HB 284-COMPACT FOR A BALANCED BUDGET  2:36:03 PM CHAIR KELLER, speaking as prime sponsor of HB 284, informed the committee that HB 284 addresses the federal national debt and proposes a specific constitutional balanced budget amendment. There are several states involved in [the Constitutional Amendment movement] and the Goldwater Institute is presenting the idea of continuing the "Compact for America" [movement]. He explained that the bill applies [U.S. Constitution] Article V conditions and uses the compact approach in order to become a U.S. Constitutional Amendment. The U.S. Constitution, Article V, lays out two avenues of proposing amendments and two avenues for proposing amendments and ratifying them. He directed attention to Article V, which read: Article V The Congress, whenever two thirds of both houses shall deem it necessary, shall propose amendments to this Constitution, or, on the application of the legislatures of two thirds of the several states, shall call a convention for proposing amendments, which, in either case, shall be valid to all intents and purposes, as part of this Constitution, when ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress; provided that no amendment which may be made prior to the year one thousand eight hundred and eight shall in any manner affect the first and fourth clauses in the ninth section of the first article; and that no state, without its consent, shall be deprived of its equal suffrage in the Senate. 2:40:53 PM NICK DRANIAS, Director, Constitutional Policy, Policy and Development, Goldwater Institute, noted that he is on the Board for Compact for America, Inc., is a 16-year attorney of which 8 years has been focused in constitutional law and he has been involved in developing Article V approaches and researching the issue for 4 years. He then related that his main claim to fame is a successful win in the U.S. Supreme Court striking down Arizona's system of campaign finance regulations. He noted that [the Goldwater Institute] published Professor Robert G. Natelson's, three-part series in the fall of 2010 and early 2011, which has proven to be seminal in providing guidance to Article V aficionados throughout the country. Mr. Dranias, focusing on the Compact for America Balanced Budget referred to the slide entitled "Your Future is at Stake" depicting the nation's current gross federal debt, not only the portion held by the public. He opined the gross federal debt is relevant to [the United States'] credit rating and described the U.S. as being at 107 percent of Gross Domestic Product (GDP), a situation the U.S. has not experienced since the height of World War II. The aforementioned is not a sustainable situation as the U.S. cannot easily grow its way out, and in fact, it may be impossible. The degree of unsustainability and "crazy" fiscal policy going on in Washington must end. Referring to a slide entitled "It Isn't Getting Better" depicting how the deficit has narrowed from $1.1 trillion last year [2013] to $650 billion, he advised that those figures possess no value because the U.S. is increasing its debt at a pace over several hundred billion dollars, given the amount of debt already accrued, and it is continuing along the unsustainable same path. He likened the fiscal situation in the U.S. to that of Greece five or six years ago when Europeans began to panic. He then opined that the fundamental problem with the debt is that of concentrated power in which the debtor is able to set their own credit limit. Therefore, that concentration of power needs to be broken up and the plan is to have a balanced budget amendment as contained in HB 284 that is a plausible and bi-partisan route de-centralizing the power over debt and limiting the ability of a debtor to write their own credit limit. 2:45:04 PM    MR. DRANIAS, referring to the slide entitled "A BBA that Divides Power is the First Payload," explained that the balanced budget amendment was developed with the goal of reaching 38 states and is an idea that should command respect and support from the center-left, center, to center-right. In fact every component of the balanced budget amendment has been poll tested by McLaughlin & Associates at over 60 percent approval ratings. He then reviewed the sections of the balanced budget amendment as follows: Section 1 defines what balance would be and limits spending to the actual cash in the bank at all times. The definition of a balance is that spending at all points in time are limited to tax revenues or the equivalent. A consequence is that there must be a revolving line of credit to "smooth out" the tax cash flow volatility, he opined. Therefore, Section 2 provides a large revolving line of credit that initially is set at 105 percent of the outstanding debt and the extra 5 percent is designed to provide a transition period to the use of debt so that within an adequate time, the hard choices are