HJR 2-CONST. AM: APPROP LIMIT  1:32:11 PM CHAIR VANCE announced that the first order of business would be HOUSE JOINT RESOLUTION NO. 2, "Proposing amendments to the Constitution of the State of Alaska relating to an appropriation limit." 1:32:47 PM BERNARD AOTO, Staff, Representative Will Stapp, Alaska State Legislature, responded to unanswered questions from the previous hearing on HJR 2, on behalf of Representative Stapp, prime sponsor. In response to a hypothetical scenario involving the federal bureau stopping economic analysis on gross domestic product (GDP), he indicated that the bill sponsor would welcome an amendment proposing a different way to gather GDP data other than the federal bureau, so as not to tie the Constitution of the State of Alaska to a specific entity. He continued by correcting a misstatement, clarifying that inflation was tied to the current proposal. He explained that GDP was a holistic calculation from several economic drivers, including inflation; therefore, adjustments to inflation would impact GDP. In response to a question regarding the timeline of GDP transmittal, he relayed that the current timeframe, as proposed in HJR 2, would make it difficult for the Office of the Governor and the Legislative Finance Division (LFD), [Legislative Affairs Agency (LAA)], to make the appropriate calculations. For that reason, he suggested changing the current language from "fiscal years" to "calendar years," making it "the five previous fiscal years." Responding to a question about capital projects, he clarified that capital spending was included under the proposed spending cap. The only exceptions on capital spending, he said, was on items with a federal match or those paid with general obligation (GO) bonds. In response to questions regarding allowable spending via bonding, he cited a court case referenced in a document that had been distributed to committee members. CHAIR VANCE passed the gavel to Vice Chair Allard. 1:36:54 PM REPRESENTATIVE VANCE moved to adopt Amendment 1 to HJR 2, [labeled 33-LS0294\A.7, Marx, 2/25/23], which read: Page 1, line 16, through page 2, line 1: Delete "federal bureau responsible for economic  analysis according to federal" Insert "state government as prescribed by" REPRESENTATIVE EASTMAN objected for the purpose of discussion. 1:37:10 PM REPRESENTATIVE VANCE explained that Amendment 1 would provide autonomy to the state by removing references to the federal government in the state constitution. Specifically, the proposed amendment would remove the language referencing "federal bureau" on page 1, line 16, through page 2, line 1, of HJR 2, and replace it with "state government as prescribed by". VICE CHAIR ALLARD asked whether the bill sponsor considered this a friendly amendment. MR. AOTO answered yes. 1:37:50 PM REPRESENTATIVE EASTMAN removed his objection. There being no further objection, Amendment 1 to HJR 2 was adopted. 1:38:16 PM The committee took a brief at-ease. 1:38:58 PM REPRESENTATIVE VANCE moved to adopt Amendment 2 to HJR 2, [labeled 33-LS0294\A.8, Marx, 2/25/23], which read: Page 2, line 2: Delete the first occurrence of "fiscal" Insert "calendar" REPRESENTATIVE EASTMAN objected for the purpose of discussion. 1:39:05 PM REPRESENTATIVE VANCE stated that Amendment 2 would change "fiscal" to "calendar" on page 2, line 2, of HJR 2 in response to the concern regarding the timeliness of the GDP data transmittal to both the legislature and the governor for consideration of the spending cap. This change would make it so the calculation would be available during the crafting of the budget. VICE CHAIR ALLARD asked whether the bill sponsor considered this a friendly amendment. MR. AOTO answered yes. 1:40:21 PM REPRESENTATIVE EASTMAN asked how much time the legislature would have to craft the budget upon receiving the GDP data, should Amendment 2 pass. 1:41:20 PM ROB CARPENTER, Deputy Director, LFD, LAA, considered the FY 24 budget as an example. He explained that should Amendment 2 pass, the calendar year before the prior fiscal year would be 2021, so the relevant data would be from years 2017 to 2021, which was readily available to both the governor and the legislature through the entirety of session. REPRESENTATIVE GRAY asked whether Amendment 2 addressed LFD's unanswered questions about the bill. MR. CARPENTER confirmed that it would clarify the intent of the bill and allow the division to make firm calculations. 1:43:36 PM REPRESENTATIVE EASTMAN removed his objection. There being no further objection, Amendment 2 to HJR 2 was adopted. 1:43:49 PM The committee took a brief at-ease. [Vice Chair Allard returned the gavel to Chair Vance.] 1:44:20 PM CHAIR VANCE invited final comments on HJR 2, as amended. 1:45:05 PM REPRESENTATIVE GROH applauded the bill sponsor's desire for stability; however, he pointed out that reforming the constitutional spending cap would require amending the state constitution. For that reason, he urged the legislature to exercise caution, as the consequences of getting it wrong could be disastrous. He shared his understanding that provided testimony had indicated that HJR 2 was not the right reform. He recalled that the University of Alaska Anchorage (UAA) professor of economics, Kevin Barry, had stated that a GDP-based spending cap would be an economic trap during times of prolonged downturn and prevent the state from recovering. Further, he stated that the proposed legislation did not adequately address the two items that history had shown to increase the most when revenue spikes occurred: capital spending and permanent fund dividend (PFD) appropriations. Additionally, he opined that forging ahead with the spending cap would be counterproductive to the recommendations from the Fiscal Policy Working Group. He advised the committee not to mistake his comments as opposition to spending cap reform, as he would be in favor of constitutionalizing the percent of market value (POMV) formula or creating a revised formula based on population and inflation. For those reasons, he said he would be offering a recommendation of "do not pass" unless substantially amended on HJR 2. REPRESENTATIVE EASTMAN suspected that the proposed formula may not account for changes to inflation that could occur during "the five previous calendar years." Nonetheless, he acknowledged that the existing constitutional spending limit was not designed to be functional. He argued that the political pressure to spend what was available would always be present, adding that it was appropriate to implement checks and balances against that pressure to limit spending to a reasonable amount. He opined that HJR 2 did not adequately account for inflation and cautioned against making changes to the constitution that may not work. 1:50:32 PM REPRESENTATIVE CARPENTER pointed out that this was only the first step in the committee process for the proposed legislation. CHAIR VANCE added that she had intentionally avoided considering the fiscal impacts of HJR 2 in the House Judiciary Standing Committee, as that was the focus of other committees of referral in which anticipated further dialogue on the proposed legislation. 1:51:24 PM REPRESENTATIVE ALLARD moved to report HJR 2, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHJR 2(JUD) was reported out of the House Judiciary Standing Committee.