SSTA - 2/13/96 SCR 23 LONG RANGE FINANCIAL PLANNING TAPE 96-11, SIDE A Number 001 CHAIRMAN SHARP called the Senate State Affairs Committee back to order at 4:45 p.m. after recess from the Joint House and Senate State Affairs Committee meeting and brought up SCR 23 as the only order of business before the committee. The chairman noted that during the joint meeting of the House and Senate State Affairs Committees earlier in the day, the Chairman of the Long-Range Financial Planning Commission stated SCR 23 was the one item he wanted to see move forward. CHAIRMAN SHARP stated there is a committee substitute in front of the committee that primarily resolves that we will reduce the size and scope of state government gradually - decrease the gap over a five-year period. The second resolve basically states some of the areas we feel should be looked at. The chairman thanked the Long- Range Financial Planning Commission for their work and effort. There is a slight change: the original figure of $429,000,000 was adjusted to $433,000,000, taking into account up-to-date revenue projections. Number 040 SENATOR RANDY PHILLIPS asked if the figure of 80% on page 1, line 10 is accurate, or if that figure should be 85%. CHAIRMAN SHARP thinks it is 80%. Number 046 SENATOR LEMAN stated that figure is correct. What that figure doesn't acknowledge is that a substantial part of the state's budget is funded by user fees. So petroleum fees are actually in the 50-60% range of the actual total budget. SENATOR LEMAN made a motion to adopt the committee substitute for SCR 23. Number 074 SENATOR DUNCAN objected. His concern with the committee substitute is that by adopting the original resolution, we are responding to the broad general intent or goals of the Long-Range Financial Planning Commission to close the fiscal gap to a certain level by 1997, and to continue to do so up until 2000. That indicates that it's up to us to change the mix of expenditure reductions and revenue increases, and other measures we deem necessary. This resolution goes a lot further than that, and is asking us to adopt some specific provisions before they've even been heard and debated in this committee. For example, he thinks welfare reform will occur; he is not sure what entitlement reform means; privatization of state services has not been determined by the legislature to be the way to go; Tier 3 state pension, wage, and benefit package- he is not willing to vote for a resolution that specifies that's...where I endorse that as one of the steps, or maybe alternative steps; and on page 2, lines 16-18, he does not think any of us oppose depositing 1.1 billion dollars into the permanent fund from the earnings when it's done as part of a plan-but this does not specify...this could lead to people believing that we're endorsing doing that immediately. The minority caucus thinks that all components of the full plan should reach the governor's desk at the same time. He is concerned CSSCR 23(STA) indicates it's ok to go ahead with the easy part of the plan before addressing the tough part of the plan. Therefore, he thinks a very non-political resolution has been politicized. Number 120 CHAIRMAN SHARP responded that the language on page 2, lines 8-9 basically states that a financial plan be adopted by the legislature. With Senator Duncan's other concern on page 2, lines 22-25, it "will make significant spending reductions through means such as...." This language is just pointing out areas which should be looked at. It doesn't say that it shall be done. The statements are broad enough to allow legislative debate to occur. As to getting all pieces of a plan to the governor's desk at the same time, the chairman thinks that is a dream. They will have to be completed a piece at a time. He thinks there will be a plan out there shortly, along with SCR 23. Number 150 SENATOR DONLEY stated concern that since the referral of SCR 23 to the Judiciary and Finance Committees was waived, the State Affairs Committee is the only committee where there will be a hearing on the legislation at the committee level. He doesn't think the public would have known that this resolution would now specify some of the things that it does until just now. Therefore, this would be the only opportunity for members of the public to comment on any of these particular provisions now contained in the committee subsitute. He thinks people would be interested in commenting, and unless the committee delays action on SCR 23, those people will not get an opportunity to comment on it at any stage of the legislative process before it reaches the floor of the senate. CHAIRMAN SHARP replied that the committee substitute incorporates nothing more than was just recommended to us by the co-chair of the Long-Range