HOUSE BILL NO. 115 "An Act relating to the permanent fund dividend; relating to the appropriation of certain amounts of the earnings reserve account; relating to the taxation of income of individuals; relating to a payment against the individual income tax from the permanent fund dividend disbursement; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date." 2:24:37 PM Representative Thompson MOVED to ADOPT Amendment 13 (copy on file): Page 2, line 9: Delete "a new subsection" Insert "new subsections" Page 2, following line 18: Insert a new subsection to read: "(c) In accordance with AS 37.13.145(b)(1), and subject to appropriation, 33 percent of the amount available for distribution under (b) of this section shall be reserved for dividends. The remainder of the amount calculate to be available for distribution under (b) of this section shall be reduced by the difference between the amount calculated under (1) of this subsection and the amount under (2) of this subsection if the amount calculated under (1) of this subsection exceeds the amount under (2) of this subsection: (1) the total amount of oil and gas production taxes under AS 43.55.011 - 43.55.180, mineral lease rentals, royalties, royalty sale proceeds, net profit shares under AS 38.05.180(f) and (g), and federal mineral revenue sharing payments and bonuses received by the state from mineral leases that are deposited into the general fund in the current fiscal year; (2) the sum of $1,200,000,000." Co-Chair Seaton OBJECTED for discussion. Representative Thompson read from a prepared statement: In times of higher revenue, we reduce how much is spent from the Permanent Fund. This concept is no different then from a family manages their money: when they make more money, they quit drawing from their savings account. The draw limit was modeled by the administration. The $1.2 billion threshold is not arbitrary. The administration vetted this number using their model, a model that was vetted by Mackenzie, a very reputable financial consulting firm. The administration determined that the draw limit is a critical addition to protecting the dividend and preserving the Permanent Fund value. The commissioner of revenue last year in May signed a letter that states, "In preserving the value of the fund, the revenue limit also protects the divided. In short, the revenue limit is a critical addition to the bill." Members who say the draw limit is unnecessary because the forecasts are low need to consider that the forecasts have consistently been inaccurate. Their forecasts only go forward 5 years. When you look over the last 10 years the forecasts have not been correct. They have been way off. Without the draw limit the state will have a smaller Permanent Fund, a smaller percent POMV, and a smaller PFD. Representative Thompson pointed out that the commissioner was in the room if anyone wanted to hear from him. Co-Chair Foster invited the commissioner to come up to provide a statement. RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE, concurred with the statements made by Representative Thompson. The administration had always felt that the draw limit was an important component within the bill to protect the durability of the fund and the dividend and to take volatility out of the State of Alaska's revenue stream. He reiterated that it was one of five "must haves" in the bill. The administration supported the amendment. Co-Chair Seaton continued to have some interest in the amendment. He had looked at a draw point of $1.5 billion. He also looked at different levels, but had not decided on an appropriate amount. He was concerned that if the proposal was enacted at $90 per barrel of oil the state would still be in a deficit. He opposed the amendment. He suggested that perhaps it would be appropriate down the road. Co-Chair Seaton MAINTAINED his OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Tilton, Wilson, Pruitt, Thompson OPPOSED: Gara, Grenn, Guttenberg, Kawasaki, Seaton, Foster The MOTION to ADOPT Amendment 13 FAILED (4/7). Co-Chair Seaton indicated a CS would be drawn up that reflected the adopted amendments. Co-Chair Foster reported the amendment would be set aside. The committee would bring back a clean CS for review. HB 115 was HEARD and HELD in committee for further consideration. 2:30:48 PM AT EASE 2:37:50 PM RECONVENED