CSSCR 23(STA) am - LONG RANGE FINANCIAL PLANNING Number 195 CHAIR JAMES announced the next item on the agenda was CSSCR 23(STA) amended, which related to long range financial planning and she had a committee substitute, Version K, dated 4/29/96. She noted the Senate Rules Committee sponsored this legislation at the request of the Long Range Financial Planning Commission. Chair James said she would explain the committee substitute which she had drafted. She said the changes from the original bill were made in the Senate State Affairs Committee and passed through the Senate some time ago. The proposed committee substitute changed the language on page 1, line 9, from a $433 million estimated budget gap in FY 96 to an anticipated $313 million. She continued, "The other statements that the fiscal gap is projected to grow steadily; changes in projected revenue and expenditures could use up the constitutional budget reserve by the year 2000 if we don't do something about it; and the conclusion is that there is no single fiscal tool sufficient to address the fiscal gap and that we have to do several different things; the members of the Long Range Financial Planning Commission were charged with developing a 3-, 5- and 10-year plan; the permanent fund is a cornerstone of the state's economic future, as well as it should continue to grow to provide reliable dividends to the general public; that a financial plan adopted by the legislature should contain a combination of spending reductions and new revenue resulting from an expanded economy that will close the gap by fiscal year 2001; whereas the combination of the fiscal policies adopted by the legislature should put the state on firm fiscal ground and strike a balance between current needs and protection of the permanent fund for future generations; and the Nineteenth State Legislature has prepared a fiscal plan to close the fiscal gap which incorporates the following: 1) as part of the plan to ensure maximum earnings from the permanent fund, the legislature has deposited $1.1 billion to the fund's principal; 2) significant spending reductions through reasonable and responsible budget cuts; 3) tax levels that are less than those proposed in other plans; and 4) protection for the permanent fund and constitutional budget reserve fund. Therefore, be it resolved that we will first reduce the size and scope of state government to decrease the gap between recurring revenue and recurring expenditures; and that in closing the fiscal gap and developing a long range plan the legislature will prioritize expenses by taking into account our constitutional responsibilities and the needs of our children, the elderly, and our needy citizens; and that further, we will make significant spending reductions through means such as welfare reform, entitlement reform, privatization of state services, and the institution of procedural changes to state employees' pension, wage, and benefit package; and be it further resolved that the legislature pledges to work with all parties to implement this long range financial plan and meet the needs and desires of the Alaskan people; and be it further resolved that the Nineteenth legislature urges all Alaskans to learn about Alaska's fiscal situation and support actions necessary to close the fiscal gap; and that the legislature thanks all members of the Long Range Financial Planning Commission for their hard work and efforts to address the state's fiscal future and assist the legislature in addressing the economic challenges we face as a state. Copies of this resolution shall be sent to the Honorable Tony Knowles, Governor of Alaska and to the members of the Long Range Financial Planning Commission." CHAIR JAMES noted that no one had signed up to testify. She asked if there were comments or questions from committee members. Number 357 REPRESENTATIVE OGAN expressed support for the Resolution but proposed an amendment on page 2, line 9, to insert "from resource development" after the word "economy". He said there are some plans that would propose to expand the economy by using the permanent fund to fund government at current levels or actually expand the current levels of government. He didn't think the economy should be expanded by the size of government. Realistically at this time, revenues result from resource development and he thought that should be the priority. Number 408 REPRESENTATIVE PORTER offered a friendly amendment to the amendment to insert "from an expanded private sector economy." Number 420 REPRESENTATIVE OGAN agreed. CHAIR JAMES restated the amendment on page 2, line 9, would insert "private sector" following "expanded". Hearing no objection, Amendment 1 was adopted. She asked if there was further discussion. Number 439 REPRESENTATIVE PORTER remarked this was the joint philosophy of the joint caucuses which had been discussed for some time, so it shouldn't strike anyone as a surprise. He moved to adopt and pass HCS CSSCR 23, Version K, with individual recommendations out of committee. Hearing no objection, HCS CSSCR 23(STA) moved from the House State Affairs Committee. CHAIR JAMES called an at-ease.