Legislature(2021 - 2022)BUTROVICH 205
09/09/2021 01:30 PM Senate JUDICIARY
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| Audio | Topic |
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| Start | |
| SJR301 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SJR301 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
September 9, 2021
2:14 p.m.
MEMBERS PRESENT
Senator Roger Holland, Chair
Senator Mike Shower, Vice Chair (via teleconference)
Senator Shelley Hughes
Senator Robert Myers
Senator Jesse Kiehl
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative James Kaufman
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 301
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit; and relating to the budget
reserve fund.
- MOVED CSSJR 301(JUD) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SJR301
SHORT TITLE: CONST. AM: APPROP LIMIT
SPONSOR(s): SENATOR(s) MYERS
09/01/21 (S) READ THE FIRST TIME - REFERRALS
09/01/21 (S) JUD, FIN
09/03/21 (S) JUD AT 1:30 PM BUTROVICH 205
09/03/21 (S) Heard & Held
09/03/21 (S) MINUTE(JUD)
09/08/21 (S) JUD AT 1:30 PM BUTROVICH 205
09/08/21 (S) Heard & Held
09/08/21 (S) MINUTE(JUD)
09/09/21 (S) JUD AT 1:30 PM BUTROVICH 205
WITNESS REGISTER
ED KING, Staff
Senator Roger Holland
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained the amendments to SJR 301 on
behalf of the committee, Senator Holland, Chair.
REPRESENTATIVE JAMES KAUFMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on SJR 301 as sponsor of the
companion bill.
ACTION NARRATIVE
2:14:55 PM
CHAIR ROGER HOLLAND called the Senate Judiciary Standing
Committee meeting to order at 2:14 p.m. Present at the call to
order were Senators Myers, Hughes, Kiehl, Shower (via
teleconference) and Chair Holland.
SJR 301-CONST. AM: APPROP LIMIT
2:15:52 PM
CHAIR HOLLAND announced the consideration of SENATE JOINT
RESOLUTION NO. 301 Proposing amendments to the Constitution of
the State of Alaska relating to an appropriation limit; and
relating to the budget reserve fund.
[SJR 301 was previously heard on 9/3/21 and 9/8/21. Public
testimony was opened and closed on 9/8/21.]
2:16:12 PM
CHAIR HOLLAND moved to adopt Amendment 1, work order 32-
LS1161\A.1.
32-LS1161\A.1
Wallace/Marx
9/8/21
AMENDMENT 1
OFFERED IN THE SENATE
Page 1, line 2:
Delete "; and relating to the budget reserve
fund"
Page 2, line 27, through page 3, line 8:
Delete all material.
Renumber the following resolution sections
accordingly.
SENATOR HUGHES objected for discussion purposes.
2:16:35 PM
ED KING, Staff, Senator Roger Holland, Alaska State Legislature,
Juneau, Alaska, on behalf of the committee, explained that
Amendment 1 would remove Sec. 2 from SJR 301. Sec. 2 would
provide a change to the constitutional budget reserve (CBR). As
SJR 301 is int
ended to alter the constitutional spending limit under Sec. 16
of Art. IX, incorporating a change to another section of the
constitution raises questions regarding whether the change could
be considered an amendment or a revision. Striking Sec. 2 from
the resolution will narrow the scope to a single section of the
constitution and remedy any potential litigation.
2:17:29 PM
SENATOR HUGHES asked if it is problematic to have two items in
one constitutional amendment or if the items should be
separated.
MR. KING said a legal opinion dated May 8, 2021, from Marie
Marx, Legislative Counsel, Legislative Legal Services, was
provided to the committee at a hearing on SJR 5. He stated that
this document was posted to BASIS for SJR 301. This memo
discusses the revision versus amendment conversation.
2:18:18 PM
SENATOR MYERS stated that legal issues aside, simpler is always
better so he favors Amendment 1.
SENATOR HUGHES removed her objection.
CHAIR HOLLAND found no further objection, so Amendment 1 was
adopted.
2:18:49 PM
CHAIR HOLLAND said he would set aside Amendment 2 with the
intent to take it up later.
