MINUTES  SENATE FINANCE COMMITTEE  April 05, 2004  9:04 AM      TAPES    SFC-04 # 69, Side A  SFC 04 # 69, Side B  SFC 04 # 70, Side A    CALL TO ORDER    Co-Chair Gary Wilken convened the meeting at approximately 9:04  AM.    PRESENT    Senator Lyda Green, Co-Chair  Senator Gary Wilken, Co-Chair  Senator Con Bunde, Vice Chair  Senator Fred Dyson  Senator Lyman Hoffman  Senator Donny Olson  Senator Ben Stevens    Also Attending: JOEL GILBERTSON, Commissioner, Department of  Health and Social Services; DORIS ROBBINS, Volunteer, Juneau  Clean Air and Tobacco Free Kids; CHERYL FRESCA, Director, Office  of Management and Budget, Office of the Governor; BRUCE  TANGEMAN, Fiscal Analyst, Legislative Finance Division; LUCKY  SCHULTZ, Staff to Senator Fred Dyson    Attending via Teleconference: From an Offnet Sites: JOHANNA  BALES, Program Manager, Cigarette and Tobacco Excise Tax,  Department of Revenue; JENNFIER APP, Advocacy Director, American  Heart Association; From Fairbanks: RUTHAMAE KARR, Chair, Alaska  Tobacco Control Alliance; From Anchorage: PAT LUBY, AARP Alaska;  MICHELLE TOOHEY, Director of Public Advocacy, American Lung  Association of Alaska; EMILY NENON, Alaska Advocacy Manager,  American Cancer Society; PATRICIA SENNER, Family Nurse  Practitioner; JOELLE HALL, Parent; KATTARYNA STILES,  Representative, Alaska Native Health Board      SUMMARY INFORMATION    SB 368-TOBACCO TAX; LICENSING; PENALTIES    The Committee heard from the Department of Health and Social  Services, the Department of Revenue, and took public testimony.  The bill was held in Committee.    SJR 3-CONST AM: APPROPRIATION/SPENDING LIMIT    The Committee heard from the bill's sponsor, the Office of  Management and Budget, the Division of Legislative Finance,  adopted two conceptual amendments, and reported the bill from  Committee.    SB 351-APOC REPORTS BY NONELECTRONIC MEANS    This bill was scheduled but not heard.    HB 357-RESTITUTION    This bill was scheduled but not heard.    HB 513-CSED NAME CHANGE/DRIVER'S LIC.SUSPENSION    This bill was scheduled but not heard.    #sb368    SENATE BILL NO. 368  "An Act relating to taxes on cigarettes and tobacco  products; relating to tax stamps on cigarettes; relating to  forfeiture of cigarettes and of property used in the  manufacture, transportation, or sale of unstamped  cigarettes; relating to licenses and licensees under the  Cigarette Tax Act; and providing for an effective date."      This was the first hearing for this bill in the Senate Finance  Committee.    Co-Chair Wilken informed the Committee that this legislation  would increase the cigarette tax from the current one-dollar per  20-cigarette pack to two dollars per pack and would increase the  Other Tobacco Products tax from 75-percent to 100-percent of the  wholesale cost. Furthermore, he specified that the legislation  would allow the Department of Public Safety "to seize and  dispose of assets used in cigarette smuggling and tax evasion  activities." Co-Chair Wilken identified the bill version before  the Committee as SB 368, Version 23-GS2116\A.    JOEL GILBERTSON, Commissioner, Department of Health and Social  Services, stated that this legislation would increase the  cigarette tax from one dollar to two dollars per pack. He  explained that this legislation is being introduced "because  tobacco is the number one public health threat" for the State in  that it is the State's "leading cause of death, disability and  chronic illness."    Commissioner Gilbertson avowed that increasing the tax levy  would continue to produce health benefits to Alaskans, as he  noted, that since 1997 when the current one dollar tax went into  effect, tobacco consumption in the State has declined 30- percent. He informed that increasing this user tax would have  the most dramatic impact on young Alaskans, as increasing the  unit price on tobacco "is one of the most effective ways of  preventing that population from ever beginning a lifelong  addiction to smoking." He stated therefore that a substantial  increase in the tax would insure that Alaskans, particularly  young Alaskans, with limited resources would choose a more  healthy avenue in which to spend their money.    Commissioner Gilbertson declared that anti-smoking efforts have  been successful, as, he disclosed that statistics developed from  a recent youth behavior survey [copy not provided] indicate that  there has been a 50-percent decline in tobacco use in young  people. He declared that increasing the tax, as proposed in this  bill, would continue that trend.    Commissioner Gilbertson remarked that the State's tobacco  enforcement efforts have successfully lowered the number of  underage Alaskans illegally purchasing tobacco products in  retail establishments from 30.2 percent to ten percent in the  last year. This action, he shared, has brought the State into  compliance with federal mandates. He asserted that were tobacco  use to further decline by 15 percent as result of the proposed  tax, "1,800 lives would be saved from premature death due to  smoking."    