'd have that more, broad look at the
constitution and look at how many of the provisions
that an amendment like this may touch on, because it's
not only the appropriation limit and the CBR. It's
also the dedicated fund provision, which there's an
exception to that within the contents of this. And
when we adopted the permanent fund amendment there was
a change to Article IX, Sec. 7 to specifically exempt
the permanent fund from the dedicated fund provision.
And this amendment takes a little bit different of a
drafting choice and the exemption to Article IX, Sec.
7 is within the subsection itself. And so, if we were
to go back and amend the dedicated fund provision,
we're adding one more section to the constitution that
we're amending to accomplish this.
1:49:05 PM
SENATOR KIEHL said her memo mentions a phrase "foundational
power." He said significant conversation has occurred with the
reapportionment or redistricting amendment. It seemed that she
had suggested that the analysis is about what "foundational
power" is and he asked how to analyze what is foundational.
MS. WALLACE recognized that other people might have different
opinions. She clarified that other opinions are not wrong
opinions, but her job is to make certain that the legislature
has both perspectives of the analysis. She said that
reapportionment or redistricting is handled by each state
differently. It is not an inherent power of the executive
branch, in terms of the inherent or foundational powers of the
legislature. She said that is the lawmaking power, which is the
power of appropriation. This affects the cornerstone
foundational power of the legislature. However, not all
constitutional amendments necessarily require such strict
scrutiny or caution from the legislature. She said that as legal
counsel for the legislature, she wants to make sure that
legislators understand that when a piece of legislation
restricts the legislature's inherent or foundational power to an
extent that does not exist today, legislators at least
understand it before moving forward. Ultimately, it is a policy
choice. If the legislature is comfortable with that restriction
in power, it is a policy decision that the legislature will make
going forward. She summarized that redistricting and
reapportionment is not a foundational power of an executive
branch, but to the contrary, appropriation and lawmaking is a
foundational power of the legislative branch of government.
1:51:54 PM
SENATOR REINBOLD said she thinks the intent is to cap spending.
She offered her belief that for at least a decade, the
legislatures have not been spending responsibly. She said that
cleaning out the CBR, the statutory budget reserve, and about $3
billion of the earnings reserve account would tie the hands of
future legislatures because the money is gone. She said that
will impact future generations. She expressed concern that it
already violates the constitution when the legislature does not
handle things appropriately. She said she thinks that this
constitutional amendment is very important. She mentioned
several funding programs that impact the legislature, including
education, health care, public employee, and teachers'
retirement. She asked whether all of these things restrict the
legislature's appropriation ability.
MS. WALLACE answered that the legislature does have some options
in terms of changing the statutory calculations for the base
student allocation and statutory formulas. She agreed the
legislature has a constitutional obligation to adequately
provide for education.
SENATOR REINBOLD remarked that the Constitution of the State of
Alaska only states that the legislature has to keep a system of
education open to all children and not that the legislature has
to do the BSA.
1:54:42 PM
SENATOR SHOWER appreciated the points that Chair Hughes brought
up. He appreciated hearing the attorneys' arguments, too. He
asked to read a portion of Constitution of the State of Alaska.
He read:
Section 2. Source of Government
All political power is inherent in the people. All
government originates with the people, is founded upon
their will only, and is instituted solely for the good
of the people as a whole.
He said that although legislators are representatives of the
people, part of the process involves the public, including the
ability to put initiatives before the people for a vote. The
people have voted on this issue twice and the will of the people
is for the state to have a spending limit. He argued that the
will of the legislature was executed because they passed the
resolutions. He said he has often heard, "If it ain't broke,
don't fix it." He offered his belief that the will of the
people, as per testimony he has heard, is that the legislature
needs to have its hands tied. He said he refers to the actual
language in the Constitution of the State of Alaska to remind
members that the government is founded upon the will of the
people and not by the legislature or the governor. Collectively,
the citizens want a spending limit and currently want one that
is relevant. He offered his belief that the committee will
address some of the concerns that people have expressed about
spending limits, caps, and growth to ensure that the
constitutional limit is more relevant. He agreed that it is an
important goal, yet it is important not to tie the legislature's
hands. He remarked that three members have seen SJR in a
previous committee, the Senate State Affairs Standing Committee.
He offered his belief that this document, [the Constitution of
the State of Alaska], is critical. He thinks that the people
have already spoken, and the court has not spoken since it was
not necessary.
1:57:20 PM
CHAIR HUGHES said that if the power is derived from the people
and they vote for the amendment to restrict the legislature's
power, they have the right to make that choice.
1:58:16 PM
CORI MILLS, Senior Assistant Attorney General, Civil Division,
Department of Law, Juneau, stated she does not have much to add,
but as Ms. Wallace pointed out differing legal opinions on legal
tests occur. In this instance, only one case from the Alaska
Supreme Court provides guidance. She said that in the DOL's
review of Bess v. Ulmer, it feels very comfortable defending
[SJR 6] if it is challenged and it is the department's view that
the court is likely to uphold it as an amendment.
She said that Bess v. Ulmer looked at three different proposals
and only found one to be a revision. The ASC upheld two out of
the three. She acknowledged that comparisons can be made, but
ultimately the department believes that the court will look at
the Constitution [of the State of Alaska] as it stands today.
The constitution contains an appropriation limit and it has the
constitutional budget reserve (CBR), she said. Both of these are
meant to address spending by the legislature and the governor
and to try to provide some type of mechanism to make sure that
the state has savings in the future.
1:59:35 PM
MS. MILLS said that using a high-level analysis of Bess v.
Ulmer, the department believes that considering that framework,
which is already in the [Constitution of the State of Alaska],
these amendments or changes do not go so far as to be a
foundational, fundamental change to the constitution and
therefore would be viewed as an amendment instead of a revision.
2:00:00 PM
SENATOR KIEHL asked the record to reflect that Bess v. Ulmer did
not leave two constitutional amendments untouched. He said,
"It's simply not factual." He gave his high-level analysis of
Bess v. Ulmer. In fact, the court cut one of the proposed
constitutional amendments in half because the second proposed
sentence was so radical and so far-reaching that it would have
had consequences that rippled throughout the constitution. The
court struck it.
He said he did not find it quite useful in the analysis of the
three proposed constitutional amendments the court had in front
of it in Bess v. Ulmer to say the court said, "Oh, these two are
great, no worries, we're only worried about the one."
2:01:10 PM
MS. MILLS said the Department of Law stands by its original
analysis. She said that in reviewing the marriage amendment,
which is what Senator Kiehl is referring to, the Alaska Supreme
Court did strike the last sentence. She said that all the
parties agreed that it was superfluous. She said that is
actually in the discussion in the preliminary order. She said
that is the reason the department did not focus a lot on it, but
rather focused on what was the foundational change those
amendments were trying to make. In that case, it was to define a
marriage between a man and a woman. The court let that go to the
ballot, she said.
2:02:07 PM
SENATOR SHOWER moved to adopt Amendment 1, work order 31-
GS1068\A.4, Wallace, 3/30/19.
31-GS1068\A.4
Wallace
3/30/19
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR SHOWER
TO: SJR 6
Page 1, lines 2 - 3:
Delete "and establishing the savings reserve
fund"
Page 2, line 12:
Delete "and"
Page 2, line 14, following "law":
Insert "; and
(9) for capital improvements, except that
the total amount of appropriations for capital
improvements in a fiscal year shall not exceed ten
percent of the total appropriation limit for that
fiscal year"
Page 2, line 21:
Delete "savings"
Insert "budget"
Page 2, line 22:
Delete "savings"
Insert "budget"
Page 2, lines 28 - 29:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 4:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 5:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 13:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, lines 19 - 20:
Delete "new sections"
Insert "a new section"
Page 3, line 26, through page 4, line 1:
Delete all material.
CHAIR HUGHES objected.
SENATOR SHOWER related one concern that was raised in the
[Senate State Affairs Standing Committee] was whether it was
necessary to redefine the [constitutional budget reserve fund
(CBR) to the savings reserve fund (SRF). After much discussion,
it was decided that it was not necessary and adds confusion. The
first part of Amendment 1 would strike the language "savings
reserve fund" and any reference to it. The effect of this is to
retain the CBR, he said.
He said that the second part of Amendment 1 would relate to
instances in which excess funding occurs. For example, in the
event that oil prices are high, or the pipeline produces more
oil than projected, instead of spending the excess revenue, the
appropriation formula would allow a portion of the excess
revenue to be used for capital improvements for one year. This
would also mean the legislature could obtain matching federal
funds, which could be applied to some of the deferred
maintenance.
SENATOR SHOWER referred to page 1, line 9 to paragraph 9, which
read, "(9) for capital improvements, except that the total
amount of appropriations for capital improvements in a fiscal
year shall not exceed ten percent of the total appropriation
limit for that fiscal year." In essence, this means that the
legislature could appropriate up to ten percent outside the
appropriation spending limit and use that excess money for
capital improvement projects, if it chose to do so. He offered
his belief that trying to fit deferred maintenance inside the
spending limit is very difficult. He added that the PERS [Public
Employees' Retirement System] and TRS [Teachers' Retirement
System] payments "gets really tight on that growth curve" so
Amendment 1 would allow the legislature the flexibility to
provide funding without spending $3-5 billion, or drawing on the
earnings reserve account or the savings account, he said.
2:05:39 PM
CHAIR HUGHES acknowledged that she had raised the concern about
capital improvement funding at a previous meeting, so she is
supportive of this concept. She asked for further clarification
on the ten percent figure and if it was based on historical
figures.
SENATOR SHOWER said he had examined a number of percentages. He
said that ten percent seemed reasonable after reviewing the ebb
and flow over time since it would provide sufficient matching
funds. He found that by using 15-20 percent the figures grew
dramatically, which results in wild swings in spending. In
further response, he related a scenario with a total budget of
$5 billion, with $4 billion in operating funds and $1 billion
for capital improvements under the appropriations limit. He
stated that using the calculation of 10 percent of the total
appropriations limit would yield an additional $500 million that
could be spent on deferred maintenance and other big projects in
a good year.
2:08:02 PM
CHAIR HUGHES asked whether the Department of Law would address
her question, whether ten percent would be on top of any capital
spent under the limit.
MS. MILLS referred to page 1, lines 11-12, of SJR 6, and read,
"This subsection does not apply to an appropriation" and then
referred to Amendment 1, which read, in part, "(9) for capital
improvements ?." When read together it would read, "This
subsection does not apply to an appropriation for capital
improvements." That means that capital improvements would never
be included when calculating the cap. She continued by saying
that capital improvements are outside the cap but "the total
amount of appropriations for capital improvements in a fiscal
year shall not exceed ten percent of the total appropriation
limit for that fiscal year." She said the way she interprets
this is that in any given year "you're stuck with ten percent"
because it is never inside the cap.
CHAIR HUGHES asked whether that was the sponsor's intent.
SENATOR SHOWER asked Commissioner Tangeman to provide an
opinion.
2:09:47 PM
BRUCE TANGEMAN, Commissioner Designee, Department of Revenue,
Anchorage, said this is exposing the conversation the governor
would like to avoid with it being so restrictive. He said,
"We've included capital within the spending limit because as
soon as you start making exceptions, there's ways to work around
the limit." He said he certainly understands the intent of
Amendment 1 and that the legislature may wish to go in a
slightly different direction; however, Governor Dunleavy is more
inclined to keep everything under the limit to avoid situations
like this. He deferred to the Department of Law as to the
technical aspects; however, the bigger picture is that this
would change the governor's intent with respect to the spending
limit.
