HOUSE JOINT RESOLUTION NO. 102 Proposing amendments to the Constitution of the State of Alaska relating to and limiting appropriations from the Alaska permanent fund based on an averaged percent of the fund market value and relating to permanent fund dividend payments. Representative Foster MOVED to report HJR 102 out of Committee with individual recommendations and with the accompanying fiscal notes. There was objection for purpose of discussion. CHERYL FRASCA, DIRECTOR, DIVISION OF MANAGEMENT & BUDGET, OFFICE OF THE GOVERNOR, explained the bill, which would provide a constitutional distribution of 5 Percent of the Market Value (POMV) of the Permanent Fund: 50% to dividends, 45% to education and 5% as a community dividend. There would be a ten-year sunset provision. Ms. Frasca noted, "it would be up to a legislature a decade from now to decide what it wanted to bring back to the voters." Representative Stoltze stated that he had a problem putting a sunset provision into the Alaska Constitution. He felt that it would erode public confidence and pointed out that any Committee Chair could "obliterate" all the plans and protections [provided under the legislation] through the legislative process. Representative Joule MOVED to ADOPT a conceptual amendment changing the distribution to: 60% to dividends, 32.5% to state functions, and 7.5% to municipalities. Co-Chair Williams OBJECTED. Co-Chair Williams referred to the constitutional approach and noted that it would take two years to implement due to voting requirement. In response to a question by Representative Croft, Ms. Frasca clarified that the legislation was drafted with a sunset. A future legislature would have to place on the ballot either the same proposal or a new proposal. "The idea was, is that, when we look forward over a decade, in ten years we don't know what Alaska is going to be like." Future revenues are anticipated from resource development. The Administration felt it was important to give a future legislature the latitude to determine what is the best fit for the circumstances at that time. A ratification approach would only allow the continuation of the process that was in place in 2004. Representative Croft concluded that the entire committee process would have to [be repeated] in 2014 [under the constitutional approach]. Representative Hawker pointed out that the ballot initiative to establish the Permanent Fund stressed that the Fund would be used to establish stable state funding when oil and gas revenues were gone. He observed that the proposal would take 50% of these funds off the table for dividends. Ms. Frasca responded that the creation of the dividend expanded the use of the Fund. The interpretation that a use of the Fund should be for dividends is supported by the statutory actions of the legislature. The legislation would put into the Constitution what has become practice in terms of dividends and education. Representative Hawker questioned if the Administration was comfortable in placing dividends as the top priority of state funding. Ms. Frasca noted that the Administration is comfortable with the use of funds for dividends and education. The 5 percent payout for municipalities establishes a new program. REPRESENTATIVE ETHAN BERKOWITZ questioned if anyone had looked at increasing the 25 percent [deposit into the Fund] from mineral leases to 50 to 100 percent. ROBERT D. STORER, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND CORPORATION, DEPARTMENT OF REVENUE, stated that he could provide the information, but speculated that the Fund size and income from the Fund would increase. In response to a question by Representative Berkowitz, Ms. Frasca was not aware of any proposals by the Administration to increase the deposit amount [from mineral leases]. She questioned if the suggestion by Representative Berkowitz would be for all revenues to go into the Permanent Fund. Representative Berkowitz stated that he wanted to consider a change and asked for additional information, which Mr. Storer promised to provide. Representative Joule reiterated his conceptual amendment for distribution of a 5 percent POMV: 60 personal dividend, 35.2 percent to state spending, and 7.5 for municipalities. Representative Hawker stated that he would be in favor of an increased municipal dividend with a 50 percent dividend payout. Representative Joule noted that constituents seem to favor a distribution of 60 percent to dividends. He spoke in support of the amendment. Vice-Chair Meyer spoke in support of a 50 percent dividend and a 10 percent municipal dividend. Representative Croft spoke in support of the amendment. He noted that a third of the payout would be upwards of $425 million dollars [for state spending]. Communities would receive approximately $105 million dollars, which is close to the amount paid by the municipal assistance program before reductions. A roll call vote was taken on the motion by Representative Joule to change the distribution amounts. IN FAVOR: Croft, Foster, Joule, Moses, Stotlze OPPOSED: Fate, Hawker, Meyer, Chenault, Williams Co-Chair Harris was absent from the vote. The MOTION FAILED (5-5). Representative Foster MOVED to report HJR 102 out of Committee with the accompanying fiscal notes. Representative Fate OBJECTED. He spoke against eroding the power of the legislature. Vice-Chair Meyer stressed the importance of the POMV approach. He felt that it merited further debate on the House Floor. Representative Stoltze and Representative Hawker agreed with the remarks of Vice-Chair Meyer. Representative Joule noted that the public needs to be convinced of the importance of the POMV. REPRESENTATIVE NICK STEPOVICH pointed out that the public is wary of the way the legislature spends its money. A roll call vote was taken on the motion to move the bill from Committee. IN FAVOR: Foster, Hawker, Joule, Meyer, Stoltze, Williams OPPOSED: Fate, Chenault, Croft, Moses Co-Chair Harris was absent from the vote. The MOTION PASSED (6-4). HJR 102 was REPORTED out of Committee with a "do not pass" recommendation and with a zero fiscal note by the Department of Revenue and a fiscal impact note by the Office of the Lieutenant Governor.