made. However, ultimately there is a constitutionally fixed debt limit that would be enforced unless that debt limit can be lifted. Section 3 ensures that the concentration power problem is lifted. He explained that if any increase in this "huge" initial line of credit were deemed necessary, it would have to be in the form of a proposal requiring a referendum of the states. In essence, he summarized, Congress would have to "refer up" the states and secure support from 26 state legislatures, a simple majority and not a super majority, of any proposed increase in the debt limit. He opined that this makes good fiscal sense as it introduces the states as sort of a fiscal board of directors that intervenes and provides supervision for a wayward CEO. Section 4 enforces the debt limit without damaging the U.S. credit history and rating. Within the current statutory debt limit system, he noted, there are "games of chicken" that arise each time it comes into play and this amendment creates a process by which the "game of chicken" cannot happen. In essence, he opined, the president will now have to name what he will impound, delay, not pay, or what he will prioritize over others in terms of spending, at 98 percent of the debt limit. He explained that the extra 2 percent basically provides 6-12 months prior to the initial debt limit, assuming it is ratified in the near future. Therefore, the president, 6-12 months prior to reaching the debt limit, will have a constitutional obligation to identify exactly what he would impound if that debt limit were enforced. Mr. Dranias acknowledged that is a considerable amount of power, but advised it is not new power as the president has the inherent implied power to do impoundments whenever there are not adequate monies to support appropriations. This amendment requires the president to exercise his power in advance. If the president lays out a plan for impoundment with which Congress disagrees, then Congress can override those impoundments within 30 days by a simple majority concurrent resolution with equal or greater amounts. The idea, he clarified, is not to secure the impoundments, but rather to [make the plans known] 6-12 months before reaching the debt limit so everyone has a clear sense of what is at stake if that debt limit, as it is currently set, will be enforced. Section 5 ensures that if the debt problem is to be fixed, the U.S. does not destroy its capacity for economic growth by over raising taxes. He explained that debt is taxes and if the intention is to pay the debt, then the U.S. does not want to have taxes so high it destroys its capacity to grow and pay back that debt. Therefore, the compromise to limit tax rate increases which would require a super majority vote, 2/3 of the whole number of each house for any increase in existing income taxes, general revenue taxes, or any new general revenue tax, he explained. Furthermore, three powerful" exceptions were created to allow a reasonable degree of revenue increases: replace the income tax with an end user non-VAT [Value-Added Tax] sales tax that is sometimes called the "fair tax;" eliminate deduction credits and loop hole exemptions that is sometimes called "making tax flatter;" and implicit exception in the definitions the Goldwater Institute uses regarding the possibility of raising tariffs and fees. He specified that those exceptions could result in new revenues with simple majorities as it is done now. The special interest "push back" will be fairly strong, he expected, and if the people's representatives in Washington are able to overcome that special interest push back, it would show a genuine consensus on the need for new revenues rather than relying on spending cuts. He opined that the overall incentive structure would incentivize spending cuts first as the root problem is spending beyond [the nation's] means. He further opined that revenue increases would be possible and would be obtained through forms of revenue increases that would either flatten or make the tax code more voluntary. He reiterated that the poll tests performed by Goldwater Institute and others are fairly consistent and go back 40 years.   2:54:59 PM [Vice Chair Lynn passed the gavel to Chair Keller.] 2:55:09 PM CHAIR KELLER explained that the bill's premise is that the debt problem is a crisis and the "Compact for America" Amendment introduces checks and balances necessary to address the debt issue. He questioned the status of other states taking this amendment forward. MR. DRANIS stated that the Georgia House of Representatives recently passed a similar bill out of its House with a 103:63 vote. The bill is pending in Arizona, is on the table in Arkansas where a fiscal limit may preclude it from being heard, and may possibly be introduced in Louisiana and Ohio. The intent, he noted, is to keep "this session" narrow so that the compact legislation is substantively identical, he opined.