SENATOR SHOWER questioned whether deferred maintenance could
ever be addressed given the curve as currently presented. He
said that the reality is that the language [in SJR 6] is so
restrictive that it would not be possible to appropriate
sufficient capital improvement funding to address deferred
maintenance.
2:11:52 PM
MS. WALLACE concurred that Amendment 1 is drafted to exempt all
capital improvements from the spending cap, but then cap the
amount of appropriations at 10 percent of the total
appropriation limit. She said that if it were the will of the
committee, it is possible to amend Amendment 1 to state that
"capital improvements are exempt and that to the extent that
capital improvements go over 10 percent of the appropriation
limit, then those appropriations count towards the limit." She
acknowledged that other avenues exist to address and allow some
flexibility for the legislature if it sees the need for capital
improvements to exceed 10 percent of the total appropriation
limit. She agreed that as drafted it is restricted to a 10
percent cap for capital improvements in a single fiscal year.
CHAIR HUGHES said that it would be her preference to have some
under the cap and limit it to ten percent over the cap. She
offered her belief that this might be a little complicated to do
"on the fly." She understood Senator Shower's intent. She noted
that the legislature has realized a lack of willingness to
reduce the operating budget. Further, the capital budget has
been very lean. One of the legislature's core responsibilities
is to ensure sufficient infrastructure for economic development
in the private sector. She said this has been a concern of hers,
so she supports the concept. She wondered if the legislature
should never spend a penny more than 10 percent of the
appropriation limit on capital improvement projects if room
exists under the cap. She said that she feels comfortable
putting some of that towards capital improvements.
2:14:04 PM
At-ease.
2:19:51 PM
CHAIR HUGHES reconvened the meeting. She related her
understanding that Amendment 1 was not meeting the sponsor's
goal.
SENATOR SHOWER said the intent of Amendment 1 was to have a
spending limit that includes operating and capital improvements,
and not to exceed 10 percent over that amount. This has turned
into something slightly different. He asked for further
clarification by the legislative legal attorney on Amendment 1.
MS. WALLACE responded that Amendment 1, as currently drafted,
would exempt all capital appropriations from the appropriation
limit, but it sets a hard cap for capital appropriations in a
fiscal year, that capital appropriations may never exceed 10
percent of the total appropriation limit. During the at-ease,
the committee discussed "going back to the drawing board" to
modify that language to allow the legislature more flexibility
to make capital improvement appropriations, but still maintain
the exemption for capital appropriations from the appropriation
limit; however, if the legislature exceeds the 10 percent
appropriation limit, all additional capital appropriations in
that fiscal year will count against the appropriation limit and
would be debated alongside the other appropriations that are
indeed subject to the appropriation limit.
2:22:05 PM
SENATOR MICCICHE asked whether it would be safe to say that the
effect would be to withdraw this section.
CHAIR HUGHES explained that she wanted to highlight what is
wrong and the remedy. She said Amendment 1 consisted of two
parts, first to rename the fund, which is fine. Secondly, the
maker of Amendment 1 would offer a conceptual amendment to
remove the problematic language and submit a new amendment to
ensure that a hard cap of ten percent on the total appropriation
limit for capital improvements, but appropriations for capital
could be made if room exists under the cap. She added that above
the cap, the legislature would have a 10 percent cap.
2:23:10 PM
SENATOR SHOWER remarked that he questioned rolling both pieces
into one amendment.
SENATOR SHOWER moved to adopt a Conceptual Amendment, to
Amendment 1, referred to as A.4, to strike lines 7-11 and leave
the rest of the language in Amendment 1 intact.
There being no objection, the Conceptual Amendment to Amendment
1 was adopted.
2:23:54 PM
CHAIR HUGHES brought Amendment 1, as amended, before the
committee for further consideration.
She explained that this would rename the savings reserve fund to
the budget reserve fund as currently in the [Constitution of the
State of Alaska]. In response to Senator Micciche, she agreed
that it keeps the name as currently in the constitution.
2:24:32 PM
SENATOR REINBOLD asked whether the Department of Law was
comfortable with the change.
MS. MILLS said she did not see any legal issues with the change.
It does not destroy the rest of the intent of Amendment 1 if the
purpose is to return to calling it the budget reserve fund
instead of the savings reserve fund. In further response to
Senator Reinbold, she said that she cannot speak to policy but
from a legal standpoint reverting to the budget reserve fund is
fine.
2:25:35 PM
SENATOR REINBOLD said that she liked the idea of naming it "a
savings reserve fund" and has a problem changing it. She
expressed concern with the 10 percent [appropriation above the
cap]. She said she was here in FY 15, when there was a $3
billion capital budget. She said that every type of operating
budget supplemental [appropriation] was included in the capital
budget. She said that she fundamentally does not trust the
legislature to have fiscal restraint. She said that she cannot
support it at this time. She offered her belief that capital
projects can be done through the federal government or can be
accomplished via local government. She said that in the
Anchorage area, residents pay significant property taxes. She
said that fundamentally she did not want to see the cap
exceeded. She said that the public wants more restraint, that
the legislature spent $15 billion in the last five years.
CHAIR HUGHES stated that the current discussion is on retaining
the current name of the fund in the Constitution [of the State
of Alaska]. She acknowledged that her comments would be
appropriate when the proposed amendment is discussed.
SENATOR REINBOLD indicated she wanted the record to reflect her
remarks.
2:26:56 PM
SENATOR MICCICHE said that he is in favor of removing the
language on the savings reserve fund because it serves no
purpose other than to rename it. He said that the fund is a
constitutional budget reserve and actually is not a savings
reserve fund. He offered his support for Amendment 1, as
amended.
MS. MILLS directed attention to page 2, [lines 18-19] of
Amendment 1, referred to as A.4, which read:
Page 3 lines 26, through page 4, line 1:
Delete all material.
She said that this relates to the transition provision for the
budget reserve fund. She said she understood the reason for this
in terms of the savings reserve fund, but the very last sentence
refers to the repayment obligation of the transition provision.
It makes it very clear that there is no repayment obligation
because that is being repealed. She said she was unsure if there
was an intention or whether it seemed unnecessary since it is
being repealed there would not be a repayment obligation.
SENATOR SHOWER offered his belief that she actually answered it
unless it would impact another section.
MS. MILLS clarified that the way Amendment 1 is drafted, it
would delete Section 31. She asked for further clarification
whether any thought was given with respect to the repayment
obligation. She asked whether it was the intent to make sure the
repayment obligation is eliminated.
2:29:20 PM
CHAIR HUGHES asked whether the repayment provision is found
elsewhere.
MS. MILLS explained that the repayment provision is found on
page 4, in proposed Sec. 5, line 2, which read:
*Sec. 5. Article IX, sec. 17 (c) and (d), Constitution
of the State of Alaska, is repealed.
She said that sec. 17 (d) is the repayment obligation. The
question relates to the existing repayment obligation of $10-11
billion. She explained that the resolution was drafted to
include specific language to clarify that once the provision is
repealed the repayment obligation goes away, so "you don't have
the sweep and you don't have to repay the fund." She reiterated
that she was unsure if the intent was that the repayment
obligation did not need to occur.
2:30:33 PM
At-ease.
2:30:54 PM
CHAIR HUGHES reconvened the meeting.
COMMISSIONER DESIGNEE TANGEMAN offered that from a policy
perspective, the intent is to do away with the CBR
[constitutional budget reserve] fund, the three-quarters vote,
the repayment, and the sweep options. The intent of the savings
reserve fund was to have in place a vehicle to store revenues
for the next year's budget, but only for that budget, which
could be accessed with a simple majority vote. In the event that
excess revenue existed, an amount would be deposited into the
savings reserve fund to cover the next year's budget. Any
additional revenues would go back to the permanent fund to repay
half of the permanent fund dividend from the previous year. If
excess reserves still existed, the balance would be deposited to
the corpus of the permanent fund. Therefore, the need for the
CBR would not exist. The savings [reserve fund] would cover
enough for the next fiscal year and that is all that is required
under [SJR 6].
COMMISSIONER DESIGNEE TANGEMAN said that if the committee is
going down a different road, Ms. Mills just wanted to point out
that the committee would be changing the intent of the
governor's resolution, which the committee has a right to do. He
said it was important for the record to reflect the governor's
intent of SJR 6. He agreed that eliminating the CBR is part of
the resolution.
2:32:41 PM
SENATOR MICCICHE said he was unsure who did not understand the
governor's purpose for [SJR 6], but "that's what we're trying to
change. That's the part that borders on being unconstitutional
and likely gets stricken down." He said, "I support a strict
appropriation limit that includes tight reins on capital." He
characterized the rest as noise. He said he thought that was the
purpose of going back to the CBR, but it seemed as though more
discussions are needed.
2:33:22 PM
SENATOR SHOWER, speaking as sponsor of Amendment 1, agreed. He
said two things were raised that he did not anticipate so he
would like to further review it. He highlighted that his intent
was to limit the amount of changes being made to the
[Constitution of the State of Alaska]. As Senator Micciche
noted, the changes are noise. He suggested that the goal was to
limit the potential issues while still allowing a safety valve
if the state had a lot of excess revenue available to allow the
legislature to spend additional funds with a cap, without
exceeding or changing the intention of the amendment to the
Constitution [of the State of Alaska], which establishes a
strict spending limit that the state desperately needs. It just
needs to be relevant, he said.
2:34:47 PM
SENATOR SHOWER said he intended to rewrite the amendment and
break it into two parts.
2:35:04 PM
SENATOR SHOWER withdrew Amendment 1.
SENATOR MICCICHE objected, then withdrew his objection.
2:35:56 PM
SENATOR MICCICHE moved to adopt Amendment 2, work order 31-
GS1068\A.3, Wallace, 3/27/19.
31-GS1068\A.3
Wallace
3/27/19
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR MICCICHE
TO: SJR 6
Page 1, lines 9 - 10:
Delete "fifty percent of the cumulative change in
population and inflation since January 1 of the
previous calendar year, derived from federal indices
as prescribed by law, or two percent, whichever is
less."
Insert "the average change in inflation in the
previous five fiscal years. In this subsection, the
change in inflation shall be based on the Consumer
Price Index for Anchorage, Alaska, as prescribed by
law."
CHAIR HUGHES objected for discussion purposes.
SENATOR MICCICHE said that Amendment 2 would delete fifty
percent of the cumulative change in population or two percent of
the consumer price index, whichever is less. He characterized
this as a "five-year smooth change in inflation average" based
on the consumer price index for Anchorage, which is still
typically below that range and would avoid the spikes. The old
limit was 1.9 percent below likely real inflation, which he
suggested is mathematically unattainable. He said this presents
a more realistic curve, and he had a diagram he could share with
members so they can see the small change.
2:37:17 PM
SENATOR HUGHES recalled the presentation indicated that as the
economy grows and the population changes, some parts of
government might need to grow. She suggested that this might
mean more teachers or troopers but probably not other employees.
She recalled asking what percentage of the government needs to
grow. She was unsure if he had a response. She expressed concern
that it might be a little "flat" and asked whether Mr. Tangeman
could speak to whether it was reasonable.
