HB4003-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT  10:29:19 AM CHAIR SPOHNHOLZ announced that the first order of business would be HOUSE BILL NO. 4003, "An Act relating to use of income of the Alaska permanent fund; relating to the amount of the permanent fund dividend; relating to the duties of the commissioner of revenue; and providing for an effective date." 10:29:39 AM CHAIR SPOHNHOLZ introduced HB 4003, on behalf of the House Special Committee on Ways and Means. She provided a PowerPoint presentation, titled "HB 4003: Updated Permanent Fund POMV Split 25%/75%" [hard copy included in the committee packet]. On slide 2, she summarized the main elements of the proposed fiscal plans in front of the legislature. 10:30:46 AM CHAIR SPOHNHOLZ turned to slide 3, which read as follows [original punctuation provided]: HB 4003: Updates the Dividend Formula Rewrite the dividend formula as follows: The 5% Percent of Market Draw from the Permanent Fund will be split as follows: 25% to dividends 75% all else CHAIR SPOHNHOLZ continued to slide 4, which outlined the impact that HB 4003 would have on the budget and the permanent fund dividend (PFD). She noted that the proposed legislation would produce a dividend of $1,248 in FY 23, increasing to $1,575 in FY 28. She advanced to slide 5, which reviewed the projected deficits of the various split formulas. She explained the HB 4003 was designed to reduce cuts and/or taxes that would be required to balance the budget. 10:33:10 AM REPRESENTATIVE PRAX inquired about the impact that HB 4003 would have on the Alaska Mental Health Trust Authority fund. He requested a sectional analysis of the bill. 10:34:03 AM MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State Legislature, on behalf of Representative Spohnholz, presented a sectional analysis of HB 4003 [included in the committee packet], which read as follows [original punctuation provided]: Section 1: Amends AS 14.17.300 adding new language allowing the foundation formula for public education to be funded through a percentage of the POMV draw. Clarifies that in the case that the percentage of the POMV is not sufficient, foundation funding may be provided by the general fund. Section 2: Amends AS 37.13.140, clarifying that the amount available for appropriation may not exceed the balance of the earnings reserve account. Repeals the old formula for calculating PFDs. Section 3: Amends AS 37.13.145(b) to allow appropriations from the earnings reserve account in accordance with AS 37.13.140(b), (the POMV statute), as follows: 25% to the dividend fund under AS 43.23.045 and 75% to the general fund. Of the 75% distributed to the general fund, no less than 50% may go to the public education fund for state aid to school districts to satisfy the foundation formula. Section 4: Amends AS 37.13.145(c) to clarify that an appropriation is required to move funds from the earnings reserve account to the principal of the permanent fund for purposes of inflation proofing. Section 5: Amends AS 37.13.145(d) to stipulate funds associated with the Amerada Hess settlement are not included in the calculation of the percent of market value under AS 37.13.140(b). Section 6: Adds a new subsection that states, of the 75% distributed to the general fund, no less than 50% may go to the public education fund for state aid to school districts to satisfy the foundation formula. Additionally, this section provides that if this percentage of the POMV draw does not satisfy the foundation formula, the remaining funds may come from the general fund. And, if it exceeds the formula, the excess may be distributed according to the foundation formula. Section 7: Amends AS 37.13.300(c) to specify that income from the mental health trust fund is not included in the calculation of the percent of market value under AS 37.13.140(b). Section 8: Amends AS 37.14.031(c) to require the Alaska Permanent Fund Corporation calculate the net income of the mental health trust fund annually on the last day of the fiscal year, excluding any unrealized gains or losses. Section 9: Amends AS 43.23.025(a) to clarify that funds must be appropriated to the dividend fund, rather than transferred as current statute provides. Section 10: Repeals AS 37.13.145(e) and (f). These sections restricted to appropriations from the earnings reserve account to the general fund to not more than was available for appropriation. Similar language is now found in Section 2 of this bill. Section 11: Provides an effective date of July 1, 2022. CHAIR SPOHNHOLZ asked whether Representative Prax had a question about Section 5. 10:36:44 AM REPRESENTATIVE PRAX opined that it wasn't necessary to make any changes to the Alaska Mental Health Trust Authority fund. He asked why that was being proposed in the bill. CHAIR SPOHNHOLZ explained that Alaska Permanent Fund Corporation (APFC) managed the Alaska Mental Health Trust Authority's investments. For the purposes of the proposed legislation, she believed that it was not necessary to include Alaska Mental Health Trust Authority funds in the dividend calculation. 10:38:02 AM REPRESENTATIVE STORY asked how much money would come from the education tax. CHAIR SPOHNHOLZ returned to slide 2 and reported that HB 189, the employment tax for education, would produce $65 million in FY 23 and FY 24 and $66 million in the subsequent three fiscal years (FY 25 through FY 27). REPRESENTATIVE STORY sought clarification on the base student allocation (BSA) increase. 10:40:28 AM CONOR BELL, Fiscal Analyst, Legislative Finance Division, offered to follow up on the requested information. 10:40:55 AM CHAIR SPOHNHOLZ announced that HB 4003 was held over.