HOUSE BILL NO. 96 "An Act relating to deposits to the Alaska permanent fund." REPRESENTATIVE NORMAN ROKEBERG testified that HB 96 would return the percentage of all-mineral lease royalties and bonuses deposited into the Permanent Fund to the constitutionally mandated 25 percent. He continued, the legislation would propose changes to a statute, not the Alaska Constitution. The Constitution states that "at least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund". In 1980, the Legislature realized excess revenues existed and wisely decided to raise the amount of royalties and bonuses deposited into the Permanent Fund to 50 percent. Representative Rokeberg stated that it is time for the State of Alaska to redirect those deposits to the general fund. He believed that passage of the proposed legislation would generate an extra $9.5 million dollars in FY00. He urged passage of the legislation. Representative Rokeberg referenced the printed handout provided by the Department of Revenue, Deborah Vogt, dated 3/26/99. [Copy on File]. The memo was drafted in response to the request for information on the royalties and other mineral payments that would be affected by the proposed legislation. The memo indicates that the bill would reduce to 25% the contribution to the Permanent Fund of those mineral payments that are currently being made at a 50% rate. Additionally, Representative Rokeberg referenced the memorandum from the Alaska Permanent Fund Corporation (APFC), Jim Kelly, Director of Communications. [Copy on File]. The intent of the memo was to make a distinction between the impact of the bill on per capita dividends over the next five years, both compared to the status quo and assuming passage of a one-time $4 billion dollar transfer from the Fund's earning reserve account to the Capital Budget Reserve Fund (CBRF) per the Governor's proposal. Based on a financial analysis, the impact would be less than a $10 difference over five years. Representative Rokeberg pointed out that the funds would not include any mineral resources or bonus money. Last year, $53 million dollars in bonus bids was received, which added up to an additional $12.5 million dollars for the FY2000 budget and does not include federal receipts. Representative Grussendorf clarified that the legislation would increase the revenue stream from oil to the general fund and would reduce it by $12.5 million dollars. He noted that the original 50% legislation was passed so that amount would be placed into the corpus for investment purposes. He reminded Committee members that any long-range fiscal plan will need to take the Earnings Reserve Account into consideration. He recommended that it remain consolidated for investments within the corpus. Co-Chair Therriault pointed out that the Alaska State Constitution indicates that 25% should be placed into that account and that with passage of the legislation that would continue to occur. Representative Grussendorf understood that the legislation would repeal the statutory 25% recommendation. Representative Rokeberg stated that the State Constitution clearly illustrates that the earnings of the corpus can be spent by the general fund. Representative Grussendorf emphasized that a long-range fiscal plan should be based on the Earnings Reserve Account, not an additional stream into the general fund. Representative Rokeberg commented that it is appropriate for the Legislature to appropriate money for the budget. He interjected that it is now time to redirect the 50% statutory language so it can be used as needed. The bill does not speak to what should be done with that money. Representative Bunde spoke in support of the proposed legislation. He suggested that the public has dictated how they would like the Legislature to spend money by who they have elected to office. Representative J. Davies argued that point. He added that it is important to look at a long-range fiscal plan for the State. He voiced his preference to continue depositing money into the corpus of the fund. At this time, the fund is not large enough to "spin off" enough money to address the State's financial condition. Co-Chair Therriault asked how the State should manage the $1.2 billion dollar deficit which it is facing. Representative J. Davies stated that the State could "absolutely" manage that deficit. He pointed out that Alaska has $2.4 billion dollars in the Earnings Reserve Account, and that the State expects a similar amount to be deposited into that account over the next fiscal year. Representative Grussendorf recommended that the needed funds could always be taken from the Earning Reserve Account or from the general fund. If those funds are not desperately required, the money should stay in the corpus generating an annual income. He recommended that the present statute stay in tact until a long-term plan had been devised. Representative Grussendorf concluded that the $12 million dollars is a small amount and that the structure should not be changed in order to access it. Representative Rokeberg pointed out that any money taken from this fund would create a situation which would cause no further public tax implementation. He proposed that a prior legislature's law is now binding the current legislature as to how additional deposits should be made to the corpus. He urged passage of the bill. Representative Williams asked how the legislation would affect the State's ability to generate more earnings. Co- Chair Mulder explained that if the State can utilize this money now, it could delay a statewide tax for a period of time. He added, the financial management of that account would drive the overall health of the Permanent Fund. The future of the Permanent Fund will be dependent upon a structure being established to retain the financial health of that fund. He believed that the revenues lost from passage of the bill would be inconsequential to the relative current health of the general fund. Co-Chair Therriault noted that the Legislature has many opportunities to make contributions to the Permanent Fund. Representative Grussendorf referenced the original premise of the Permanent Fund in which the Constitution is explicate that the interest earned off of it should be used as designated by statute. Over $3 million general fund dollars has been placed into the corpus of that fund. Outside of that concern, Representative Grussendorf emphasized that the title of the proposed legislation was too broad and that in the future, the earnings reserve could possibly be attached into the corpus. Co-Chair Therriault acknowledged that the title would need to be tightened. In response to Representative Austerman, Co-Chair Therriault explained that 25% was deposited and did not come through the general fund. The additional 25% was a yearly appropriation of general fund dollars into the corpus. Representative J. Davies pointed out that this money would be a statutory dedication. The money funds need to technically be placed into the general fund and then deposited. Any legislature has the authority to pass a bill as the one proposed. He clarified that there has been no binding of one legislature by another. He remarked that a small stream of money continues to build the fund. Co-Chair Therriault asked if Representative J. Davies' comfort level was higher because a small amount of money was requested. Representative J. Davies commented on current funds versus state taxes. He recommended that the State would be better off if State taxes were paid "sooner" rather than "later". He recommended the reinstitution of an appropriate income tax. Co-Chair Therriault suggested that the title should be changed in order to tighten it up and then the legislation could be brought before the Committee for final consideration. HB 96 was HELD in Committee for further discussion. (Tape Change HFC 99 - 76, Side 2).