SB 102-AMEND COMPACT FOR A BALANCED BUDGET  3:53:10 PM CHAIR SHOWER announced the consideration of SENATE BILL NO. 102 "An Act relating to the Compact for a Balanced Budget." He listed the individuals who would provide invited testimony. 3:54:07 PM SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau, Alaska, sponsor of SB 102, said she was honored when former lieutenant governor Meade Treadwell asked her to carry this bill. Alaska joined the Compact for a Balanced Budget in 2014 and SB 102 reauthorizes that membership. She said the federal debt is approaching $28 trillion and the compact is an effort to keep from overburdening future generations. She explained that the goal of the compact is to amend the US Constitution through the Article V process. She deferred further introduction to Buddy Whitt. 3:56:39 PM BUDDY WHITT, Staff, Senator Shelley Hughes, Alaska State Legislature, Juneau, Alaska, advised that SB 102 extends Alaska's membership in the Compact for America. He said the goal of this compact is to pass a balanced budget amendment to the US Constitution. Alaska entered the compact in 2014 after the passage of HB 284 sponsored by former Representative Wes Keller. At the time, the national debt was $17.3 trillion, but it had not surpassed the nation's Gross Domestic Product (GDP). As of March 2021, the national debt was $28 trillion, which exceeds the GDP by $6.4 trillion. For perspective, the difference between the national debt and the GDP is more than the GDP of every nation on earth except for the US and China. He said this is obviously unsustainable. He urged the committee to recognize the need for a balanced budget amendment and to continue to work towards that goal. SENATOR HOLLAND expressed appreciation for the bill. SENATOR COSTELLO stated that it is a good idea to shine light on this situation. 4:01:16 PM RILEY NYE, Intern, Senator Shelley Hughes, Alaska State Legislature, Juneau, Alaska, presented the following Sectional analysis for SB 102: Section 1 Article I Page 1, Line 3 through Page 2,  Line 3  Article I of the Compact is the Declaration of Policy, Purpose, and Intent of the Compact for a Balanced Budget Amendment. There are no changes to Article I of the compact. Article II, Sections 1 5 Page 2, lines 6 through  30  These sections of Article II of the compact contains definitions for the commonly used terms; "Compact", "Convention", "State", "Member State", and "Compact Notice Recipients". There are no changes to these definitions, so these sections to Article II are unchanged. Article II, Section 6 Page 2, Lines 31 through Page  3, Line 2  Article II, section 6 contains the notice requirement stipulations for the compact to the member states. There are no changes to this section of the compact. Article II, Section 7 Page 3, line 3 through Page 4,  Line 23  Article II, Section 7 is the Balanced Budget Amendment itself. The Balanced Budget Amend contains 7 sections and outlines the details and the mechanics of the amendment. This section in unchanged. Article III, Page 4, line 24 through Page 6, line 6  Article III of the Compact detail's membership and withdrawal criteria. Article III is unchanged. Article V, Page 9, Lines 4 through 14  Article V of the compact contains the resolution language to Congress for the application for an Article V Convention for the ratification of the Balanced Budget Amendment. Article V of the compact is also unchanged from the current compact. Article VI, Page 9, line 15 through Page 11, line 23  Article VI of the compact contains instruction on the appointment of delegates, the limitations of delegate powers and delegate instructions. There is a change in Article VI of the compact in that the Governor, Speaker of the House and President of the Senate or their designee will be the delegate to the Article V Convention. This section also stipulates that the vote of the majority of the members of the three-member delegation will be the vote of the member state. Article VII, Page 11, line 24 through Page 14, line 1  Article VII of the compact details the rules of the convention and there are no changes in this article to the current compact. Article VIII, Page 14, lines 2 through 19  Article VII of the compact specifies a prohibition on Ultra Vires (or Outside the Powers) Convention. Meaning, that any action outside the scope, purpose, and rules of the compact and the convention are out of order and invalid. Article VII is unchanged from the current compact. Article IX, Page 14, lines 20 through 28  Article IX contains resolution language for each state to use in ratifying the Balanced Budget Amendment. This article is unchanged from the current compact. Article X, Page 29, line 29 through 30  Article X contains the Construction, Enforcement, Venue, and Severability Clause for the compact. The only change to this Article is in the termination date of the compact, which occurs either upon ratification of the Balanced Budget Amendment or on April 12, 2031, whichever occurs first. 