Commissioner Gilbertson declared that, in addition to lowering  tobacco use in young Alaskans, the increased tax would be an  effective tool in changing behavioral patterns and improving the  health of adults in the State. He estimated that a tax increase  "would be the direct catalyst" in encouraging 3,500 Alaskan  adults to stop smoking, which he shared would save approximately  800 lives. He noted that in conjunction with other entities, the  Department provides opportunities for people to participate in  tobacco cessation programs.    Commissioner Gilbertson pointed out that included in the number  of individuals who would cease to smoke would be expectant  mothers. He stated that this would equate to assisting 850  babies from maternal tobacco exposure within the next five  years.    Commissioner Gilbertson reported that the Alaskan group having  the highest number of smokers, 44-percent verses the norm of 22- percent, is Alaska Natives. He commented that while the number  of Alaska Natives who smoke continues, "to be disproportionately  higher" than other groups, there has been a decrease in the  number smoking since the one-dollar tobacco tax was implemented.  He additionally noted that Alaska Native high school youth are  four times more likely to smoke that the general youth  population.    Commissioner Gilbertson informed that the Campaign for Tobacco  Free Kids compiled an analysis of health costs that indicates  that an increased tobacco tax would assist in reducing smoking  related health expenses by $1.6 million over the next five years  as a result of fewer smoking related heart attacks and $1.8  million would be saved from expenses associated with stokes. He  shared that information garnered from a [unspecified] 1998  comprehensive study denoted that smoking related medical  expenses amounted to $133 million in the State with $137 million  in lost productivity due to tobacco related deaths. Additional  expenses, he shared, were incurred by smoking related work  absences and such things as smoking breaks. He stated that  smoking related expenses have an "unfortunate" and "huge  economic impact on this State."    Commissioner Gilbertson stated that "17 large econometric  studies" have been utilized by the Department in order to  determine how pricing would affect the consumption of tobacco  products. He shared that all 17 studies reflect that there is "a  direct correlation between increase in tobacco price and a  decline in smoking." He stated that he would provide the  Committee with a copy of a recently completed Department's  Division of Public Health report titled "Tobacco in the Great  Land: A Portrait of Alaska's Leading Cause of Death" [copy not  provided] which substantiates the Department's position that  "tobacco is the number one public health threat facing the  State" as it is, he reiterated, the leading cause of death,  disability and chronic illness in the State. He concluded that  increasing the tobacco tax by one dollar per pack would be a  "prudent" thing to do, as it would prevent people from starting  to smoke and would assist in getting other to stop.    JOHANNA BALES, Program Manager, Cigarette and Tobacco Products  Excise Tax, Department of Revenue, testified via teleconference  from an offnet site and presented a technical overview of the  legislation in that it, in addition to increasing the current  cigarette tax from one dollar per pack to two dollars, would  increase the Other Tobacco Products tax from 75 percent to 100  percent of the wholesale cost. She informed that New Jersey  currently has the highest cigarette tax in the nation at $2.05  per pack, and that Rhode Island would soon implement a $2.45  cent per pack tax. In addition, she communicated that the state  of Washington has the highest Other Tobacco Products tax at 129  percent of the wholesale cost.    Ms. Bales noted that other provisions in the bill would increase  the annual direct buying retail license fee from $25 to $50 in  order to align these license fees with those currently paid by  distributors, as, she contended, these two entities more often  than not, "operate in the same business." She also noted that  the bill includes technical corrections that would eliminate the  double-taxation issue that might arise were in-State dealers to  purchase from out-of-state dealers who are licensed by the  State.    Ms. Bales continued that the bill would also allow distributors  dealing with recent manufacturers' returned goods policy changes  to possess unstamped cigarettes and it would also provide them  with credits for stamped cigarettes sold out-of-State. She  clarified, however, that the distributor must prove they "are  properly licensed in the other state where the cigarettes were  sold" before the credit would be issued.    