COMMISSIONER DESIGNEE TANGEMAN said that he did not have the
specific percentages of types of employees in the state, but
certainly if population is growing in the state, the line would
be less flat. He offered his belief that it would be up to the
legislature and the administration to decide the type of
employees needed, and if it would be teachers, troopers, or
others. He said that the administration did not want to restrict
how additional funds should be spent under the cap. He said,
"It's more just about the cap."
COMMISSIONER DESIGNEE TANGEMAN, speaking to Amendment 2, said
the administration does not object to it. He said the
administration understands it is a formula, which can be
adjusted. He characterized it as "fairly flat" from the
department's perspective. He said that "giving a little relief
under that is certainly reasonable." He said, "We don't object
to the formula change."
2:39:57 PM
SENATOR REINBOLD asked how much more this would cost assuming
the total budget would be $10 billion.
COMMISSIONER DESIGNEE TANGEMAN said that he did not have that
information.
2:40:24 PM
ED KING, Chief Economist, Office of Management and Budget,
Office of the Governor, Juneau, said he did not have the
specific figures with him but offered to provide them to the
committee. Generally speaking, he said that Amendment 2 would
raise the allowable growth rate above the proposed rate in the
original resolution. Given the existing projections for
inflation and population, the original proposal allowed a growth
rate of about 0.8 percent over time, he said. The five-year
average real rate of inflation against the three-year average
budget is closer to 1.1 percent. Although the rate in Amendment
2 is more than the original proposal, it is not excessive, he
said.
2:41:41 PM
SENATOR REINBOLD said that this would just increase the cap. She
expressed frustration at the number of times that she has heard
promises that government will be reduced, or how services are
needed to address issues, but she has not seen the outcome. She
would like to see government reduced without having loophole
after loophole that allows government to grow.
2:42:38 PM
CHAIR HUGHES asked for further clarification that the original
proposal allows a 0.8 percent growth rate and under Amendment 2,
it would be 1.1 percent growth rate.
MR. KING answered that because of the 2009-14 timeframe with low
inflation, the rolling five-year average will be about 1.5
percent growth rate. He anticipated that inflation would
stabilize going forward at 2.25 to 2.5 percent. He stated that
the previous 5 years at 2.5 percent inflation would be allowed
against the average of the previous 3 years, which would be less
and be about 1.1 percent. In response to Chair Hughes he said
the growth rate in SJR 6 is 0.8 percent, which increases to 1.1
percent under Amendment 2.
CHAIR HUGHES asked whether the starting point is more important.
She recalled from the presentation that the problem with the
1982 spending cap was the starting point used. At the time, the
amendment allowed for full inflation and then it ballooned, she
said. Thus, the starting point is crucial, but the adjustment is
not as important.
COMMISSIONER DESIGNEE TANGEMAN answered that the starting point
in 1982 was a number that was fairly accurate at the time, but
it was adding full inflation and full population growth year
after year. He said that it was making the line too steep, which
is why it is currently at $10 billion.
2:44:42 PM
MR. KING added that part of reason is that inflation and
population factors were applied to the previous spending limit
rather than to the total expenditures. He suggested that it
meant compounding growth on money that was not spent, which is
how the state got out of balance. The proposal would reset that
every year by using a three-year average of actual spending. He
agreed it is more important to adjust to actual spending than to
use the actual inflation or population figures.
CHAIR HUGHES said that the adjustment for growth could use some
kind of calculation using the statewide GDP [gross domestic
product]. If so, the cap would be based on economic growth,
which would allow for large increases during boom times. She
questioned why government growth should correlate with private
industry growth, which she did not think should occur. She said
that things do not need to grow proportionately. She suggested
that the Senate Finance Committee may wish to consider using the
GDP. She wanted the record to reflect concern that the fact
there is more money in the private sector does not mean more
funding needs to be directed to government growth.
SENATOR MICCICHE remarked that Mr. King indicated that Alaska
does not see the same correlation between the budget and the
GDP, which is why the adjustment is set. He clarified that this
does not set the base. His goal is to reduce the budget wherever
possible. He said this base will adjust every year. The more the
budget is reduced the more the base will be reduced, he said.
This amendment reflects the growth rate and has nothing to do
with cutting the budget, or spending outside of the cap. It
simply would set the curve. He offered his belief that the
governor's curve is unattainable. He said he does not think any
economist in the world would disagree. He said, "It's not about
cutting." It is about what happens to inflationary growth and
spending after that. He said, "If you think you can afford the
same apple ten years from now, you can, but only if you keep
buying progressively smaller apples until there is not much left
worth eating." He said he would like to hear from the
administration, but he said the curve is more realistic and
manageable going forward.
2:48:06 PM
COMMISSIONER DESIGNEE TANGEMAN said he likes the analogy, which
is accurate. The administration does not disagree with the
amendment to change the formula and address it in a slightly
different manner since is still fairly constrictive, which is
the goal. He said, "If you are interested in restricting
spending, it must be something that is not going to be out of
line in five years." As Mr. King pointed out very astutely, this
is not being compounded off the previous year's cap amount.
Instead it is derived from the previous year's spending amount.
Although it may appear to be a "flatter" line, it is based on
actual budgets from previous years, he reiterated.
2:49:13 PM
SENATOR KIEHL said that he appreciated Commissioner Designee
Tangeman's comment that it should be up to future elected
officials and the executive branch to decide on spending
priorities. In terms of this limit and the five year or three-
year average, which is pegged to prior years rather than a
single fixed point, he expressed concern that Amendment 2 does
not have an allowance for population growth. He recalled that
U.S. Senator Sullivan campaigned on a sustained 3.5 percent
economic growth for long periods of time. He related his
understanding that the 40-year growth rate in Alaska's
population is about 1.5 percent. Allowing only for inflation
would put the state in a difficult spot if the state built a
gasline or otherwise had significant growth. He recalled Senator
Reinbold's desire for restraint. He asked whether the five-year
average to actual spending could constrain spending below actual
population growth.
MR. KING answered yes, that it would restrict it without
accounting for population growth and it does not allow for an
escalation for population growth. The question becomes whether
the legislature believes that it is necessary to include both
the full inflation and the full population growth escalation. He
said that history has shown that the economy has been able to
grow at a faster rate than that government has needed to grow,
at least in Alaska's history. The last time the state had an
economic boom the population more than doubled and government
spending did not.
This leads to a question of why that is the case. Academically,
one can see how technology, productivity, and economies of scale
have affected the economy. For example, just because student
population increases by 10 percent doesn't mean that schools
need ten percent more teachers. And just because inflation grows
by 5 percent does not necessarily mean everyone's wages need to
increase by 5 percent because technological and other economic
factors are pushing down on prices.
MR. KING said that the current law in the [Constitution of the
State of Alaska] that allows the full consideration of inflation
and population is generous. The question for the legislature is
what amount less than that is the proper amount. The governor
put forth a proposal that was much more limiting [in SJR 6], and
under Amendment 2, it is a little less restrictive. He said, "If
you allowed zero growth, I would say that at some point you
might run into a situation where the population would not be
allowed to grow because services would not be able to be
provided." However, he did not think that is the situation in
this case.
2:53:05 PM
SENATOR KIEHL acknowledged that is the reason to use population
instead of economic growth as one factor. However, he also
appreciated knowing that by floating the period used for the
calculation of the cap, in the sustained growth timeframe, it
would not be able to increase the size of government as fast as
population and inflation increased. He said he has a fundamental
disagreement with Commissioner Designee Tangeman that it is a
good idea to choose troopers or teachers when the population and
the economy is growing.
He said the existing language only lists "inflation," which
leaves it to the legislature to define what inflationary measure
to apply. He directed attention to [Page 1, lines 6-7 of
Amendment 2, referred to as A.3], which read, "?the Consumer
Price Index for Anchorage, Alaska, as prescribed by law." He
asked for further clarification on the reason to use the
Consumer Price Index (CPI) for Anchorage, but then allow the
legislature to "fiddle" with it.
SENATOR MICCICHE replied that he did not see it that way. He
said that the CPI for Anchorage is prescribed by law. That is
the index that would be used. He considered other national
indexes but did not believe they were adequately reflective of
the real cost of doing business in Alaska. He offered his belief
that the CPI for Anchorage is the best one to use.
SENATOR KIEHL offered to follow-up with Legal Services later. He
interprets this to mean that a future legislature could direct
the Department of Labor & Workforce Development to write its own
Consumer Price Index for Anchorage by law.
SENATOR MICCICHE asked the Department of Law to respond.
2:55:34 PM
MS. MILLS related her understanding that the question surrounds
the specific point to the language "Consumer Price Index for
Anchorage, as prescribed by law." She said that the existing
amendment, similar to the governor's proposal, specifically
refers to [Page 1, lines 9 - 10 of SJR 6], "derived from federal
indices as prescribed by law, ?" She said that [Amendment 2,
lines 6-7] reads, "the change in inflation shall be based on the
Consumer Price Index for Anchorage, Alaska, ?" She said that
points to a specific index. It goes on to read, "as prescribed
by law" and she was unsure of what would need to be clarified in
statute.
2:56:42 PM
SENATOR MICCICHE responded that Amendment 2 refers to the
Consumer Price Index for Anchorage. He said he thinks that is
quite clear. He said he understands the concern, but he is not
going to waste a lot of time on it. He asked the record to
reflect that it refers to the Consumer Price Index for
Anchorage.
SENATOR REINBOLD recalled that Mr. King had said 0.8 and 1.1
would be the difference. She asked whether inflation has gone
over that historically.
MR. KING responded that other than in times of economic
recession, inflation is typically above that rate.
SENATOR REINBOLD asked whether inflation can be really
significant in other countries.
MR. KING answered yes. He stated that several countries print
money to deal with debt issues, which can result in hyper-
inflationary periods. He said that the State of Alaska does not
have the ability to print money so the state would not be the
driving force for that type of problem in Alaska. Theoretically,
the federal government could print money.
SENATOR REINBOLD asked whether this has the potential to raise
the appropriation limit.
MR. KING answered yes, that the consideration of inflation
allows the budget to grow in response to inflation. He related a
scenario in which periods of high inflation happened, and the 5-
year averaging would smooth it out. If it only occurred in one
year, it would not be a spike and a drop. However, in response
to rising costs of services the government provides, the
legislature would have the ability to increase its budget
accordingly, he said.
2:59:31 PM
SENATOR REINBOLD related her understanding that as the economy
grows, less government is needed. She remarked that she does not
consider them as services, but rather that people become more
self-sufficient, that they have jobs, and they "get their act
together." She suggested that more infrastructure and easier
ways to access resources might also occur. She said that if the
legislature is going to propose changes to the Constitution [of
the State of Alaska], it is important to make sure that it is
doing the right thing and she certainly wants to limit
government, with as few loopholes as possible for government to
grow when economic growth occurs.
3:00:19 PM
CHAIR HUGHES asked when inflation has risen, historically,
whether the smoothing factor of the five-year averaging would
take care of the spikes. She related her understanding that it
typically only lasts a few years.
MR. KING agreed that except for a high inflation period in the
late 70s, with sustained double-digit inflation, it has been
very rare to have more than several years in which inflation is
much higher than 2.5 percent. In further response to Chair
Hughes, he recalled that it was 4 - 5 years, although he would
need to double check.
CHAIR HUGHES asked whether he was comfortable with the change
and that the five-year smoothing factor would likely address
Senator Reinbold's concerns.