2:19:03 PM
SENATOR KIEHL moved to adopt Amendment 3, work order 32-
LS1161\A.5.
32-LS1161\A.5
Marx
9/7/21
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR KIEHL
Page 1, lines 13 - 14:
Delete "[, INCLUDING REVENUES OF A PUBLIC
ENTERPRISE OR PUBLIC CORPORATION OF THE STATE THAT
ISSUES REVENUE BONDS]"
Insert ", including revenues of a public
enterprise or public corporation of the State that
issues revenue bonds"
CHAIR HOLLAND objected for discussion purposes.
2:19:13 PM
SENATOR KIEHL explained that Amendment 3 would restore an
exemption from the spending cap for the revenues of a public
enterprise or public corporation of the state that issues
revenue bonds. He said an astute observer pointed out that he
took the opposite position during the discussion on SJR 5. At
the time, he warned that the state should avoid the risks of
unaccountable public corporations "squirreling away" funds or
potentially "sliding" state assessments in lieu of taxes and
expenditures from the spending cap and the responsibility of the
legislature. He said this was prior to the lawsuit on whether
the Power Cost Equalization (PCE) Fund was "sweepable." Since
then, there was a lawsuit and a judge's ruling. This provides an
opportunity for public corporations to "squirrel away" funds and
potentially, not to tax, but to establish fees for services on
Alaskans that would not be under the spending cap.
SENATOR KIEHL suggested that given this, it would be wise to
leave these items out of the spending cap in case future
legislatures see the need for more oversight "or tighter
control" over operations of state corporations. He said it is
not hard to envision a time when the legislature may want to
rein in a fee and toll corporation, but there might not be any
room under the cap to do so. Therefore, corporations would not
be subject to the Executive Budget Act or legislative oversight.
If the legislature retains the exemption, future legislatures
will have that opportunity. He said the effect of Amendment 3
would be to retain the constitutional language as it reads
today.
2:21:54 PM
SENATOR HUGHES said she was interested in allowing corporations
the latitude to make creative solutions. For example, the
legislature has considered a corporate structure for the Alaska
Marine Highway System (AMHS) since it has struggled. If AMHS
came up with a way to increase corporate receipts, those
revenues wouldn't be under the cap. She expressed concern that a
corporation or entity could be set up and the state could move a
substantial amount of revenue to the entity. This corporate
entity could earn interest and spin off revenue that would no
longer be included in the cap. She suggested a friendly
conceptual amendment to delete language on line 4 of Amendment
3, "including revenues of a public enterprise or public
corporation ..." and insert, "including corporate receipts of a
public enterprise or public corporation...."
2:23:40 PM
MR. KING responded that the issue of the definition of revenues
has previously arisen in other iterations of the constitutional
amendment. Some members previously expressed concern that
interest earned on endowment funds or state subsidies from the
general fund could be considered revenues of the corporation. If
the committee is worried about those interpretations, Senator
Hughes's conceptual amendment could be a good remedy.
2:24:13 PM
SENATOR KIEHL said he liked the concept. He asked for members'
level of confidence that investment earnings would not be
considered corporate receipts.
2:24:34 PM
MR. KING answered that the general interpretation of corporate
receipts is to consider them as monies received by the
corporation in the process of doing business. Specifically, it
would relate to fees charged for services provided. The interest
accrued on assets are considered capital gains and not receipts
of the corporation. It could be defined more clearly by saying
"corporate receipts generated from business activities excluding
interest from assets" or something to that effect. He recapped
that generally, the corporate receipts should exclude non-
business like activities.
2:25:26 PM
SENATOR KIEHL said this would require enacting legislation due
to the nature of the proposal. He agreed with Mr. King's
definition. He said if that was Senator Hughes' intent, he would
be amenable to including that language and making the definition
clear in enacting legislation.
CHAIR HOLLAND asked if he was speaking to the expanded language
Mr. King suggested language "including corporate receipts and
...."
SENATOR KIEHL interjected that it would be appropriate for an
enacting bill once this passes. He said the intent matches.
SENATOR HUGHES offered to move a conceptual amendment.