4:04:30 PM CHAIR SHOWER asked Mr. Whitt to set the record straight regarding Articles IV and Article VII. MR. WHITT advised that Article IV outlines the powers and responsibilities of the compact commission and stipulates that each commission member has one vote. This article provides the mechanism for getting the commission together and to the final goal of ratification of the constitutional amendment. MR. WHITT said Article VII lays out the details of the rules of the convention. He noted that there are no changes from the current compact. CHAIR SHOWER asked Mr. Whitt to introduce the invited testifiers. MR. WHITT said former Lieutenant Governor Meade Treadwell will give opening comments and introduce the panel. 4:06:54 PM MEADE TREADWELL, Chair, Balanced Budget Compact, Anchorage, Alaska, stated that this is a very narrowly focused compact that is intended to force a national conversation on the debt to try to avoid a US default. The compact commission has economic experts that are looking at the national default issue and who owns US Treasuries. As to why Alaska should renew its membership, he said the compact is working to force a conversation on spending and debt. Mississippi, North Dakota, North Carolina, and Arizona, either renewed their compacts or renewal is pending. He said there is no perfect compact because the federal government needs the means to spend in the event of a true emergency, but the spending sideboards Congress has put on itself have not been successful. It is important to have this conversation because Alaska would feel the effects very quickly if the federal government were to default. He said the state owns a lot of Treasury bonds and it depends on federal spending. MR. TREADWELL introduced Chip DeMoss to explain how the compact works. CHAIR SHOWER said he agrees with the concept. 4:12:50 PM CHIP DEMOSS, CEO, Compact for America Educational Foundation (AEF), Houston, Texas, advised that AEF is the designated administrator for the Compact for a Balanced Budget. He related that he is a CPA and has been involved in all aspects of corporate finance for 30 years. He explained that the written testimony he provided addresses the technical aspects of the compact document and the balanced budget amendment it contains. He thanked the State of Alaska for taking a leading role in moving the compact forward, starting in 2014. Alaska was the second member state to express its desire to exercise the power of the state legislature to propose and ratify amendments to the US Constitution without going through Congress. He also thanked Mr. Treadwell for working on behalf of the foundation and for his leadership role as chair of the compact commission. 4:14:33 PM MR. DEMOSS provided an update. In 2017 when Arizona joined the compact, the deadline for joining was extended to 2031 to give other states time to join. The North Dakota legislature recently sent the extension bill to the governor for a signature. Georgia has indicated it wants to renew participation next session and bills will be introduced in the North Carolina legislature next week to join the compact. He said AEF believes more states will join the compact very soon because Congress is unable to address the out-of-control spending and federal debt. He highlighted that the national debt grew to over $28 trillion last month. Now that the stimulus bill was signed into law, the federal debt is expected to exceed $30 trillion by the end of 2021. He noted that he attached a graph to his written testimony that shows the dramatic increases in the annual deficits over the last 10 years. He offered his belief that Congress never intends to pay back what it has borrowed or to cut spending. He predicted ballooning deficits and hyperinflation, which will destroy American wealth nationwide. MR. DEMOSS said economic experts are forecasting double-digit inflation before the end of 2021. Instilling fiscal constraints on Congress has to come from state legislatures. He said Alaska has indicated it is willing to do so and the America Educational Foundation is working to bring other states on board. CHAIR SHOWER commented that this is not a partisan issue it is an American issue. SENATOR COSTELLO asked if issues other than the balanced budget