3:01:24 PM
COMMISSIONER DESIGNEE TANGEMAN answered yes, that the
administration is comfortable with this formula.
3:01:29 PM
CHAIR HUGHES removed her objection.
SENATOR REINBOLD objected.
3:01:48 PM
SENATOR MICCICHE remarked that loophole means that there would
be some way out of the spending limit or some way around it. He
said that the legislature simply needs to cut and reduce the
state's spending and many of us believe this, although not
everyone does. The appropriation limit has nothing to do with
that because as the budget is cut, it resets the baseline. The
approach [under Amendment 2] is a more realistic curve. In fact,
reviewing the 10-year period from FY 03 - FY 19, the changes are
almost exactly the same. He related his understanding that
[inflation] ranges about one-tenth of a percent every couple of
years. He said that this figure does not accelerate over time,
that it is steady and is below the interest rate and below the
Anchorage CPI. He offered his belief that this is a more
realistic way of dealing with that increase.
SENATOR REINBOLD clarified that what she meant by loophole is it
provides just one more opportunity to increase the appropriation
limit. She said it seems as though the legislature is constantly
finding them. "I'm going to be a no vote," she said.
3:03:10 PM
A roll call vote was taken. Senators Micciche, Shower, and
Hughes voted in favor of Amendment 2 and Senators Reinbold and
Kiehl voted against it. Therefore, Amendment 2 passed by a 3:2
vote.
3:03:40 PM
CHAIR HUGHES remarked on the time constraint before taking up
Amendment 3, which members briefly discussed.
3:04:58 PM
At-ease.
3:06:25 PM
CHAIR HUGHES recessed the meeting.
6:01:32 PM
CHAIR HUGHES reconvened the meeting at 6:01 p.m. Present at the
call to order were Senators Micciche, Reinbold, Shower, Kiehl,
and Chair Hughes.
6:02:09 PM
CHAIR HUGHES remarked the committee will continue to hear SJR 6.
She advised the public that written testimony could be submitted
to [email protected].
6:03:37 PM
CHAIR HUGHES opened public testimony on SJR 6.
6:04:01 PM
DEBORAH HOLLAND, representing herself, Anchorage, testified in
support of SJR 6 because she would like a sustainable budget and
wants the legislature to cut the budget.
6:04:33 PM
ALLEN HIPPLER, representing himself, Anchorage, testified in
support of SJR 6 because the state needs to balance its
spending, revenues, and expenditures and still retain the
balance in the permanent fund.
6:04:49 PM
TIM ROBINSON, representing himself, Wasilla, testified in
opposition to SJR 6 and the governor's budget since the
governor's budget is short sighted, ill advised, and sure to
wreak havoc on Alaska. He offered his belief that the state
needs a progressive income tax with a credit for the PFD
[permanent fund dividend]. He said he sent written comments with
his specific suggestions.
6:06:08 PM
CHAIR HUGHES remarked that the committee was not taking public
testimony on the budget and that this hearing was related to a
constitutional amendment to institute a state constitutional
spending cap.
6:06:27 PM
LESLIE HVAMASHAD, representing herself, Houston offered her
support for SJR 6, stating that "real Alaskans" will vote in
support of SJR 6.
6:07:04 PM
JOHN MORIN, representing himself, Soldotna, testified in support
of SJR 6 because he is tired of the liberals.
6:07:26 PM
SAM ALBANESE, representing himself, Eagle River, offered his
support for SJR 6 since the state needs a cap to be responsible
about its spending. Alaska does not have a revenue problem but a
spending problem, he said.
6:07:55 PM
CHARLES SIMON, representing himself, Hooper Bay, testified in
support of SJR 6.
6:08:27 PM
BARBARA HANAY, representing herself, North Pole, testified in
support of SJR 6 and the governor's package. She said that she
is an economist who has lived in the state for 30 years.
6:08:57 PM
LYNN LOWRY, representing himself, Wasilla, testified in favor of
the PFD and not for a cap.
6:09:49 PM
CAROLINE MALSEED, representing herself, Juneau, stated her
opposition to SJR 6 because the constitution provides long-term
stability to the state. She said that elected officials should
make shorter term fiscal decisions rather than to have
appropriations imbedded in the constitution. She emphasized that
the governor and the legislature need to have the flexibility to
create appropriation standards in response to the needs and
values of the people in Alaska.
6:11:47 PM
SENATOR SHOWER asked if the Constitution [of the State of
Alaska] has a spending limit and whether this resolution would
just tweak it.
MS. MALSEED responded that she did not think that the
Constitution [of the State of Alaska] needs to be tweaked. In
further response to Senator Shower she said she understands a
spending limit currently exists in the constitution. She said
she does not think it needs to be adapted.
6:12:25 PM
BRIDGET SMITH, representing herself, Juneau, testified in
opposition to SJR 6 since Alaska has one of the best
constitutions in the U.S. She said that SJR 6 would limit the
legislature's power to appropriate, and the people's power to
influence the decisions. She expressed concern with Section 16.
She said that Judge Tom Stewart brought constitutions from other
states to use as models for our constitution. Further, the
current constitutional spending limit is so generous that it has
never been used. She said that SJR 6 would limit the
legislature's power to appropriate and limit the people since
they elected their representatives.
6:14:39 PM
KEN FREDERICO, representing herself, Wasilla, testified in
support of SJR 6 because the state needs to rein in spending.
6:15:53 PM
OLIVIA FELLERS, representing herself, Wasilla, testified in
support of SJR 6 to rein in legislators, implement efficiencies,
and to leave the PFD alone. She offered her belief that Governor
Dunleavy has the right plan in mind and needs public support. In
response to Senator Micciche, she responded that she supports
SJR 6.
6:17:02 PM
EDWARD MORAN, representing himself, Wasilla, testified in
support of the governor's budget. He said the state needs more
discipline in government spending and must reduce waste. In
response to Chair Hughes, he offered his support to SJR 6 and
the spending cap.
6:17:57 PM
KEN BROWN, representing himself, Soldotna, voiced his support
for SJR 6 and the legislators who support it. He expressed
opposition to legislators who oppose it.
6:18:36 PM
CAROLYN PORTER, representing herself, Palmer, testified in
support of SJR 6. She said that tweaking the spending cap is a
means to cut spending since the legislature has been over
appropriating. She urged members not to cut dividends or
implement taxes, but to reduce spending.
6:19:28 PM
FRANK GOLDTHWAITE, representing himself, Sterling, testified in
support of SJR 6. Government should have a spending limit just
as Alaskan households limit their spending. He urged members not
to touch the [corpus of] the permanent fund and to distribute
earnings. He supported "getting something in the coffers" and
remarked that "spending is out of control."
6:20:55 PM
MARILYN MENISHNUCHE, representing herself, Petersburg, said she
strongly opposed SJR 6 because she does not support any
amendments to the Constitution of the State of Alaska.
6:21:20 PM
DARREN FIDLER, representing himself, Wasilla, stated his total
support for a spending limit [SJR 6]. After asking whether a
sales tax was under consideration in SJR 6 and learning it was
not, he offered his total support for the spending cap in SJR 6.
6:22:24 PM
MARIETTA DAVIS, representing herself, Petersburg, testified in
support of SJR 6.
6:22:52 PM
NORMAN CLARK, representing himself, Kotzebue, testified in
opposition to SJR 6. He said he hopes Governor Dunleavy will
change the law to prevent reducing the permanent fund dividend
so Alaskans will have more money. He expressed concern that too
many out of state people come to Alaska and apply for the
permanent fund dividend.
6:23:43 PM
JOAN TRUITT, representing herself, Big Lake, testified in full
support of SRJ 6 to reduce spending.
6:23:55 PM
GREGORY WHITE, representing himself, Anchorage, testified in
support of SJR 6 to have a spending limit and prevent
legislators from overspending.
6:24:31 PM
JACK JOHNSON, representing himself, North Pole, testified in
support of SJR 6 to reduce spending.
6:25:19 PM
EMILY MESCH, representing herself, Juneau, testified in
opposition to SJR 6 because it will not have a short-term effect
and would limit the legislature's ability to deal with
unforeseeable problems. She characterized it as a solution in
search of a problem.
6:26:01 PM
LYNDA MYERS, representing herself, Anchorage, testified in
support of SJR 6 due to her concern that the legislature has
overspent to the point it now wants to take money set aside for
the people when the permanent fund was established while it
gives itself raises. She further expressed concern about the
residency requirements to qualify for the permanent fund
dividend.
DAVE DANEZINE, representing himself, Kasilof, testified in
support of SJR 6. He said he would like legislative sessions
limited to 90 days, and the state to stop using salt on highways
and bridges.
6:28:46 PM
SHOSHANA KUEN, representing herself, Fairbanks, testified in
opposition to SJR 6 since it would be difficult to remove a
spending cap and it could adversely affect future generations.
6:29:21 PM
GREG GARRIS, representing himself, Talkeetna, testified in favor
of SJR 6.
6:29:46 PM
BRIDGETTE VAUGHN, representing herself, North Pole, as a 30-year
resident, testified in support of SJR to cap government spending
and ensure Alaska's great wealth survives. She urged members not
to cut education first.
6:30:57 PM
TANYA LANGE, representing herself, Kenai, testified in support
of SJR 6 because the state needs to cut spending and get control
over the budget without taking the people's [permanent fund
dividend].
6:32:11 PM
ARTIS SELLIERE, representing himself, Big Lake, testified in
support of SJR 6 because he disagrees that a spending cap will
tie the legislature's hands. He said that government can do with
less, just as people must cut their household budgets when they
have less income.
6:33:07 PM
GUY WHITNEY, representing himself, Ketchikan, testified in
support of SJR 6. He echoed the previous testifier who urged
members to cut the spending just as his family must budget if
their income is reduced.
6:33:41 PM
TIM STATON, representing himself, Fairbanks, offered his support
of SJR 6 because a spending cap is long overdue to protect the
permanent fund dividend (PFD) program. He urged members to
return the PFD that Governor Walker cut.
6:34:35 PM
COLLEEN BAGOT, representing herself, Palmer, as a life-long
Alaskan, testified in support of SJR 6 in order to [limit
government spending] and prevent government from stealing from
the people.
6:35:20 PM
LINN MCCABE, representing herself, Big Lake, testified in
support of the constitutional spending cap to give the people a
vote in the next general election. The current spending is
completely irresponsible. She said she supports a balanced
budget. The legislature has proven over and over again that it
cannot self-regulate. She related her understanding that if the
constitutional spending limit had been implemented 12 years ago,
the state would have $29 billion more plus interest in the
permanent fund.
6:36:37 PM
LARRY BEACH, representing himself, Wasilla, testified in support
of SJR 6 and cautioned that legislators who do not follow the
will of the people will not be re-elected. He noted that the
hearing last week on SB 23 had overwhelming support, but the
legislature is not paying any attention.
6:38:00 PM
JERRY BAGNESCHI, representing himself, Wasilla, stated he has
been an Alaska resident since 1974. When the permanent fund was
established the state had a "rainy day" account and an energy
account in case of "bad times." The legislature spent all the
money and now wants to take the people's money, he said.
6:38:47 PM
ROSEMARY LEBOWITZ, representing herself, Hoonah, testified in
support of SJR 6 because it seems wise to conserve state
spending and prevent a state tax that would put government's
hands right into our pockets.