2:26:35 PM
At ease
2:26:52 PM
CHAIR HOLLAND reconvened the meeting.
2:27:05 PM
SENATOR HUGHES moved Conceptual Amendment 1 to Amendment 3, on
line 4 to delete "revenues" and insert "corporate receipts."
CHAIR HOLLAND objected for discussion purposes.
CHAIR HOLLAND removed his objection.
2:27:31 PM
CHAIR HOLLAND found no further objection, so Conceptual
Amendment 1 to Amendment 3 was adopted.
2:27:36 PM
SENATOR MYERS said he shared some of Senator Kiehl's concern
about using corporations as a shield from under the spending cap
or hiding spending in the other ways. He recognized that during
the discussion on SJR 5 that the price paid for a ticket on the
Alaska Railroad counts toward the spending cap. He offered his
view that Conceptual Amendment 1 to Amendment 3 would help
segregate those funds and help determine what should be counted
towards the spending cap and what should not count.
2:28:37 PM
CHAIR HOLLAND stated that Legislative Legal Services is
authorized to make conforming changes.
2:28:51 PM
CHAIR HOLLAND stated that he would assume Senator Shower (via
teleconference) was in agreement unless he verbally objects.
2:29:09 PM
SENATOR SHOWER said he agrees with the amendment.
2:29:17 PM
CHAIR HOLLAND removed his objection. He found no further
objection, so Amendment 3, as amended, was adopted.
2:29:57 PM
SENATOR KIEHL moved to adopt Conceptual Amendment 4, which has
handwritten changes to work order 32-LS1161.A.7.
CONCEPTUAL AMENDMENT 4
Page 1, line 16, through page 2, line 1:
Delete "real gross domestic product"
Insert "personal income of the residents"
Page 2, lines 4 - 6.
Amend to read: The value of the personal income of the
residents in this section shall not include
compensation of state government employees and shall
not include distributions of permanent fund dividends"
CHAIR HOLLAND objected for discussion purposes. He
asked for an explanation of Amendment 4 as originally
drafted.
Amendment 4, work order 32-LS1161.A.7 in its original form read,
as follows:
32-LS1161\A.7
Marx
9/7/21
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR KIEHL
Page 1, line 16, through page 2, line 1:
Delete "real gross domestic product"
Insert "personal income of the residents"
Page 2, lines 4 - 6:
Delete ". The value of the real gross domestic
product in this section shall not include expenditures
for government spending"
2:30:28 PM
SENATOR KIEHL explained Amendment 4. He stated that this topic
arose during the original discussion of the bill. Amendment 4
would ultimately shift the economic indicator from gross
domestic product (GDP) to personal income. Without restating the
discussion from the prior hearing, it would put the
legislature's interest directly on the people being served. He
highlighted that personal income would be less subject to the
peaks and valleys of oil prices or mineral prices. He
acknowledged that Mr. King could help adjust the figures in the
bill to keep within the sponsor's spending level.
2:31:52 PM
SENATOR MYERS expressed concern about Conceptual Amendment 4
since it proposes using personal income instead of GDP as the
economic indicator. He said he understood the reason to use
personal income is because it is a commonly used indicator in
the Lower 48 and Alaska would be the first state to use GDP. He
said a significant portion of SJR 301 is to tie the activity of
the state government to the activities of the state's economy.
However, a lot of personal income does not tie directly into the
state's economy, such as retirement income. He offered his view
that retirement income and investment income will only grow
moving forward. Currently, retirement accounts have spread,
including 401(k) accounts. Perhaps his daughters' college funds
would qualify as personal income, but none of this income has
anything to do with economic activity in the state, he said.
2:33:51 PM
SENATOR MYERS elaborated that the goal of SJR 301 is to affect
state policy by creating a good business climate and encourage
investment in Alaska, not in the stock market as a whole. He
said he would rather see people invest in their own business or
a friend's business and foster economic activity in Alaska.
Switching from GDP to personal income will cause the state to
lose sight of this, which ultimately could result in a larger
government spend. Although he recognized some volatility of a
natural resource based economy, he maintained that GDP is a
better approach.
