SENATE BILL NO. 104 "An Act relating to an appropriation limit; relating to the budget responsibilities of the governor; and providing for an effective date." 10:42:12 AM Co-Chair Stedman MOVED to ADOPT proposed committee substitute for SB 104, Work Draft 31-LS0804 (Wallace, 4/29/19). Co-Chair von Imhof OBJECTED for discussion. 10:43:18 AM JULI LUCKY, STAFF, SENATOR NATASHA VON IMHOF, noted that there was one substantive change and one technical change in the CS. The changes would not impact the fiscal note. Ms. Lucky read from an Explanation of changes document (copy on file): version: 31-LS0804\K Changes appropriation limit to $6.0 billion from $5.0 billion [Page 1, line 13; conforming change page 3, line 11]. Technical correction deleting unnecessary language referencing the use of capital appropriations exceeding the cap in the calculation of the spending limit in subsequent years [Sec. 2]. version: 31-LS0804\U An exception for capital spending is added. An amount equal to up to five percent of the total allowable spending under the cap can be spent on capital improvements outside the cap. Technical corrections to two sections of the bill that do not change the intent: Spending cap is increased by the cumulative  change in inflation [Page 1, line 13 through page 2, line 2]. Debt exceptions are clarified [page 2 lines 5-7 and 19-20]. 10:44:35 AM Senator Micciche asked whether the bill allowed additional spending on capital in years where there were extra funds and there was additional need for spending. Ms. Lucky clarified that the bill put in place an appropriation limit of $6 billion. The capital appropriations language would allow an exception for an amount up to 5 percent of the $ 6 billion. It would allow an additional expenditure, not included in the cap, of 5 percent of the cap for the given year. Capital spending could be done under the cap as well and would be up to the legislature to decide. 10:46:15 AM Senator Micciche asked why the cap went so far above current UGF spend. CAROLINE SCHULTZ, STAFF, SENATOR NATASHA VON IMHOF, stated that after discussions on SB 103 and SB 104 the previous day in committee, it was considered that the $5 billion appropriation limit was inadequate. She referenced updated spreadsheets entitled "Unrestricted General Fund short-term budget expectation (1.5 percent inflation)," (copy on file). She clarified that the spreadsheets considered three scenarios: PFD: Surplus to dividend, PFD: 50 percent of POMV, and PFD: Current statutory PFD. 10:48:06 AM Senator Micciche summarized that because the bill chose to have the dividend inside of the cap, a realistic probability was that the 5 billion cap would be impossible. He added that even $6 billion would require prudent spending in the future to remain within the cap. Ms. Schultz agreed. She added that the second spreadsheet reflected a 50 percent POMV split. Under that calculation for the dividend the cap only allowed an additional $56 million. 10:48:59 AM Co-Chair von Imhof added that the cap would come into play when the state's cash flow increased significantly. She thought that the cap would put pressure to keep spending down. She emphasized that the state did not have to spend to the cap and could put money into savings. She pondered the purpose of a cap and thought that it was to keep spending down when cashflow was high. 10:50:30 AM Senator Micciche appreciated Co-Chair von Imhof's comments. He thought it was unfortunate that the spending cap did not help in the present but would in the future. He asked about the cumulative change in inflation. He asked whether the calculation used the 5-year lagging CPI average. Ms. Schultz replied in the affirmative. She explained that the clarifying language was intended to emphasize that the 5-year moving average for inflation would be added in subsequent years. 10:51:58 AM Co-Chair Stedman looked at row 'T' on page two of the spreadsheet document. He thought that the numeric needed to be changed from 5 to 6. Ms. Schultz affirmed that the change should be made. She said she would make the change and redistribute. She clarified that the math was still correct. 10:52:52 AM Co-Chair von Imhof WITHDREW her objection. 10:53:10 AM Senator Wilson OBJECTED for discussion. He spoke to his objection. He shared that he was in favor of removing the dividend from the cap altogether. 10:54:21 AM Senator Micciche thought the PFD being inside of the cap signified taking no position on the PFD but highlighted the total amount that would need to be accounted for at payout. He relayed that he did not have a problem with having the PFD inside the cap. Ms. Schultz agreed with Senator Micciche. 10:55:43 AM Senator Hoffman agreed with Senator Wilson. He thought the amount of the PFD and the attention the dividend received ensured that it would be a subject of attention for future years. He believed that for the legislature to put the dividend within a spending limit weakened the spending limit because the limit would be ignored. He said that the number one reason that the spending limit would not be adhered to would be because it would be restricted by whatever level the dividend was set. 10:57:51 AM AT EASE 10:59:28 AM RECONVENED Co-Chair von Imhof reminded the committee that Senator Wilson had objected to adopting the CS. Senator Wilson WITHDREW his OBJECTION. There being NO further OBJECTION, it was so ordered. Co-Chair von Imhof set the bill aside. SB 104 was HEARD and HELD in committee for further consideration. Co-Chair von Imhof discussed housekeeping. She noted that the 1:30 PM meeting would be Delayed to the Call of the Chair following floor session.