Several senators made anecdotal comments.
6:40:44 PM
MICHAEL GERENDAY, representing himself, Wasilla, testified in
support of SJR 6 to institute a spending cap. He said he does
not agree with state spending, and that the permanent fund is
the people's money. He stated that his family is poor, that good
jobs are not available, and he relies on the permanent fund
dividend to survive.
6:41:41 PM
JARED JORGENSEN, representing himself, Soldotna, testified in
support of SJR 6 to provide a spending cap.
6:42:46 PM
KATIE BOTZ, representing herself, Juneau, testified in
opposition to SJR 6. She said that the legislature needs to
budget money wisely. She said that the state needs an income tax
and should reduce the permanent fund dividend. She expressed
concern about seasonal workers who take earnings out of state.
In response to Chair Hughes, she said she currently opposes SJR
6, but hopes to see it back in the future.
6:45:52 PM
ELIZABETH SWEET, representing herself, North Pole, testified in
support of SJR 6 to reduce spending. She said she also supports
SB 23 and 24.
6:46:34 PM
JOHN MILLER, representing himself, Wasilla, testified in support
of SJR 6 because he supports the financial plan the governor
laid out during his town hall meeting. He said he would like a
spending cap in the constitution.
6:47:20 PM
STACEY SEEGERS, representing herself, Eagle River, testified in
support of SJR 6.
6:48:00 PM
JAMES SQUYERS, representing himself, Rural Deltana, testified in
support of SJR 6.
6:48:20 PM
PAMELA GOODE, representing herself, Rural Deltana, testified in
support of SJR 6. She said the problem has always been state
spending and this will remedy future state spending.
6:48:53 PM
FRANK WHITESIDES, representing himself, Ketchikan, testified in
support of SJR 6.
6:49:12 PM
DAVID AUSTIN, representing himself, Hoonah, testified in support
of SJR 6.
6:49:27 PM
RONALD HOWARD, representing himself, Ketchikan, testified in
support of SJR 6.
6:49:55 PM
KIRSA HUGHES-SKANDIS, representing herself, Juneau, testified in
opposition to SJR 6 because she opposes putting legislative
choices in the constitution. She said it was not necessary 30
years ago when the income tax was repealed. She offered her
belief that SJR 6 would limit the state from being flexible and
adaptable when it needs to address unknown economic future
events.
6:50:23 PM
GAIL LIMBAUGH-MOORE, representing herself, Soldotna testified in
support of SJR 6.
6:50:49 PM
KAREN PERRY, representing herself, Wasilla, speaking as a state
resident since 1982, testified in support of SJR 6. She said
that her family is Dunleavy strong.
6:52:04 PM
JUDITH CLARK, representing herself, Hoonah, offered conditional
support of SJR 6 if it would prevent taxes since the prospect of
income or sales taxes is an untenable option, with a possible
annual review if conditions change. She acknowledged that no one
likes the proposed cuts.
6:52:34 PM
JASON DUNN, representing himself, Wasilla testified in support
of SJR 6 and the governor's plan. He suggested that before
legislators "steal the people's money," they should cut 10
percent of their income. He added that disabled veterans rely on
the PFD.
6:54:05 PM
RALPH VERNACHIO, representing himself, Chugiak, testified in
support of SJR 6.
6:54:42 PM
RON GILLHAM, representing himself, Soldotna, testified in
support of SJR 6 since the spending cap will keep the government
in check.
6:55:10 PM
DONNA AUSTIN, representing herself, Hoonah, testified in support
of SJR 6.
6:56:06 PM
DOUGLAS LOWRY, representing himself, Fairbanks, testified in
support of SJR 6 to keep spending within our means and to retain
the PFD, which rightfully belongs to the citizens and should not
be used to fund government.
6:57:05 PM
At-ease.
7:01:20 PM
CHAIR HUGHES reconvened the meeting.
7:01:49 PM
SENATOR MICCICHE moved to adopt Amendment 3, work order 31-
GS1068\ A.1, Wallace, 3/22/19, which read as follows:
31-GS1068\A.1
Wallace
3/22/19
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR MICCICHE
TO: SJR 6
Page 2, lines 8 - 12:
Delete all material and insert:
"(6) from a non-State source in trust for a
specific purpose, including revenues of a public
enterprise or public corporation of the State that
issues revenue bonds; and"
Renumber the following paragraph accordingly.
CHAIR HUGHES objected for discussion purposes.
SENATOR MICCICHE referred to page 2, lines 8-12 of SJR 6 to
Section 16(a)(6)-(7) and stated that Amendment 3 would combine
the two paragraphs. It would still allow money held in trust by
the state or received from the federal government for a
particular purpose, or from a source other than the state or
federal government for a specific purpose, such as a donation.
However, Amendment 3 would allow other [funds] from a non-state
source to be used. For example, the public could decide to put a
project on the ballot if they wanted to build a bridge and
establish a toll on the bridge. He envisioned that the Alaska
Marine Highway System (AMHS) could decide it would like to cover
more costs related to coastal communities. Amendment 1 would
allow the public to move something forward that is outside the
appropriation limit established by Article IX, sec. 16 of the
Constitution of the State of Alaska. This language would not
allow the legislature to go outside of the appropriation limit,
but it would allow the public to do so, which is the intent of
Amendment 3.
7:03:30 PM
SENATOR KIEHL asked how Amendment 3 would restrain the
legislature from creating a public corporation to do the same
activity the sponsor of Amendment 3 described.
SENATOR MICCICHE responded that it does not, since the state is
already included in paragraphs (6) and (7). However, his
specific rationale to add this language is to allow the public
to create a public corporation or enterprise to meet the
public's need outside of the cap in proposed Section 16.
7:04:09 PM
SENATOR KIEHL asked for further clarification on the language
"in trust" [on line 3 of Amendment 3]. He related his
understanding that in trust has a specific legal meaning. It
seemed as though the sponsor of Amendment 3, was using it to
mean "money that the state holds for a specific purpose," but
not a legal trust with "lock up" provisions. He recalled that
private sector donations for a specific project would be
included in the "in trust" language.
SENATOR MICCICHE answered that existing trusts, such as the
Alaska Mental Health Trust Authority (AMHTA), the [Public School
Trust Fund], and other existing trusts are already outside of
the cap. Amendment 3 would specifically apply to new projects
that might arise after the cap, if passed, is established.
7:05:28 PM
SENATOR REINBOLD asked whether Amendment 3 could include
corporations such as the [Alaska Gasline Development Corporation
(AGDC), the Alaska Industrial Development and Export Authority
(AIDEA), the Alaska Railroad Corporation (ARRC), or the Alaska
Energy Authority's (AEA) Power Cost Equalization (PCE)]. She
said this seemed like a "broad wide-open door."
SENATOR MICCICHE answered that those were already public
corporations, which are outside of the spending cap. He said
this would not open up anything additional, but the language in
Amendment 3 would apply to a new project that may arise that the
public supports.
7:06:07 PM
SENATOR REINBOLD asked whether the Department of Law could
respond. She further asked if it could mean a $40 billion
gasline.
MS. MILLS responded that that this is language that exists in
the current constitutional appropriation limit.
7:06:56 PM
SENATOR REINBOLD referred to paragraph (6), which read as
follows:
"(6)from a non-State source in trust for a specific
purpose, including revenues of a public enterprise or
public corporation of the State that issue revenue
bond; and"
She said that it sounds like a dedicated "non-State source,"
"including revenues of a public enterprise or public
corporation," which sounds like it is from public corporations
like AIDEA, ARRC, or the AGDC. It seemed to her that this could
be "busting through a cap" if people were creative enough. She
asked whether people could build a gasline.
MS. MILLS answered that the language does not go a lot broader
than what it is replacing. She said that revenue bonds are
already exempted. She explained that the state can
constitutionally issue revenue bonds if revenues are anticipated
to cover them. This language does open it up a little broader
than the current two exceptions, but not by a whole lot.
SENATOR REINBOLD asked for further clarification on what
Amendment 3 does and what it would allow.
MS. MILLS said that the amendment would encompass federal
appropriations, which are considered held in trust by the state
to use for a specific purpose. It would also encompass
donations, or a public private partnership, in which the private
partnership contributes some funds. The funds cannot be used
except for the purpose the private partner indicated. She said
that public corporations issue revenue bonds for a specific
purpose. In addition, as Senator Micciche stated, the normal
trusts are outside the cap.
7:09:07 PM
SENATOR REINBOLD related her understanding that Amendment 3
would create a loophole and allow a lot of federal money to come
in, including for Medicaid expansion. She said it seems as
though this could undermine the spending cap.
MS. MILLS responded that federal receipts are outside the cap
and [Amendment 3] would not change that aspect.
SENATOR REINBOLD asked whether this would make Alaska more
dependent on federal funds. She said that she could not figure
out the specific reason.
7:10:13 PM
CHAIR HUGHES related a scenario in which the Knik Arm crossing
was built as a toll road. Prior to the project, the state was at
the cap for plowing the Glenn Highway. Using the toll to
maintain the bridge might result in funding cuts for road
maintenance for plowing. The project would need to support
itself. She said she understands her concern, but this does not
create a loophole. She related that one thing the legislature is
considering is to restructure the ferry system. It might make
sense to create a public corporation to partner with the private
sector and the legislature needs to allow that to happen. The
corporation would need to be able to function outside the
appropriation limit. She said, "So I'm supporting the
amendment."
7:11:50 PM
SENATOR MICCICHE acknowledged the examples were good ones. He
said, "The thing it adds is you either trust the people of
Alaska or you don't. This isn't about legislators. It's about
people of Alaska deciding." When the budget is cut, which is
separate from SJR 6, it will empower the people of Alaska. He
said, "They would be paying for it. We wouldn't." Amendment 3
would allow this to occur.
7:12:49 PM
SENATOR REINBOLD expressed her frustration. She asked for
further clarification from the Department of Law on Amendment 3
and whether the governor supports it.
7:13:18 PM
MS. MILLS deferred to Commissioner Designee Tangeman to weigh in
on the administration's stance. She said generally speaking that
Chair Hughes and Senator Micciche covers the DOL's view on the
effect of Amendment 3. She clarified any state general fund
appropriation that subsidized a public corporation would still
be under the appropriation limit. This would only relate to any
revenue a public corporation would receive for a specific
purpose.
7:14:03 PM
COMMISSIONER DESIGNEE TANGEMAN said the administration does not
see a problem with Amendment 3.
SENATOR REINBOLD referred to page 2, lines 8-12, and read the
language that would be deleted from SJR 6, which read as
follows:
(6) of money held in trust by the State or received
from the federal government for a particular purpose;
(7) of money received by the State from a source other
than the State or federal government that is
restricted to a specific use by the terms of a gift,
grant, bequest, or contract;
She referred to paragraph (6) of Amendment 3, which read as
follows:
"(6) from a non-State source in trust for a
specific purpose, including revenues of a public
enterprise or public corporation of the State that
issues revenue bonds; and"
SENATOR REINBOLD asked whether this language would allow for
bonding.
MS. MILLS deferred to the sponsor of Amendment 3 for the intent.
However, this is meant to cover the items already covered
outside the cap, which are considered held in trust because the
funds cannot be spent except for the purpose for which they have
been framed. She offered her belief that this would add the
possibility for a public corporation or enterprise to take on a
large project or some other form of program that requires
specific revenues from a non-state source.