2:35:59 PM
SENATOR HUGHES said she appreciates SJR 301 because it is
important for the legislature to think about the state's budget
in terms of what Alaska can afford. She stated that the oil-
based economy is volatile with deep spikes and drops but
indexing to the GDP using the 5-year averaging would smooth it
out. She said the changes would still result in rolling hills
and valleys. However, when oil prices go up the budget tends to
increase and when prices drop, it creates a crisis. This results
in the state needing to make cuts or raise taxes. However, if
the state had a more diversified economy, it would be a
brilliant thing to explore.
SENATOR HUGHES offered her support for Conceptual Amendment 4
for two reasons. First, personal income would smooth things out
even better than GDP. Second, personal income relates to income
of residents and reflects what the state can afford. For
example, if the oil industry is doing really well and prices
rose, a lot of dollars would leave the state and other countries
and shareholders benefit, not Alaskans.
2:38:11 PM
SENATOR HUGHES said it would not take the legislature's focus
off the state's economic health because personal income is a
subset of GDP. Thus, it will reflect the general intent that the
budget is relevant but have a better smoothing effect. Income is
income, she said, whether it is retiree income or not. Third,
since personal income does not include income going out of
state, it will provide a better indicator. She explained that
effect of Conceptual Amendment 4 is to delete lines 6 and 7 of
Amendment 4.
2:39:45 PM
SENATOR KIEHL read the portion of Conceptual Amendment 4 that
incorporated the handwritten changes for the benefit of those
listening to the hearing:
On page 2, lines 4-6
Amend to read: "The value of the personal income of
the residents in this section shall not include
compensation of state government employees and shall
not include distributions of permanent fund dividends.
2:40:19 PM
SENATOR KIEHL said he appreciated Senator Hughes' work on
Conceptual Amendment 4. It avoids a feedback loop, in which
state employee spend or PFDs can affect the cap. These feedback
loops can create vicious cycles. Conceptual Amendment 4 cleans
it up and prevents feedback loops.
2:40:56 PM
SENATOR SHOWER asked Mr. King to weigh in. He recalled work on
other constitutional amendments.
2:41:31 PM
MR. KING responded that it comes down to a policy call of
whether to use GDP or personal income as the macroeconomic
indicator of choice. The GDP will be more volatile in a
resource-based economy such as Alaska because the price of the
commodities changes the GDP without any changes in production
levels. Therefore, in a more standard economy that is based on
manufacturing, GDP would expand if a new manufacturing plant
opened up. There would be a strong economic tie to the amount of
economic activity involved captured by GDP. In Alaska, GDP can
increase because the prices change so it is more volatile. He
acknowledged that the 5-year average helps smooth out the peaks
and valleys.
2:42:46 PM
MR. KING said as Senator Myers pointed out, if the state moves
away from a resource-based economy, GDP might be a better
measure of how the economy functions rather than the amount of
money people in the economy have. Senator Hughes made the point
that the amount of the money residents has provides the tax base
of the government. Therefore, other states that use personal
income and have income taxes are very married because it does
determine how much is available for the government to spend. He
said either of these indicators will work. He noted that
personal income would be a little less volatile but that does
not automatically mean it is superior. However, if volatility is
one of the measures the legislature is worried about, it is a
concern.
2:43:48 PM
SENATOR SHOWER indicated he supports the indicator change from
GDP to personal income. He asked Mr. King if either approach
will serve the state slightly better.
MR. KING responded that on the one hand, the GDP is a leading
indicator of personal income in some respects, especially in
Alaska's commodity-based market. When oil prices increase, the
companies producing oil have more money in their budgets.
Therefore, the companies can use the additional funds in their
capital budgets and maintenance funds to hire more people to do
maintenance, exploration, and development. Thus, GDP will move
faster than personal income, which is one reason why personal
income tends to be smoother. When dramatic shifts occur with oil
pricing, companies are trying to manage those peaks and valleys.
Since Alaska already uses a 5-year average, the state is already
"lagging" the indicator. So, using a 5-year average on personal
income will result in "lagging" a lagging indicator. This means
it will move even slower and be more stable, but less
responsive. There are merits to either decision, he said. For
example, if the state moves away from a resource-based economy
to a more diversified economy this conversation will not matter.