Financial Planning Commission. The debate will come on the individual bills, on whether or not any of these will occur through statute or through the budget. He thinks Senator Donley will agree that there will be considerable debate on any particular item contained in SCR 23 before it's locked into a bill that passes the senate. He thinks there will be plenty of opportunity for public input. Number 186 SENATOR LEMAN noted that several of the items contained in SCR 23 are not new to this legislature. He would prefer that the list of things the legislature looks at include more things than those contained in SCR 23. He would include things such as the revision of the education foundation formula. Overall, Senator Leman thinks SCR 23 just states, "These are things that the legislature is going to do." It's a plan. It may take 40 or 50 pieces of legislation to implement all that. It will certainly be soundly debated. Number 210 SENATOR DUNCAN commented he stands by his statement, and thinks it's unfortunate that SCR 23 is being politicized beyond what it needs to be. He thinks the commission also recommended a retirement incentive program, which is not listed in SCR 23, for political reasons undoubtedly. He thinks they also recommended that revenue measures be considered. Nowhere is that specified in SCR 23. Senator Duncan stated he is not trying to be overly political, but this is a political statement. It is not a broad framework. Number 230 CHAIRMAN SHARP stated that no matter how the resolution is worded, it will always be a political statement; that's the name of the game around here. Some legislators have been accused by others that we haven't acted quickly enough. This is just a very small step, and it does reflect very accurately most of the things the commission recommended as potential possibilities. He is sure there will be many other things that are looked at, which aren't listed specifically in SCR 23. Number 255 SENATOR DONLEY stated he agrees with the chairman that everything the legislature does is part of politics, so he doesn't think he would criticize it because it's a political statement. But his concern is that certain things have been chosen for inclusion, and it would be appropriate to have a public debate over what should be included in the resolution. Since this is the only committee that will be taking action on SCR 23, he thinks it would be appropriate to take public comment. If it is the chair's intent to move the legislation today, Senator Donley has several amendments he would like to suggest. CHAIRMAN SHARP asked the pleasure of the committee. SENATOR RANDY PHILLIPS stated, "Let's entertain the amendments." SENATOR DONLEY agreed with some of the comments made earlier that a key element is reform of the education foundation formula. He feels uncomfortable moving ahead with the resolution and leaving out such a huge part of the budget. He is frustrated that hasn't been addressed the last three or four years, and thinks it should be mentioned in SCR 23. Senator Donley also is disappointed that the commission didn't have the time to deal with the issue of the relationship between local government and state government. The commission acknowledged that relationship is a very significant element in closing the fiscal gap. As a member of the legislature, Senator Donley would like that to be part of any package which is developed. There are a lot of inequalities out there in terms of how services are delivered versus who pays for those services. CHAIRMAN SHARP agreed with Senator Donley. That was also discussed in the Finance Committee this morning. He still feels strongly that entitlement reform, benefits packages, and those kinds of wordings allow broad areas that can be worked on, without naming a whole litany of every item the state provides. Number 295 SENATOR RANDY PHILLIPS noted that Senator Donley's concern over addressing education foundation formula funding would be covered by the term entitlement reform . If Senator Donley has amendments, Senator Phillips stated he would be open to considering them. SENATOR DONLEY commented that the only other opportunity for amendments will be on the floor. Number 305 SENATOR DUNCAN thinks all kinds of amendments could be offered to SCR 23. He is concerned - there is a laundry list started, and we're going to add to the laundry list. There will still be a lot of things left off. It is for that reason he prefers the original resolution. It was very broad in nature, endorsing the idea of having a financial plan, endorsing the concept that we bring the gap down to a certain level, endorsing the concept that we look at spending reductions, and perhaps look at revenue measures. Once we start a laundry list, that can go on forever. Senator