7:15:57 PM
SENATOR MICCICHE said that one could argue it was included in
the language in paragraphs (6) and (7). He said he wanted to
clarify that the public corporation or enterprise issuing bonds
would be outside of the cap.
7:16:26 PM
SENATOR KIEHL stated that the clarification of "held in trust"
helped. He referred to the language "from a non-State source."
As Ms. Mills and Senator Micciche stated, the Alaska Mental
Health Trust Authority (AMHTA) and the Public-School Trust Fund
(PSTF) are already not subject to the cap in the existing
[Constitution of the State of Alaska]. He asked for further
clarification on how the AMHTA and Public School Trust Fund
could be considered as a non-state source. He acknowledged that
in the origins of the AMHTA this was so, but in the decades
since then, the AMHTA has become a state entity, managed by
state employees, and it generates revenue from investments made
by the state and through land sales.
MS. MILLS replied it is because of how the entities originated.
She explained [the revenue] can only be used for a specific
purpose pursuant to federal law. For example, the whole purpose
of the AMHTA and the Public School Trust Fund acquiring assets
was to raise revenues, but it is done so based on the original
land grant. She said this would be interpreted as being held for
a specific purpose and that purpose came from the original land
grant, not from the state.
SENATOR KIEHL asked for further clarification on the transition
point since the AMHTA is a state entity. He pondered whether one
original dollar was a non-state source, it is never considered a
state source. He said his interest is to ensure that the
language has the described intent.
7:19:02 PM
MS. MILLS highlighted the purpose of [the resolution] is to
determine how the legislature will calculate the appropriation
limit and not to set out new constitutional guidelines by these
exceptions. It is important to determine what falls within the
cap and what falls outside of the cap. Just as "in trust" can
have a very specific meaning in certain contexts, she interprets
the language to mean that revenue would be used for a certain
purpose. Certainly, the state runs up against the dedicated fund
clause. However, this is not about the dedicated funds clause or
whether it would be considered dedicated from a legal
standpoint. She said the distinction is where the funds
originated from and in terms of the consideration between a non-
state source and a state source, it would need to be evaluated
on a case-by-case basis. She said she could not give a clear
answer without reviewing the specific set of facts or reviewing
the Alaska Mental Health Trust Authority (AMHTA).
7:20:38 PM
SENATOR KIEHL offered his support for Amendment 3 because he
supports the change Senator Micciche intends. He referred to
[page 1,] line 8 of SJR 6 to the first ten words, which is
clear. He suggested that as SJR 6 moves forward that it would be
worthwhile to review it further. He characterized the change
intended in Amendment 3 as being good.
7:21:21 PM
CHAIR HUGHES asked whether the University of Alaska] and Alaska
Marine Highway System, as currently structured, are public
enterprises and if the tuition and fares would be outside the
cap.
MS. MILLS recalled hearing the question on the university asked
previously. The [Constitution of the State of Alaska] describes
the University of Alaska as a corporate body. She offered to
research the tuition question and respond back to the committee.
In terms of the AMHS, it currently is a division of a
department, so it is not a public corporation and it does not
have a separate legal identity. She said public corporations are
state instrumentalities, so the liability is held within the
public corporation and does not open up the state to liability.
The entities can be sued on their own. The AMHS would not fall
under this currently, she said.
7:23:01 PM
SENATOR SHOWER said that the committee is really discussing
growing the operating and capital budgets. He referred to
Amendment 3 and asked whether the legislature could spend more
funds with its appropriations for the operating and capital
budgets under this language. He interpreted it to mean a non-
state source, which is not included in the appropriation limit
since it is outside the cap.
MS. MILLS answered that this would be an exception so it would
be outside the appropriation limit.
SENATOR SHOWER asked for further clarification that under
Amendment 3, the legislature would not be spending more money in
the operating and capital budget in the year this occurs. He
highlighted the concern with the language in Amendment 3 is
related to concerns about increased spending. He asked whether
[Amendment 3] would allow the state to grow its operating and
capital budget.
MS. MILLS answered that this does not require any specific
amount of spending. Instead, it is all about the calculation. In
terms of the operating and capital budget as it stands today,
the exceptions would be removed from the cap, and a three-year
average would be based on that, but this does not create any new
spending or take it away.
SENATOR MICCICHE related his understanding that essentially if
state dollars were going to be spent on one of these projects
that the funds would be under the cap, whether the funds were
operating or capital budget funds, and the rest would need to
come from some other financial source.
MS. MILLS answered yes, that is correct.
7:25:18 PM
SENATOR REINBOLD asked whether this could allow a public
corporation, such as Alaska Railroad Corporation (ARRC), to
spend significantly more, so long as the public entity could get
funding from the federal government. She asked whether this
would allow the opportunity for spending to increase, just not
with UGF [unrestricted general fund] or DGF [designated general
fund].
7:25:57 PM
MR. KING said that if you create a public corporation that
performs a function and raises its own revenues, those revenues
can be layered on top of the unrestricted general fund [UGF]
spending. Amendment 3 would allow a public corporation or public
enterprise that generates its own revenues to "grow" the
government. It would not matter if the funding was brought into
the state via the federal government or the private sector as
long as it is not from a tax. The appropriation limit avoids
raising government spending through taxation, he said.
SENATOR REINBOLD expressed concern when she recalled former
Senator Stoltz had an $80 million item because the federal
government wanted him to do something related to the Alaska
Railroad. She expressed further concern that "we got stuck with
it our budget." She has seen public corporations cost the state.
She acknowledged that many Alaskans support a gasline, but many
do not. She said she views this as just another opportunity to
"bloat government." She said she was not comfortable supporting
[Amendment 3.]
7:28:12 PM
CHAIR HUGHES recalled that the funding previously mentioned,
perhaps $80 million, was for positive train control and the
state funding would have been under the cap.
MR. KING added for further clarification, that it would also be
true for the creation of a public corporation or any trust. The
money that goes to capitalize that new endeavor would also be
subject to the cap.
7:28:41 PM
SENATOR MICCICHE said, "It's only the money from somewhere else
that is not under the cap, whether it's a contribution, a
donation, an assessment or if there's a federal program that is
outside of it. It's only the money outside of state spending
that would be out of the cap, so there is not a way to grow
state spending because you would be capped off at the
appropriation limit."
7:29:09 PM
CHAIR HUGHES directed attention to [the Alaska Marine Highway
System]. If the AMHS was restructured as a public corporation
and the fares were used to build smaller, more efficient, cost
effective vessels, such as catamarans, the state would want it
to do so since it would not fall under the cap. She said that
public corporations have a responsibility to be efficient and
effective. She would hope that they would raise funds for
purposes that would be of benefit to Alaskans and actually save
money.
7:30:09 PM
SENATOR REINBOLD said the AMHS has had opportunities to do so
but she has not seen it happen; instead, the state subsidizes
the ferry. She further recalled seeing subsidies for the Alaska
Housing Finance Corporation (AHFC). She reiterated that she
views this as a loophole. She said she is not comfortable with
Amendment 3.
MR. KING clarified that if a public corporation is losing money
and obtains a state subsidy, that the subsidy would fall under
the cap. It is only the revenue the public corporation generates
that would be excluded from the cap.
7:31:29 PM
CHAIR HUGHES removed her objection.
7:31:38 PM
SENATOR REINBOLD objected.
7:31:45 PM
A roll call vote was taken. Senators Micciche, Shower, Kiehl,
and Hughes voted in favor of Amendment 3 and Senator Reinbold
voted against it. Therefore, Amendment 3, was adopted by a 4:1
vote.
CHAIR HUGHES closed public testimony on SJR 6.
7:32:18 PM
At-ease.
7:39:27 PM
CHAIR HUGHES reconvened the meeting.
7:39:34 PM
SENATOR SHOWER moved to adopt Amendment 4, work order 31-
GS1068\A.5, Wallace, 4/1/19.
31-GS1068\A.5
Wallace
4/1/19
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR SHOWER
TO: SJR 6
Page 1, lines 2 - 3:
Delete "and establishing the savings reserve
fund"
Page 2, line 21:
Delete "savings"
Insert "budget"
Page 2, line 22:
Delete "savings"
Insert "budget"
Page 2, lines 28 - 29:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 4:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 5:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 13:
Delete "savings [BUDGET]"
Insert "budget"
Page 3, line 26, through page 4, line 1:
Delete all material and insert:
"Section 31. Budget Reserve Fund Transition. The
repeal of Section 17(d) of Article IX in the 2020
amendments eliminates any repayment required under
that subsection through the fiscal year ending
June 30, 2021."
CHAIR HUGHES objected for discussion purposes.
SENATOR SHOWER explained Amendment 4. As previously discussed,
[Amendment 1, which was withdrawn], contained two different
topics. This is the first of two amendments. Amendment 4 removes
the name change from the savings reserve fund and reverts to the
budget reserve fund, commonly referred to as the CBR
[constitutional budget reserve] fund. Throughout SJR 6,
Amendment 4 prevents the name change.
SENATOR SHOWER characterized this as a cleaner approach.
7:40:33 PM
CHAIR HUGHES removed her objection. There being no further
objection, Amendment 4 was adopted.
7:40:46 PM
SENATOR SHOWER moved to adopt Amendment 5, work order 31-
GS1068\A.6, Wallace, 4/1/19.
31-GS1068\A.6
Wallace
4/1/19
AMENDMENT 5
OFFERED IN THE SENATE BY SENATOR SHOWER
TO: SJR 6
Page 1, line 7:
Delete "Appropriations"
Insert "Except as provided in (b) of this
section, appropriations"
Page 2, following line 14:
Insert a new subsection to read:
"(b) The legislature may appropriate an
additional amount in excess of the appropriation limit
under (a) of this section for capital improvements,
except that the amount for capital improvements made
in excess of the appropriation limit in a fiscal year
shall not exceed ten percent of the total
appropriation limit for that fiscal year.
Appropriations for capital improvements that exceed
the appropriation limit shall not be used in
calculating the appropriation limit in subsequent
fiscal years."
Reletter the following subsections accordingly.
Page 2, line 26:
Delete "(b)"
Insert "(c)"
CHAIR HUGHES objected for discussion purposes.
SENATOR SHOWER said that this is the second part of [Amendment
1, which was withdrawn]. He said this reverts to the capital
budget discussion. He characterized it as a safety valve for
"good years," when revenue is high, and the legislature chooses
to use it for capital improvements. This would not increase the
size of government by increasing the operating budget. He read
lines 7 - 12, subsection (b) of Amendment 5.
For example, if the total budget is $3 billion, the operating
and capital budget falls inside the appropriation limit. If the
legislature chose to add 10 percent, or $300 million, for
capital improvements, the funding would be outside the cap, and
must be used that year. This would give the legislature
flexibility going forward to work on capital improvement
projects it deems appropriate.
7:42:40 PM
CHAIR HUGHES said she appreciated the distinction of the term
"capital improvements" rather than the capital budget
terminology since the practice of placing programs in the
capital budget has previously occurred.
7:43:02 PM
SENATOR REINBOLD asked whether this would apply to a one-time
capital improvement, for example, related to an earthquake. She
asked of the total budget was $10 billion, if that meant the
state could spend $1 billion.
MR. KING answered that if the limit is $3 billion, the
legislature could only exceed the cap by 10 percent or $300
million. He said to spend $1 billion, it would be necessary to
back out $700 million from other operational costs.