He said he does not have a strong opinion for which indicator to
use in the context of a constitutional amendment looking forward
in 50-100 years.
2:46:24 PM
SENATOR MYERS highlighted that the most important part of GDP is
"D" or domestic. It is what happens here, he said. A number of
types of personal income happen elsewhere but flow into the
state. Thus, moving away from what happens domestically concerns
him. Certainly, volatility is an issue but the state is moving
away from that as it becomes less dependent on oil for the
state's economy as a whole. Alaska will still be a natural
resources state due to mining, fishing or other resources.
However, none of those will swing as wildly as oil. Therefore,
it's important to move the state towards a more diverse economy.
Focusing on GDP could result in the legislature considering the
state's economy as a whole rather than solely on its natural
resources. Finally, if state employees are backed out of
personal income, salaries of local government employees should
also be taken out due to pass through funding. Alaska's funding
is a little different in that so much of local government is
funded by the state. For example, funding from the state for
school districts, community assistance grants, school bond debt
reimbursement all effect local government. Other states manage
these things at the county level, he said.
2:49:41 PM
REPRESENTATIVE JAMES KAUFMAN, Alaska State Legislature, Juneau,
Alaska, speaking as sponsor of the companion bill to SJR 301,
stated that one goal in crafting [SJR 301 and the companion
bill, HJR 301] was to use the best composite index, including
volatility. Although GDP is novel, it was selected because it
incorporated so many factors, including new business activity,
inflation and population. Moreover, data is easier to obtain and
the quality of the metric has improved.
REPRESENTATIVE KAUFMAN acknowledged the necessity for multi-
generational language in a constitution, which should span 50-
100 years. Although the economy will not always be oil based, it
will be resource driven and will ebb and flow. He predicted that
if states using personal income as the economic indicator had a
chance to do so, some states might consider switching to a GDP.
The economic modeling shows that extreme volatility evens out
with the five-year smoothing so it has not been problematic, he
said.
2:52:22 PM
REPRESENTATIVE KAUFMAN said his second choice would be to use
personal income. He considered using it but found that GDP
really represents the private sector economy, which is the
productive economy that should be the focus rather than for the
state to rely so heavily on government.
2:52:53 PM
SENATOR HUGHES remarked that in the last 50 years the state has
had an oil-based economy. During the budget process, the
legislature has observed a growth in the number of Alaskans that
are dependent on government for their income. In fact, one in
three Alaskans rely on Medicaid, she said. By tying the
[appropriations limit] to personal income, the state would be
focused on improving the income of all residents and working to
diminish the number of people dependent on government. As
Representative Kaufman noted, the GDP data has improved, but so
has the personal income data collection. Since personal income
is more directly related to the money available in Alaska, using
it as the indicator encourages the legislature to focus on
economic growth. Thus, it would add an additional motivator
besides seeking a healthy economy. Although she recognized that
Representative Kaufman does not support personal income as the
first choice for an economic indicator, and even though the
five-year average will provide some smoothing, it would not be
as smooth as using personal income. Again, during oil income
spikes, much of that income goes outside, but it also leads to
larger state budgets and potentially to budget gaps. Further,
she expressed concern about rolling hills and volatility. She
stated her support for using a personal income per Conceptual
Amendment 4.
2:55:25 PM
SENATOR KIEHL said it all comes back to the need for state
services. Investors still have kids in schools, license their
cars, insure their homes, and use the court system. He
acknowledged that personal income is not as close a tie as an
infrastructure base, but the income of Alaskans is key. He
provided what he characterized as an absurd example, in which a
Canadian Robotic Mining Company mine on the Canadian side of the
border extracted ore in Alaska but did not employ any Alaskans.
This would not benefit Alaskans in any meaningful way. He asked
members to support Conceptual Amendment 4.
2:57:19 PM
At ease
2:57:49 PM
CHAIR HOLLAND reconvened the meeting.
2:57:53 PM
SENATOR MYERS proposed Conceptual Amendment 1 to Amendment 4, on
line 7 add "compensation of state and local government
employees."
