HOUSE FINANCE COMMITTEE SPECIAL SESSION May 23, 1999 11:15 P.M. TAPE HFC SS 99 - 5, Side 1. CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 11:15 P.M. PRESENT Co-Chair Mulder Representative Foster Co-Chair Therriault Representative Grussendorf Representative Austerman Representative Kohring Representative Bunde Representative G. Davis Representative J. Davies Representative Williams Representative Moses was not present for the meeting. ALSO PRESENT Representative Jim Whitaker; Representative Andrew Halcro; Representative Ethan Berkowitz; Senator John Torgerson; Representative Sharon Cissna; Representative Bill Hudson. SUMMARY HB 1001 An Act authorizing an advisory vote on a long-term financial plan for the state; and providing for an effective date. CS HB 1001 (FIN) was reported out of Committee with a "do pass" recommendation. HOUSE BILL NO. 1001 An Act authorizing an advisory vote on a long-term financial plan for the state; and providing for an effective date. Co-Chair Mulder spoke to the changes made to the work draft currently before the members. He advised that a change had been made to Page 3, Section 7, which would mandate that the permanent fund dividends issued in 2000 would be the same as those issued in 1999. Representative Williams questioned the reason for that change. Co-Chair Mulder explained that would allow the public to know the amount that their dividends would be for the next two years. Representative Williams pointed out that the public would not know the dividend amount should the status quo calculation be in place. Representative Grussendorf explained by providing the public information regarding the amount, would increase their comfort enough to be able to focus on the plan and the State's financial problem. Representative Grussendorf asked the time frame from which the 1999 dividend would be calculated. Co-Chair Mulder replied it would be determined from a 5-year rolling average and based on the July 1st through June 30th fiscal year. Co-Chair Mulder advised that Section 8 provided transitional language; Section 9 changes the sunset date and the repealing date. He added that this legislation will require additional action by the Legislature for it to stay in place. Representative J. Davies suggested that the legislation would provide security to the voters. Representative Williams asked how distribution of a $1700 dollar dividend would affect budget numbers calculated in plans previously discussed. Co-Chair Mulder explained that level of dividend would create a "medium level" volatility. The plan works with all the same assumptions. Co-Chair Mulder pointed out that the current work draft contains no language regarding new revenues. The proposed plan is only a "model", which will serve the purpose of showing assumptions of how a plan could work. Those assumptions would vary from legislature to legislature depending on new revenues and/or additional budget reductions. Representative Williams emphasized that it would be "risky" for the welfare of the State's budget to guarantee a $1700 dollar dividend for the next two years. Co-Chair Mulder agreed that the $1000 dollar dividend would be the more responsible way for the State to proceed, however, he believed that the $1700 approach would be less risky than the status quo. He acknowledged that the intent was to appease voters enough to hopefully vote "yes" on the issue. Representative Williams asked if the proposed plan would need "adjusting" in the next few years. Co-Chair Mulder reiterated that the proposed legislation could work. Representative Williams acknowledged that he was "bothered" by this proposal and reminded members that when various plans were being considered, the $1700 dollar dividend plan was known to be "very" risky. He believed that the Legislature would have to come back into session to "fix" this plan. Representative Williams pointed out that this is the first time that the Legislature has come before the people to request usage of the Permanent Fund. He emphasized that he would like to see it done correctly the first time. Representative Grussendorf spoke to the "risk" of presenting any plan to the public. He stressed that the Legislature can not afford to "fail". The public must be educated, however, he acknowledged that what is on their minds is only the amount of the dividend check. The $1700 dollar dividend will provide the voting public a little "comfort" and hopefully, the proposed plan should provide a better political and economic environment to sell the plan. Representative G. Davis agreed that the $1000 dividend would provide complete safety from an economic standpoint, the $1500 dividend would provide a degree of comfort, and that the $1700 dividend does guarantee more risk. However, he acknowledged that the need for a plan is so important, it is essential to convince the public while at the same time, they don't sacrifice too deeply. Co-Chair Therriault MOVED to RESCIND action taken on adopting the previous CS HB 1001 (FIN) from Committee. There being NO OBJECTION, it was so ordered. Co-Chair Therriault MOVED to adopt work draft #1-LS1022\I, Cook, 5/23/99, as the legislation before the Committee. There being NO OBJECTION, it was adopted. Representative Austerman asked clarification on how the legislation would work. Co-Chair Mulder explained that this year, the dividend would be calculated in the traditional manner; next year, the dividend would be the same amount as in 1999. He continued, the following year, the dividend would be calculated at 50% of the 5.88 payout. Representative Austerman pointed out that by putting off the endowment for two years, could jeopardize the intended concept. Representative Foster referenced Page 5, Lines 7 and 10. He questioned if that language should be included. He posed a hypothetical situation in which, if the plan does not generate enough funds, then the State would need to find future revenue sources. He believed that the language could "tie the hands" of future legislatures when trying to create revenue sources. Co-Chair Mulder agreed, however, noted the intent was to convey to the public, that there is confusion related to the approach as provided by the Governor. This language is "not" the Governor's approach. He noted that it would not preclude other new revenues or a statewide tax from being discussed as possible options in the future. Representative J. Davies agreed that the language referenced by Representative Foster would not preclude an income tax in the future. Co-Chair Therriault MOVED to report CS HB 1001 (FIN) out of Committee with individual recommendations, There being NO OBJECTION, it was so ordered. CS HB 1001 (FIN) was reported out of Committee with a "do pass" recommendation. ADJOURNMENT The meeting adjourned at 11:40 P.M. H.F.C. Special Session 4 5/23/99 p.n.