Ms. Bales noted that, as reviewed by Commissioner Gilbertson,  the seizure section in the bill would allow the State to seize  assets that are in violation of the State's cigarette stamp tax  laws. She stated that this enforcement tool would assist in  promoting compliance.    Ms. Bales noted that the bill also includes "a floor stock tax  provision" which would require all entities selling cigarettes  in the State to conduct an inventory upon the enactment of the  new tax, and remit the difference between the old and new stamp  tax rate to the State within 30 days. She informed the Members  that approximately 200-million cigarettes were stockpiled,  primarily by retailers and distributors, prior to the State's  last cigarette tax increase. She estimated that scenario to have  resulted in approximately $7 million dollars in lost revenue to  the State. She also noted that the State received numerous  consumer complaints stating that they were charged the new tax  rate on the first day it was enacted, "when in fact, none of the  distributors or retailers had actually paid that increase."    Ms. Bales shared that the federal government and other states  commonly institute similar floor stock taxes.    Co-Chair Wilken noted that Ms. Bales' written testimony [copy  provided] is in the Members' packets.    Senator Bunde asked the Departments' positions on including  tobacco products such as smokeless tobacco in this bill.    Ms. Bales reminded that the tax on Other Tobacco Products was  increased in 1997 from 25 percent to 75 percent of the wholesale  cost. She noted that this bill would increase that level to 100  percent. However, she continued, when the Department conducted a  study specifically addressing chewing tobacco products such as  Copenhagen, for the Department of Health and Social Services, it  was determined that despite the tax increase implemented in  1997, there has been "a fairly significant increase in the use  of that product in the State." One of the problems, she pointed  out, is that, currently, Other Tobacco Products are not subject  to tax if an individual imports that product for personal  consumption. She stated that, even with the tax increase as  proposed in this legislation, individuals purchasing and  importing other tobacco products into the State through such  avenues as the Internet or other out-of-State purchases "would  not be subject to any of the tax, period."    Senator Bunde ascertained that this is good reason to include  those who import for personal consumption into this bill, as he  contended, not including them "would drive business out of  Alaska and puts retailers at a disadvantage."    Ms. Bales stated that the Department of Revenue would support  Senator Bunde's suggestion for two reasons: one, it would  support local business; and two, an increase in price might  curtail use of the product.    Senator Dyson understood that "the demonstrable health risks" of  non-smoked products "are significantly less" than the risks  associated with those that are inhaled.    Commissioner Gilbertson responded that, "it would be correct to  say that the health risks are not identical"; however, he stated  that, "the Department would not support a statement that the  health risks are so reduced as to be one that is diminished." He  shared that the Department could provide material attesting to  the health risks associated with both smokeless and smoked  tobacco products.    Senator Dyson agreed; however, he commented that smokeless  products pose "no risk to others from secondhand smoke and no  risk to a fetus from oxygen deprivation that happens with a  smoking mother." In addition to stating that its addiction rate  might be similar to that of cigarettes, he acknowledged that  chewing tobacco products does incur such things as gum and  throat cancer. However, he continued, its contribution to lung  cancer is minimal.    Senator Dyson asked how the legislation would affect those who  roll their own product from loose tobacco. He also noted that a  Surgeon General report, issued approximately 15 years earlier,  stated that pipe tobacco health risks are significantly less  than manufactured cigarettes. He pointed out that not all  tobacco products have the same cost impact and health risk and,  therefore, he attested they should not be treated the same.    Commissioner Gilbertson declared that, "varying tobacco products  have varying risks." He reiterated that the Department could  provide scientific study information to the Members. He noted  that, while he was unfamiliar with the pipe tobacco research  referred to, studies support the position that all tobacco  products "carry some health risks." Furthermore, he voiced that  the Department views all those health risks as negative health  risks, of which the State should discourage.    