2:58:22 PM
CHAIR HOLLAND objected for discussion purposes.
CHAIR HOLLAND removed his objection. He heard no further
objections, so Conceptual Amendment 1 to Amendment 4 was
adopted.
2:58:49 PM
CHAIR HOLLAND brought Amendment 4, as amended, before the
committee. He removed his objection.
SENATOR MYERS objected.
At ease
2:59:09 PM
CHAIR HOLLAND reconvened the meeting.
A roll call vote was taken. Senators Hughes, Shower (via
teleconference) Kiehl and Holland voted in favor of Amendment 4,
as amended, and Senator Myers voted against it. Therefore,
Amendment 4, as amended, was adopted by a 4:1 vote.
2:59:43 PM
CHAIR HOLLAND announced that Amendment 4, as amended, was
adopted by a vote of 4 yeas and 1 nay.
2:59:58 PM
At ease
3:00:25 PM
CHAIR HOLLAND reconvened the meeting and tabled Amendment 5.
3:00:55 PM
SENATOR MYERS moved to adopt Amendment 6, work order 32-
LS1161\A.8.
32-LS1161\A.8
Marx
9/8/21
AMENDMENT 6
OFFERED IN THE SENATE
TO: SJR 301
Page 2, lines 3 - 4:
Delete "established by law except that the
percentage shall be not more than fourteen percent"
Insert "the percentage established by law that is
not a law enacted as an appropriation bill or fourteen
percent, whichever is less"
CHAIR HOLLAND objected for discussion purposes.
3:01:00 PM
SENATOR MYERS explained that Amendment 6 provides a technical
fix for an issue raised by Senator Hughes. SJR 301 provides for
a spending cap in statute that does not exceed more than
fourteen percent of the average of the value of the personal
income of residents established by law. Since the budget is
considered a law, it would overwrite any statute.
SENATOR MYERS said Amendment 6 would clarify that the percentage
that applies to the calculation in the proposed resolution is
either the amount established by law, or fourteen percent,
whichever is less. Amendment 6 also provides that the law may
not be an appropriation law.
SENATOR MYERS explained that the bill would provide a spending
cap of not more than 14 percent.
3:02:31 PM
SENATOR KIEHL asked if the spending cap in SJR 301 would
specifically be subject to an initiative.
SENATOR MYERS offered to check with Legislative Legal. His
initial reaction is that it could be done by an initiative
because an initiative process does not appropriate money.
Amendment 6 would limit the amount that can be appropriated so
there would not be any restriction. Conversely, an initiative
could raise the spending cap, as well.
3:03:49 PM
SENATOR KIEHL said he reviewed the restrictions on initiatives
and it is clear this doesn't make or repeal appropriations. He
was uncertain whether there was an argument it could dedicate
revenues. He said this is something to contemplate. However, he
said he thinks he agrees with Senator Myer's interpretation.
3:04:39 PM
CHAIR HOLLAND removed his objection. He found no further
objection, so Amendment 6 was adopted.
3:05:00 PM
SENATOR MYERS moved to adopt Amendment 7, work order 32-
LS1161\A.9.
32-LS1161\A.9
Marx
9/8/21
AMENDMENT 7
OFFERED IN THE SENATE BY SENATOR MYERS
TO: SJR 301
Page 2, lines 2 - 4:
Delete "The percentage that applies to the
calculation in this section shall be established by
law except that the percentage shall be not more than
fourteen percent."
Insert "The percentage shall be established by
law and shall not exceed fourteen percent. Upon an
affirmative vote of two-thirds of the membership of
each house, the legislature may appropriate an
additional amount for capital projects in excess of
the limit under this section, except that the total
amount appropriated shall not exceed an amount equal
to fourteen percent of the average calculated under
this section."
CHAIR HOLLAND objected for discussion purposes.