Duncan stated that when he referred earlier to a political statement, he meant that SCR 23 is not a balanced political statement. It reflects the viewpoints of the drafters. Senator Donley can make his own laundry list, but he thinks it's foolish to put together a laundry list. SCR 23 was supposed to be a broad endorsement of adopting a financial plan. CHAIRMAN SHARP stated he would like to see the laundry list remain broad. SENATOR DUNCAN commented he does not think that Tier 3 and privatization are broad. CHAIRMAN SHARP disagreed; privatization of state services is every state service out there. He thinks that's about as broad as you can get. SENATOR DUNCAN responded there has been no decision that would even be economically efficient, or should be the way we're going. And Tier 3 is not broad. There is no revenue in this. CHAIRMAN SHARP responded there is a statement in SCR 23 that revenues- SENATOR DUNCAN interrupted, "Not in the resolve clauses." Number 338 SENATOR DONLEY stated he personally supports the implication that the legislature look at reductions in government and spending. It seems to be saying that, "First, reduce the size and scope of state government to decrease the gap." He thinks that means we're going to look at cuts before we add revenue generators. It doesn't say exactly that, but the whereas clause on page two, lines 8-10 states that any fiscal plan should contain a combination of spending reductions and new revenue resulting from an expanded economy. His concern with that specific language is it doesn't really conform with the report from the commission. He disagrees with the report in this specific area. But it was interesting that the chairman of the commission made the comment to the State Affairs Committees that you won't get new revenue for the state with an expanded economy, with possibly the exception of natural resource areas where we do have a tax, because in most areas there aren't state taxes. Just expanding the economy won't give Alaska the additional revenue that other states would have. So he is a little concerned that particular phrase is actually out of line with what the commission's report stated. Not that he agreed with the commission's proposal for new taxes, but he also thinks that clause misrepresents the commission's proposal. Number 360 CHAIRMAN SHARP appreciates those comments, but he does not think the commission chairman anticipated the legislature adopting the commission's recommendations carte blanche, or even a majority of what the commission recommended. He doesn't believe, as he heard the presentation, that there was any direction on anything in their plan which was sacred. SENATOR LEMAN stated the committee substitute could be called amendment #1. There is a motion before the committee to adopt the committee substitute. He suggested acting on the motion to adopt the committee substitute, and then beginning on further amendments or suggestions. CHAIRMAN SHARP asked if there were objections to adopting the committee substitute. SENATOR DUNCAN objected. CHAIRMAN SHARP asked the secretary to call the roll. Number 376 The committee substitute was adopted by a vote of 3 yeas, 2 nays. Voting in favor of adoption were Senators Phillips, Leman, and Sharp. Voting in opposition were Senators Donley and Duncan. SENATOR LEMAN offered an amendment to SCR 23. In the last resolve on page 2, line 32, delete "wishes to thank", and insert "thanks". CHAIRMAN SHARP asked if there is objection to the amendment. Hearing none, the amendment is adopted. Number 388 SENATOR DONLEY thinks it would be important to add several other items to the resolution. He doesn't think most people would consider education funding as being an entitlement. Since it is such a huge element of our budget, he thinks it would be appropriate to address it directly. CHAIRMAN SHARP agreed that individuals might think that, but borough and city governments know it's an entitlement. SENATOR DONLEY supposed amendments could be considered when SCR 23 reaches the floor. Number 400 SENATOR RANDY PHILLIPS thinks concerns could also be addressed in the Rules Committee. Number 403 SENATOR RANDY PHILLIPS made a motion to discharge CSSCR 23(STA) and the accompanying zero fiscal note with individual recommendations. SENATOR DONLEY objected. He thinks some people would like to testify on the resolution, and feels uncomfortable not giving them the chance to do so. CHAIRMAN SHARP asked the secretary to call the role. The motion passed 3 yeas, 2 nays. Voting in favor of the motion to discharge are Senators Leman, Phillips, and Sharp. Voting against the motion are Senators Duncan and Donley. CHAIRMAN SHARP stated that the motion passes and the resolution is discharged from committee with individual recommendations.