SENATOR REINBOLD said that the state's budget is about $10
billion.
MR. KING explained that the appropriations limit includes only
items subject to the limit. He related that using the FY 19
budget, it would be about $4.6 billion.
SENATOR REINBOLD said that the state could spend $460 million on
a project, such as earthquake repair or bridges, but it cannot
be used in the calculation for the following year.
MR. KING answered yes, that is correct.
SENATOR REINBOLD asked whether the governor supports this.
7:45:11 PM
COMMISSIONER DESIGNEE TANGEMAN said the administration
understands the purpose, but the administration does not support
[Amendment 5] simply because it does allow growth outside of the
intent of SJR 6.
SENATOR MICCICHE said that he intends on supporting [Amendment
5] because it keeps the capital improvement funding under a cap.
The reason the amendment is being offered in this committee is
because as it moves through the process, others will try to
eliminate a cap on capital improvement. [Amendment 5] actually
states that the most that can be spent on capital improvements,
in years with excess revenue, is 10 percent above the
appropriation limit. He surmised that anything from here on out
gets worse. He offered his belief that Amendment 5 is a good
line to draw. He said, "If someone supports this amendment,
they're saying it should be limited to 10 percent." In the past
the capital budget has not been part of the appropriation limit.
He characterized the approach taken by Amendment 5 as a bit of a
safety valve since it would allow some additional spending but
not at the level the legislature has seen in the past.
7:46:50 PM
SENATOR KIEHL asked for further clarification on Amendment 5. He
offered his belief that unlike the earlier version, this does
not place a limit on the amount of capital improvement
appropriations.
MR. KING answered that is technically correct, that the
amendment does not make any limitation on the total amount of
capital [improvement] spending that can be incurred other than
the legislature could theoretically spend the entire cap plus
ten percent on capital improvements.
SENATOR KIEHL acknowledged that would be pretty unlikely.
7:47:48 PM
SENATOR KIEHL turned to how Amendment 5 would affect the
legislature's ability to make a CBR [constitutional budget
reserve} fund draw. He related his understanding that if the
legislature invoked this provision that it could not make a CBR
draw.
MR. KING answered that another provision of SJR 6 does allow a
CBR draw in order to generate enough revenue to reach the
appropriation limit. If the legislature wanted to fund
government at the cap, but insufficient revenues exist to do so,
it could draw funds from the CBR in order to fill the gap.
However, the legislature could not reach into the CBR to fund
the additional ten percent for capital improvements.
7:49:01 PM
SENATOR KIEHL asked whether [Amendment 5] would allow the
legislature to tap into the CBR at all.
MR. KING answered yes, but only to the extent that the revenues
are short of the appropriation limit.
7:49:46 PM
SENATOR KIEHL acknowledged that it is complicated to read "on
the fly." He asked if the effective date of the additional
capital improvement spend could be shifted back a fiscal year to
make a CBR draw if the legislature did not make a CBR draw the
previous year.
MR. KING replied that in his view, the funds do not roll over so
the funds cannot be carried forward to a future year if the
legislature elects not to use them in one year.
MS. MILLS said that she thinks that is correct. The way these
provisions function together, the legislature can only spend an
extra ten percent on capital improvements if the excess revenues
are flowing into the general fund (GF) to "get you there." If it
was necessary for the legislature to draw from the CBR, the
legislature would not have sufficient revenues to get to the ten
percent.
SENATOR KIEHL acknowledged that is the intent, but he would like
to be certain that is the effect.
7:51:32 PM
SENATOR SHOWER said that he understood the concern but asked to
focus on the language in Amendment 5. He said that Amendment 5
strictly speaks to capital improvement appropriations. He
reiterated the purpose, that in good years, with excess revenue
available, the legislature can limit the additional
appropriations for capital improvements to ten percent. The
structure of SJR 6 is different. The legislature would use the
CBR structure to [fill the gap] to the appropriation limit. He
said [Amendment 5] is separate. There should be "no crossing the
streams here," he said.
7:52:54 PM
SENATOR KIEHL suggested he would study it further. He asked how
"capital improvement project" is defined.
MS. MILLS answered that capital improvements were defined
elsewhere in Article IX [of the Constitution of the State of
Alaska] related to government obligation (GO) bonds for capital
improvements so that term would be interpreted in the same way.
"If you could do general obligation bonds to fund a capital
improvement, you could use this exception to spend ten percent
of the appropriation limit on capital improvements," she said.
7:53:52 PM
SENATOR KIEHL asked whether it differs materially from the
statutory definition.
MS. MILLS offered to review it since she does not have the
statutory definition before her, but she would get back to the
committee. She added that the current appropriation limit in
Article IX refers to "capital projects" which could potentially
be interpreted differently. However, she reiterated that
"capital improvements" would be viewed as those projects for
which the state can issue bonds.
7:54:23 PM
SENATOR KIEHL stated that many things meet the statutory
definition of capital improvements that could range far afield
from bricks, mortar, and asphalt. He offered his belief that the
statutory definition comes pretty close to what can be
capitalized. He argued that most of the Office of Information
Technology, including salaries and telephone systems meet the
definition of a capital improvement project in statute. He
envisioned situations in which the state has sufficient revenue
and uses this provision to get into trouble.
7:55:25 PM
CHAIR HUGHES asked for further clarification from the Department
of Law as to whether the language in Amendment 5 would refer to
the definition in the Constitution [of the State of Alaska],
which she believes it does, rather than in statute.
MS. MILLS agreed that is correct. She explained that the
Department of Law would look to what the constitutional framers
meant by capital improvements, which is the brick and mortar,
and infrastructure projects. She said that unless the sponsor's
intent is different, that is how it would be interpreted. She
said it is important that the record reflect what is intended
because that will help to determine the legislative intent.
7:56:11 PM
SENATOR SHOWER asked to make it crystal clear. He said that his
intent is that his amendment [Amendment 5] refers to "brick and
mortar," including buildings, bridges, roads, and other things
of that type. He does not mean ferry operations or other types
of things. He emphasized that "he means building things." He
asked to have Ms. Wallace speak to the definition.
MS. WALLACE replied that she largely concurs with the testimony
from Ms. Mills regarding the way the term is used already in the
Constitution [of the State of Alaska]. She offered her belief
that as this language is placed into a revised constitutional
amendment, the intent behind the term as it is being drafted
will be relevant to the conversation and will be captured by
that phrase.
7:58:08 PM
SENATOR REINBOLD expressed concern with Amendment 5. She leans
toward voting for it because of disasters and this has the
potential to place a real cap on capital expenditures. However,
the reason she is leaning not to support Amendment 5 is because
she has seen so much deception in terms of real budget numbers.
She said she has observed supplemental budget overruns being
placed in the capital budget. She said she does not want any
more room for government to grow. She said that Alaska is
spending three and a half times per capita higher than the rest
of the states. She asked whether the operating budget could be
"stuffed," and this amendment could be used to fund the capital
budget with an additional ten percent funding.
MS. WALLACE asked to share a few thoughts that may help clarify
the amendment. With respect to disasters, SJR 6 contains an
exception for disasters, so disaster spending would be outside
of the cap. The legislature would not be restricted to fund
those projects. She concurs with the testimony by Ms. Mills and
Mr. King in terms of borrowing from the CBR and whether there is
any "wiggle room." She concurs that SJR 6, as drafted, would
limit borrowing to fulfill the deficit up to the appropriation
limit. The only exception or only potential "work around" she
can envision is to borrow from the CBR [constitutional budget
reserve] and use the ten percent additional funding for capital
improvements by using a revision in proposed Section 3 [of SJR
6]. She said that money "in the general fund" and the earnings
reserve account, which is available for appropriation but is not
in the general fund, might be available to the legislature to
make capital improvement appropriations up to the ten percent
cap.
8:01:57 PM
MS. MILLS concurred with Ms. Wallace that SJR 6 contains an
exception for disaster funding. She also agreed that the
earnings reserve account would be the only other source to go to
for spending. She reiterated the funding sources are the
earnings reserve account (ERA) the general fund (GF) and the
constitutional budget reserve (CBR).
SENATOR SHOWER said that if the legislature were to take an
unstructured draw from the earnings reserve account, it would
mean the legislature was not following statutes and is breaking
the law. He said Section 3 is clear that the CBR can only be
used to fund up to the appropriation limit. He related his
understanding that anything beyond that would be an unstructured
draw.
MS. MILLS answered that he is correct. However, if a different
amount of revenue was flowing in, it could change the picture.
The legislature could still take a structured draw, but the draw
could bring the entire amount that is available to above what is
needed to just do the cap. She asked whether that makes sense.
SENATOR SHOWER said that it does.
8:03:34 PM
MR. KING asked to play the devil's advocate. He offered his
belief that there might be something he might wish to look more
closely at before he responds.
CHAIR HUGHES acknowledged that this is not the final committee
of referral so additional opportunities exist.
8:04:02 PM
SENATOR MICCICHE said it does not seem that the ERA becomes the
general fund (GF) until the POMV [percent of market value] draw
occurs and is moved into the general fund. "The earnings reserve
account is not the general fund, is that correct?"
MS. MILLS answered that is correct.
SENATOR MICCICHE related a scenario in which the budget is $4.6
billion, and the combined revenue and POMV was $4 billion. If
the legislature needed to do a CBR draw of $600 million to reach
the $4.6 billion, the legislature could not go above the cap for
any capital. He asked whether that is correct.
MS. MILLS answered that is correct.
MR. KING said if he was referring to a draw from the CBR that is
correct. However, he pointed out that there is not any
limitation in the Constitution [of the State of Alaska] that
prevents an additional draw from the earnings reserve account
(ERA).
SENATOR MICCICHE said that it would not be from the general
fund. The POMV is deposited to the general fund. However, funds
from the earnings reserve fund do not become general fund
monies, unless the legislature decided to disregard all laws.
MS. MILLS answered that is correct. It would just be considered
part of what is counted towards appropriations since it will go
into the general fund, and then have to leave, at which point it
would be considered under the appropriation limit.
SENATOR MICCICHE said that without a CBR draw, the revenue plus
POMV, which he would simply refer to as "general fund revenue"
was $4.61 billion, suddenly a little money could be spent on
excess capital, but to reach the ten percent would require $5.06
billion of "natural revenue" plus POMV, before the legislature
could use the ten percent. He offered his belief that this could
only be used in high revenue years without a CBR draw.
MS. MILLS answered yes, that is how the department would
interpret all of these provisions working together.
8:07:05 PM
SENATOR MICCICHE asked whether there is currently any limit on
capital [improvements] with the existing appropriation limit. He
further asked whether [Amendment 5] is the first limit on
capital [improvements], which is much stricter since it does not
allow the legislature to go above the cap unless there is no CBR
draw. This provision would only apply to a high-revenue year.
MS. MILLS answered yes, for the most part. She agreed that
[Amendment 5] would be the first real cap on capital
improvements. Under the current appropriation limit, several
areas relate to capital improvements, she said. First, it states
that as the legislature approaches the limit, it is necessary to
spend up to one-third of the limit on capital projects.
Therefore, it currently forces a certain amount of capital spend
if "you get up there to the limit." The other thing it does is
to allow the legislature to go to the voters to spend more on
capital projects, without any specific cap on that amount.