3:05:05 PM
SENATOR MYERS explained that Amendment 7 began as a discussion
with SJR 5 and applies to SJR 301, in which the issuance of
general obligation (GO) bonds and their repayment are exempt
from the cap. This provides an incentive for the legislature to
avoid the cap in capital spend by issuing GO bonds. He
characterized it as a pretty easy escape valve. In searching for
a solution, he used the assumption that a future statutory cap
was in place, which was lower than the constitutional spending
cap. Capital appropriations could be made for the difference
between the statutory cap and the constitutional spending limit,
but it would require a two-thirds vote of each body instead of a
simple majority. This would avoid the expense of an election and
remove an incentive to create new debt, but still provide head
room on the cap. As mentioned in the bill presentation, part of
the goal and purpose of SJR 301 is to smooth out capital
spending to avoid maintenance or deferred maintenance costs.
This would maintain some smoothing, add accountability and
retain the spending cap, but give the state the ability to build
capital projects in the state.
3:07:51 PM
SENATOR HUGHES acknowledged the need for infrastructure in
Alaska. Assuming the constitutional amendment was set at
fourteen percent and the statute at eleven percent, she asked if
it would require a two-thirds vote to exceed eleven percent or
only if it surpassed fourteen percent.
SENATOR MYERS answered it would be required if it exceeded
eleven percent.
SENATOR HUGHES asked whether the two-thirds vote could ever
exceed the fourteen percent.
SENATOR MYERS answered no.
3:08:44 PM
SENATOR HUGHES asked for the definition of capital projects.
SENATOR MYERS said the Senate Transportation Standing Committee
discussed the definition during the general obligation (GO) bond
package in SB 74. The Alaska Supreme Court uses a legal
definition for capital projects in the Alaska Constitution that
requires physical infrastructure.
3:09:50 PM
SENATOR KIEHL related that the past court and attorney general
opinions relate to a definition of capital improvements. He
related that the term "capital projects" is defined in statute.
He asked if the sponsor wanted to use capital projects or if he
preferred to use the term "capital improvements.
SENATOR MYERS responded that he preferred to use the tighter
term "capital improvements."
3:10:55 PM
SENATOR HUGHES asked if asked if a capital project would include
a new road.
SENATOR KIEHL answered yes.
3:11:20 PM
SENATOR KIEHL referred to lines 4-5 of Amendment 7, which was
amended by Amendment 6. He asked if the sponsor wanted to use
that language in Amendment 7.
3:11:49 PM
At ease
3:12:19 PM
CHAIR HOLLAND reconvened the meeting.
3:12:21 PM
SENATOR MYERS moved Conceptual Amendment 1 to Amendment 7, on
line 6 to replace "projects" with "improvements".
CHAIR HOLLAND found no further objection, so Conceptual
Amendment 1 to Amendment 7 was adopted.
SENATOR KIEHL asked if lines 4 and 5 of Amendment 7 should
conform to Amendment 6.
SENATOR MYERS answered yes.
3:13:08 PM
CHAIR HOLLAND removed his objection.
CHAIR HOLLAND found no further objection, so Amendment 7, as
amended, was adopted.
3:13:36 PM
At ease
3:16:18 PM
CHAIR HOLLAND reconvened the meeting and withdrew Amendment 8
3:16:41 PM
MR. KING explained that every change the committee made changed
the macroeconomic indicator, which is the value multiplied by
the percentage. The fourteen percent in SJR 301 was written to
achieve a certain outcome assuming real GDP minus all government
spending. By moving to personal income minus state and local
compensation of employees and the permanent fund dividend, that
number has changed, he said.
3:17:27 PM
MR. KING concluded that it actually turns out to almost be a
wash. The fourteen percent that is currently in SJR 301 will
provide approximately $600-$700 million in head room, which was
in line with the intent of the original amendment. If the intent
was to get down to that level with the 12.5 percent in Amendment
8, maintaining the fourteen percent will be very close to that.
He said this calculation could be done by the committee or it
could be deferred to the Senate Finance Committee.
CHAIR HOLLAND reiterated that he withdrew Amendment 8.
3:18:24 PM
SENATOR MYERS moved Amendment 2, work order 32-LS 1161.A. 4.
32-LS1161\A.4
Wallace/Marx
9/8/21
AMENDMENT 2
OFFERED IN THE SENATE
TO: SJR 301
Page 2, line 1:
Delete "reported by federal indices as prescribed
by law"
Insert "as estimated by the federal bureau
responsible for economic analysis according to federal
law, expressed in current dollars,"
CHAIR HOLLAND objected for discussion purposes.
