HB 4010-PERMANENT FUND DIVIDEND; POMV SPLIT  11:31:03 AM CHAIR SPOHNHOLZ announced that the final order of business would be HOUSE BILL NO. 4010, "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." 11:32:02 AM REPRESENTATIVE KEN MCCARTY, Alaska State Legislature, as prime sponsor of HB 4010, gave a PowerPoint presentation, titled "HB 4010; A New Solution for an Established sustainable tradition" [hard copy included in the committee packet]. As shown on slide 2, he reviewed that the percent of market value (POMV) is a 5 percent draw on the Alaska permanent fund. He directed attention to a slide 3, which shows the following question asked by a committee member at a previous meeting: "Does the HB 4010 plan have a negative impact on the operational budget resulting in reductions to it in order to support the capital budget?" Slide 4 provides the answer in a breakdown of the bill, which he clarified at the request of Chair Spohnholz to be that of the 100 percent coming from the POMV draw: 35 percent goes to the permanent fund dividend (PFD), and 65 percent goes to Alaska government expenses; of the 65 percent, 20 percent goes to capital projects and 45 percent to government operations. 11:35:55 AM EMILY NAUMAN, Deputy Director, Legislative Legal Services, Legislative Affairs Agency, at the request of Chair Spohnholz, clarified that as drafted, HB 4010 would allot 35 percent [of the POMV draw] to the PFD and 65 percent to the general fund for general state spending. Of that 65 percent, 20 percent would go to capital projects in other words, 13 percent of the 100 percent. REPRESENTATIVE MCCARTY, in response to Chair Spohnholz, confirmed that was his intent. CHAIR SPOHNHOLZ asked that Representative McCarty resubmit the figures on slide 4 so that there are sub-bulleted items under the 65 percent specifying that 20 percent of the 65 percent would go to capital projects and 80 percent of the 65 percent would go to government operations. 11:38:58 AM REPRESENTATIVE MCCARTY noted that slide 5 shows the information from slide 4 in a pie chart. Slide 6 has two graphs, one showing $60 per barrel in FY 21-27 and project revenue with no liability reduction until 2028 and surplus in 2030. The other graph shows $70 per barrel in FY 21-24 and reflects a projected slight deficit with significant surplus growth after 2025. Slides 7 and 8 offer a closer look at the plan. Slide 9 addresses appropriations to capital projects and indicates money to support jobs for Alaskans, a boost for the economy, and infrastructure for the present and future. Slide 10 boasts no disadvantages of the "35/65" plan and advantages including a distribution plan that is: dependable & sustainable; equitable for both the people's government and individual Alaskans; beneficial from the standpoint of the PFD and jobs and services from capital projects; and fiscally sustainable without requiring excessive revenue expansion or taxation. Slide 11 reiterates the sustainable future aspect of the plan. REPRESENTATIVE MCCARTY noted that slide 12 answers "no" to the question of whether HB 4010 would result in reduction to the operational budget in order to support the capital budget. The slide further posits that the proposed legislation would offer "balanced fiscal management with projections of future surplus protection." Slide 13 adds that "recent projected oil revenue forecasts have seen unexpected surplus, which could reduce or eliminate deficit years." 11:42:36 AM CHAIR SPOHNHOLZ pointed out that the bill comparison presentation given by Alexei Painter just prior to this bill hearing used the current oil prices as an even way to compare the various proposed legislation. 11:43:45 AM REPRESENTATIVE STORY inquired whether the bill sponsor knew how many millions of dollars would go to capital projects. REPRESENTATIVE MCCARTY responded that if the model were used this year, it would produce just shy of $400 million from the permanent fund to capital projects. In 2030, $800 million would go towards capital projects. In response to a follow-up comment, he agreed that there is a need to build workforce that has been lost. He noted that HB 108 would help with workforce and training. 11:47:33 AM REPRESENTATIVE JOSEPHSON noted that Representative McCarty's presentation states there would be no impact on the operating budget; however, slide 30 from Mr. Painter's Legislative Finance Division presentation said there would be an impact on the budget. He said, "Something's got to give." CHAIR SPOHNHOLZ compared the bill sponsor's analysis of HB 4010, which shows a deficit of $617 million in FY 23 going down to minus $69 million in FY 25, and she expressed interest in comparing this to the information from the Legislative Finance Division, for example whether slide 30 reflects only the operating budget and does not include "the additional capital spend." 11:49:45 AM CONOR BELL, Fiscal Analyst, Legislative Finance Division, said the division assumed that the capital budget increases and the agency operating budget "stays with the status quo of the enacted budget growing with inflation." He said the division views the cutting or increasing of the operating budget as a response to a larger capital budget as a separate policy choice. In response to Chair Spohnholz, he confirmed that all the amounts on slide 30 of the division's presentation account for a higher capital budget and resulting overall higher unrestricted general fund (UGF) budget. 11:52:22 AM MR. BELL, in response to Representative Josephson, said the numbers improve because revenue is growing faster than inflation "during this forecast period," including both POMV and non-POMV revenue. CHAIR SPOHNHOLZ reasoned that the FY 23 deficit under HB 4010 is $200 million higher due to the additional capital spend. MR. BELL confirmed that's correct. 11:53:57 AM CHAIR SPOHNHOLZ thanked the bill sponsor and announced that HB 4010 was held over.