could be brought forward at the convention. MR. DEMOSS said no, only the balanced budget amendment may be considered at the convention. The compact limits the convention to 24 hours and the balanced budget amendment must be ratified by 38 states. MR. TREADWELL added that Article V has never been used to amend the US Constitution and the compact was carefully crafted to prevent a runaway convention. SENATOR HOLLAND asked how many states have joined and if there was a projection for getting 38 states to join. 4:20:17 PM MR. TREADWELL mentioned states moving in the direction of joining and suggested the committee members should work through interstate legislative groups to encourage other states to join. SENATOR HOLLAND said this is a noble effort that could snowball once it picks up momentum. 4:22:48 PM SVEN LARSON, Economist and Advisor, Balanced Budget Compact, Wyoming, stated that he participated in the initial drafting of the Balanced Budget Amendment. He highlighted that the budget deficit today is 15 percent of GDP and in 2020 the federal government borrowed the equivalent of 15 percent of GDP. MR. LARSON said both Alaska and Wyoming have structured their state and local governments on the premise that minerals will continue to produce revenue. That is no longer the case so both states have to realign to a new revenue stream. In this circumstance, it is easy to become more dependent on federal money, he said, particularly for Medicaid. Should the federal government default or even see the potential for that, it will quickly cut expenditures and Medicaid money for states will be at the top of the list. He asked members to imagine what the Alaska government would do if it were to lose even 10 percent of its Medicaid funding. MR. LARSON said the benefit of the Balanced Budget Compact is that it gives states a seat at the table, so the federal government never reaches the point of drastic cuts in aid to states. That is probably the most important component of the Balanced Budget Compact for state legislatures to consider. He said a final point about that is that the federal money to states cannot be used as a quid pro quo to allow Congress to increase its debt limit. MR. LARSON concluded that as an economist he cannot emphasize strongly enough how important the Balanced Budget Amendment is for states. SENATOR HOLLAND said he appreciates the enthusiasm. CHAIR SHOWER expressed hope that the state continues to work on this. 4:28:04 PM WES KELLER, representing self, Wasilla, Alaska, said he appreciates the opportunity to testify in support of SB 102. He thanked the sponsor and Mr. Treadwell for their work on the bill and pointed out that the Compact for American will cost the state nothing. He said he was honored to carry the bill in 2014 and he believes there is more reason to be enthused today. He explained that the compact provides for the use of Article V to amend the US Constitution to require a balanced budget. Alaska was the second state to join the commission. He drew an analogy between having a compact on the books and having a high-quality damper control on a raging wood-fired stove. He said the compact enables three-fourths of the sovereign states to slow federal spending, which he believes is long overdue. He said a point that has not been made is that the compact can provide the catalysis that Congress needs to regulate itself. He asked the committee to support this very well vetted bill. SB 102 gives states the opportunity to cooperate and compel Congress to limit spending. SENATOR HOLLAND thanked him for the enthusiasm. CHAIR SHOWER said he believes the committee understands the importance of the bill and the danger of an unsustainable national debt. MR. TREADWELL thanked the committee and Alaska for the support it has given to this compact. MR. WHITT thanked the committee for hearing the bill. 4:35:00 PM CHAIR SHOWER opened public testimony on SB 102. 4:35:19 PM MIKE COONS, representing self, Palmer, Alaska, reported that according to the Balanced Budget Taskforce website, 6 more states or 34 states in total need to join the compact to authorize holding a convention and 38 states are needed to ratify the amendment. He said he has been advocating for a balanced budget amendment to the US Constitution for years. He stated support for SB 102 and states taking back their government through Article V of the US Constitution. 4:37:03 PM CHAIR SHOWER closed public testimony on SB 102. He advised that written testimony could be sent to ssta@akleg.gov and it would be added to the record. 4:37:29 PM CHAIR SHOWER held SB 102 in committee for further consideration.