3:18:39 PM
SENATOR MYERS explained Amendment 2 was a technical language
change on the advice of Mr. King. The initial language in SJR
301 used GDP reported by federal indices as prescribed by law.
However, Mr. King indicated that the way it is reported was as
an estimate using economic models. Amendment 2 will correct that
by replacing it with the language "as estimated by the federal
bureau responsible for economic analysis according to federal
law, expressed in current dollars."
3:19:37 PM
SENATOR MYERS moved Conceptual Amendment 1 to Amendment 2, to
strike "expressed in current dollars."
CHAIR HOLLAND objected for discussion purposes.
SENATOR MYERS explained that income is always expressed in
current dollars. In order to calculate the lag, it will be
necessary to factor in inflation. Again, income is always
expressed in dollars, he said.
3:20:06 PM
SENATOR HUGHES asked Mr. King to explain the effect.
MR. KING explained that technically, personal income is always
expressed in nominal dollars, not in current dollars, which
would be historic dollars adjusted for inflation. Since the
committee removed the language "real GDP" there is no longer an
inflation adjustment within the macroeconomic indicator and
therefore the term "expressed in current dollars" is not
necessary unless the intent of the committee is to re-impose
inflation adjustments.
3:20:55 PM
CHAIR HOLLAND removed his objection. Chair Holland found no
further objection, so Conceptual Amendment 1 to Amendment 2 was
adopted.
CHAIR HOLLAND stated Amendment 2, as amended, was before the
committee.
3:21:18 PM
CHAIR HOLLAND withdrew his objection. Chair Holland heard no
further objection, so Amendment 2, as amended, was adopted.
3:21:29 PM
SENATOR KIEHL withdrew Amendment 5. He stated that this issue
was previously addressed.
3:21:59 PM
CHAIR HOLLAND solicited a motion.
3:22:05 PM
SENATOR HUGHES moved to report SJR 301, work order 32-LS116\A,
as amended, from committee with individual recommendations and
attached fiscal note(s).
3:22:24 PM
SENATOR KIEHL said he is not a fan of spending caps because he
doesn't view them as constitutional necessities in a system with
regular elections. However, he found SJR 301 to be carefully
crafted and responsive to a number of concerns. Therefore, he
will carefully watch it as it goes through the process, but he
will not object to it moving from committee.
3:22:53 PM
SENATOR HUGHES offered her view that SJR 301 was improved in the
process. She stated that part of the Fiscal Policy Working
Group's (FPWG) recommendation included a spending cap. She
stated that this could be a vehicle for one of the components.
3:23:29 PM
SENATOR SHOWER said the FPWG members were not aligned on how to
craft a spending cap, but everyone agreed changes were
necessary. He characterized this as a step in that direction. He
stated that SJR 301 was in line with FPWG recommendations moving
forward.
3:24:31 PM
REPRESENTATIVE KAUFMAN appreciated the productive committee
work. He said the core goal was to have something that ties
government to the productive economy. He said this measure does
so. He commended the committee process.
3:25:35 PM
SENATOR MYERS said even if the committee spent months on the
language for the spending cap that another legislature would
find holes. He characterized it as an imperfect solution. Still,
the state needs a spending cap. He thanked the committee for its
willingness to discuss SJR 301.
3:26:35 PM
CHAIR HOLLAND heard no further objection. Therefore, CSSJR
301(JUD) was reported from the Senate Judiciary Standing
Committee.
3:26:49 PM
There being no further business to come before the committee,
Chair Holland adjourned the Senate Judiciary Standing Committee
meeting at 3:26 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR 5 Legal Memo 2.pdf |
SJUD 9/9/2021 1:30:00 PM |
SJR 5 SJR301 |
| SJR 301 Legal Memo to A.8.pdf |
SJUD 9/9/2021 1:30:00 PM |
SJR301 |
| SJR 301 SJUD Amendment Packet.pdf |
SJUD 9/9/2021 1:30:00 PM |
SJR301 |