8:08:21 PM
SENATOR REINBOLD indicated her question was not answered. She
asked whether the legislature has an opportunity to spend more
money on the operating budget and use ten percent to fund
capital improvements.
MS. MILLS answered yes, if the legislature had sufficient
revenues. She said that the legislature could fill the cap with
the operating budget [appropriation] and then use the ten
percent for capital improvements.
SENATOR REINBOLD offered her belief that nothing prohibits the
legislature from having a federal pass through directly to
municipalities. She said she believes in local control. She said
capital projects do not have to go through the state. She asked
whether anything prohibits the municipalities from obtaining
funding for capital improvements.
MS. MILLS answered there is not.
8:09:58 PM
SENATOR KIEHL asked whether the money in the statutory budget
reserve account is considered as general fund, in terms of the
CBR draw under subsection (b) of Amendment 5.
MS. MILLS answered yes, that would be considered in the general
fund. She said that basically, her view is that the state has
the general fund and the constitutional funds, including the
constitutional budget reserve (CBR), and the permanent fund.
MR. KING explained that another provision within the resolution
would prevent this money from being held in the statutory budget
reserve. It indicates that for excess funds not appropriated at
year end, the funds will be transferred to the principal account
of the permanent fund or to the constitutional budget reserve
(CBR). If [SJR 6] were to take effect, this would be a moot
point because there would be no [savings reserve fund].
SENATOR KIEHL asked for the reference in SJR 6.
MS. MILLS referred to language on page 2, lines 15-24], Section
16 (b), which would become subsection (c) if Amendment 5 is
adopted
8:11:52 PM
SENATOR KIEHL asked when the state sells general obligation (GO)
bonds, if project managers can be funded from the receipts from
the bond sales.
MS. MILLS said she was not familiar with how this works. She
offered to research it and report back to the committee.
8:12:37 PM
CHAIR HUGHES offered her support for Amendment 5. She said as
Senator Micciche indicated, there has not been a cap. She said
she thinks a cap is good, especially since Alaska is still a
young state that lacks infrastructure. The last major highway
project was the Parks Highway in the 1970s, which is nearly 50
years ago. If the legislature wanted to fund $300 million in
capital improvement projects, it could add $300 million to the
operating budget under the cap. She suggested the Senate Finance
[Standing Committee] might wish to consider a percentage limit
within the cap for the operating budget to avoid the legislature
using the ten percent provision to grow the operating budget.
However, she supports SJR 6 because Alaska still has a lot of
roads to build over time. However, she would prefer to have some
type of limit.
8:14:48 PM
SENATOR REINBOLD remarked it was obvious that roads to resources
need to be built. However, she favors local government control
since the state has repeatedly overspent. She said she does not
support Amendment 5 because she envisions the legislature would
use it to "bloat" the operating budget and use the cap to fund
capital improvement projects. She said that she thinks the
intention is good. However, she sees the potential for abuse.
8:16:01 PM
SENATOR KIEHL referred to the language on page 1, line 7 of
Amendment 5, which read "an additional amount in excess of the
appropriation limit ?" He asked whether this language includes
all fund sources or if the amount is limited to effectively"
general fund amounts as calculated in excess of the cap. He
further asked if the legislature could bring in another "8-1
ratio" federal project for $300 million no matter what the fund
source.
MS. MILLS said that she thinks it might be helpful to think
about the other exceptions that exist. Federal monies are
already outside the cap. If the project has a state match, the
state matching funds would fall under the cap or would need to
be in the ten percent of the total appropriation limit.
SENATOR KIEHL agreed that was precisely the question. He
referred to subsection (a), which read, "Appropriations made for
a fiscal year shall not exceed ?" It goes on to list exceptions,
but the language in [Amendment 5 on lines 7, (b)] reads, "the
legislature may appropriate an additional amount in excess of
the appropriation limit under (a)?." It does not indicate an
additional amount in excess of the appropriation limit "as
calculated under subsection (a)." He asked how the language in
Amendment 5 pertains to the scenario of "$300 million cap, don't
care what the fund source is, that's what you got."
8:18:06 PM
MS. MILLS responded that federal receipts already fall outside
the limit. She said she did not think this would affect the
amount of federal funds and that just because it is a capital
improvement project, that this would create another cap. Rather,
this would really restrict the state funds because there is no
other exception for that sort of spending.
SENATOR KIEHL said that is precisely what he is driving at, but
that is not what the words in Amendment 5 read.
MS. MILLS interjected that it is necessary to read the existing
exceptions list along with Amendment 5. She said that the
existing exceptions allow federal funds for a specific purpose.
She interpreted this to mean that federal funds are allowed, but
Amendment 5 relates to [appropriations for] capital
improvements. She acknowledged that it would be possible to
specify "money from the general fund" as a way to clarify the
language.
8:19:28 PM
CHAIR HUGHES offered her belief that the totality is important.
SENATOR KIEHL explained that he was unsure of that language. He
said he appreciated the desire to read "amount" as specific, but
it is not. He said he was unsure at this point of what to do.
8:20:14 PM
SENATOR SHOWER said that he understood what Senator Kiehl was
saying, but he believes the language in Amendment 5 "gives us
what we need." He explained that part of his goal with Amendment
5 is to allow the legislature to exceed the cap in "good years"
to access federal funding. He echoed the same concerns as
Senators Reinbold and Hughes because he wants to reduce state
government. He agreed that if a loophole exists, someone will
find a way to spend more money than the state can afford, which
is partly why the state is at this juncture. He stated his
intent is to allow the safety valve on "good years" for
infrastructure, since infrastructure is important. He said he
would not support this if he thought it would be used to
increase the operating budget and thereby the size of government
each year. However, he said he thinks Amendment 5 is fine
because it is limited to capital improvements and only for one
year. In addition, it includes a revised [appropriation] limit,
which remains low and does not increase. He said he believes
this works and meets the governor's intent in [SJR 6]. This
would eliminate extra ways to spend money and increase the size
of government. He offered his belief that the questions have
been answered.
8:22:05 PM
CHAIR HUGHES removed her objection.
8:22:13 PM
SENATOR REINBOLD objected. She said that she has repeatedly
observed supplemental budgets added to the capital budget and
not enough parameters are in place to prevent it. She
appreciated the sponsor's intention, but every single word in a
constitutional amendment matters. She said that she would err on
the side of caution since she does not trust legislators to
follow it. She said, "With that, I'm going to be a no vote on
this."
8:23:08 PM
A roll call vote was taken. Senators Micciche, Kiehl, Shower,
and Hughes voted in favor of Amendment 5 and Senator Reinbold
voted against it. Therefore, Amendment 5 was adopted by a 4:1
vote.
8:23:39 PM
SENATOR MICCICHE offered his belief that the state needs a
dramatically revised appropriation limit. He appreciated what
the governor brought forward. He thinks the first interest rate
was unrealistic, but he can support this wholeheartedly, and it
would have avoided tens of billions of dollars had this been in
place 25 years ago. He appreciated the committee's hard work on
the amendments that he views as improvements to SJR 6.
8:25:10 PM
SENATOR REINBOLD said she supports local control since not all
funding must pass through the state for local projects. She said
she is not confident with the effects of the amendments the
committee adopted, but she supports the concept of an
appropriation limit and the original version of SJR 6. However,
she did not wish to hold up moving SJR 6.
SENATOR KIEHL said that he appreciated the committee's work
because it made a very bad constitutional amendment marginally
better. Ultimately, he does not believe that the state needs a
revised constitutional spending limit because the voters are the
"term limit" and the "spending limit." They send a very strong
executive branch and 60 very different legislators to represent
them.
He said it is up to the legislature to figure out the structure
in the Constitution [of the State of Alaska]. Mr. King presented
numerous charts with three extended periods of reduced state
spending that demonstrates that the constitution works. He said
voters select their legislators who collectively complete the
work. However, to place a particular political philosophy in the
state's constitution rather than looking to the voters to make
necessary changes is not the best way to amend it. He offered
his belief that leaving aside the arguments the committee made
about whether SJR 6 is an amendment or a revision, this
resolution has serious constitutional issues. He reiterated his
belief that it is not good constitutional writing because it
does not put "faith in Alaskans at the ballot box." He said he
would not be supporting moving the bill.
8:27:15 PM
CHAIR HUGHES remarked that this committee has focused on the
constitutionality of the resolution. She expressed concern about
the cascade, the waterfall, and the amount in the constitutional
budget reserve (CBR). Since the next committee referral is the
Senate Finance Standing Committee, she hopes it will consider
the appropriation amount to keep on hand during volatile revenue
streams and if one year is sufficient. She also would like to be
sure, in terms of the cascade or waterfall, that funds can be
deposited into the CBR. If excess funds must first be deposited
into the permanent fund, perhaps not enough funds would be
available to deposit to the CBR.
She said that she opposes depositing any of the ten percent
appropriation for capital improvements outside the cap into the
operating budget and would like the finance committee to
consider ways to prevent that from happening, including
considering establishing percentages within the cap. She offered
her belief that the intention of SJR 6 is not to increase the
operating budget. She said that recent polling has shown a very
strong majority, 62 percent, of Alaskans support a
constitutional spending limit. In addition, more people within
each political party support it than oppose it. In the past,
polling indicated seven percent of Alaska unsure. In closing,
she said that Alaskans are very interested in seeing this move
forward.
8:30:06 PM
SENATOR REINBOLD moved to report SJR 6, work order 31-GS1068\A
as amended, from committee with individual recommendations and
attached fiscal note(s). There being no objection, the CSSJR
6(JUD) was reported from the Senate Judiciary Standing
Committee.
8:30:30 PM
CHAIR HUGHES stated that the committee authorizes Legal
Services, the Division of Legal and Research Services,
Legislative Affairs Agency to make technical and conforming
changes to the amended resolution.
8:30:55 PM
There being no further business to come before the committee,
Chair Hughes adjourned the Senate Judiciary Standing Committee
meeting at 8:30 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR4 Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Transmittal Letter.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Sectional Analysis Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM |
SJR 4 |
| SJR4 Explanation of Changes Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Fiscal Note GOV-DOE.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM |
SJR 4 |
| SJR 6 Sponsor Statement.pdf |
SJUD 4/1/2019 1:30:00 PM SSTA 3/21/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM |
SJR 6 |
| SJR006A.PDF |
SJUD 4/1/2019 1:30:00 PM SSTA 3/21/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM SSTA 3/26/2019 1:30:00 PM |
SJR 6 |
| SJR 6 - Slideshow Presentation.pdf |
SJUD 4/1/2019 1:30:00 PM |
SJR 6 |
| SJR 6 ver A Sectional 3.21.19.pdf |
SJUD 4/1/2019 1:30:00 PM SSTA 3/21/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM SSTA 3/26/2019 1:30:00 PM |
SJR 6 |
| SJR 6 Fiscal Note.PDF |
SJUD 4/1/2019 1:30:00 PM SSTA 3/21/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM SSTA 3/26/2019 1:30:00 PM |
SJR 6 |
| SJR 6 - Leg. Legal Memo.pdf |
SJUD 4/1/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM |
SJR 6 |
| SJR 6 - DOL Memo - re amendment vs. revision.pdf |
SJUD 4/1/2019 1:30:00 PM SSTA 3/25/2019 5:00:00 PM |
SJR 6 |
| Legal Service Memo SJR 6 - 3.29.19.pdf |
SJUD 4/1/2019 1:30:00 PM |
SJR 6 |