Senator Dyson asked whether the aforementioned impacts of the  tobacco tax increase on such things as mortality rates, were  annual projections.    Commissioner Gilbertson clarified that the aforementioned  results would be the accumulative affect of this tax increase.    Senator Dyson asked whether information could be provided  regarding annual death rates and usage effects of the tax.    Commissioner Gilbertson replied that the most noticeable long- term health benefit that would result from the tax increase  would be a reduction in the number of young Alaskans who would  choose not to smoke. He informed the Committee that the majority  of long-term tobacco addicts partake of their first tobacco  product before the age of 18.    Senator Dyson voiced that there is public discontentment  regarding how the money raised from this tax has been allocated,  as there is general perception that it should be used to promote  cessation and prevention programs. He asked for a recap of how  the current tobacco tax revenue is allocated; specifically the  amount spent on cessation and prevention programs, and whether  this legislation would alter the current scenario.    Commissioner Gilbertson stated that this legislation would not  dedicate its revenues for tobacco control programs. Continuing,  he informed that the Department, individually and in conjunction  with the Tobacco Control Alliance partners, manages a tobacco  control program. Furthermore, he explained that the majority of  the monetary support for these programs is supported by Tobacco  Master Settlement money with additional funding generated from  licensure fees. He noted that approximately $5 million would be  spent on these programs in FY 05.    Ms. Bales disclosed that currently 76-percent of the revenue  generated from the tobacco tax is distributed to the State's  School Fund and 24 percent is deposited into the general fund.  She explained that increasing the per pack tobacco tax from one  dollar to two dollars would generate double the revenue; and,  she attested that even though this legislation would reduce the  percentage allocation for the School Fund to 38 percent, the  money generated would remain constant. Continuing, she stated  that the amount allocated to the general fund would increase to  62 percent.    Ms. Bales noted that 100 percent of the revenue generated from  the tax on Other Tobacco Products is currently, and would  continue to be, deposited into the general fund.    Ms. Bales clarified that there is no language in the Master  Tobacco Settlement agreement specifying that it be used to fund  such things as tobacco cessation and education programs. She  voiced the understanding that the money could be used to  reimburse the State's general fund for such things as Medicaid  expenses. She concluded that it is the Legislature's decision as  to how to spend that money.    Senator Olson asked for assurance that language in the bill  pertaining to the seizure of assets as specified on page five,  line three and page six, line eight would not jeopardize such  things as aircraft and vehicles owned by common carriers who  might unknowingly transport cigarettes.    Ms. Bales understood that the forfeiture provisions which were  drafted by the Department of Law, would provide "innocent person  relief" in the case that their property were unknowingly used by  a cigarette tax violator. She assured that provisions are also  included to address situations, for example, in a village  wherein "a family's sole source of transportation would be  protected from seizure."    Ms. Bales reminded that violations of the tobacco tax would not  apply to personal cigarette consumption.    Senator Olson asked regarding the scenario in which a common  carrier who, as a means of business, transports cigarettes.    Ms. Bales clarified that a violation would not occur unless the  common carrier knowingly transported illegal cigarettes. She  noted that she would confirm this interpretation of the language  with the Department of Law.    Co-Chair Wilken asked Ms. Bales to review comments included in  an April 4, 2004 letter [copy on file] he had received from  wholesale distributor, Mike Elerding of Northern Sales, as well  as two proposed amendments that pertain to comments in that  letter.    Ms. Bales stated that she would review that information and  provide a response at the next hearing on this bill.    Senator Hoffman asked whether a portion of the revenue generated  from this tax increase would be used to support anti-smoking  advertising campaigns.    Commissioner Gilbertson responded that this bill specifies that  the revenue generated by this legislation would be deposited  into the general fund. He reiterated that the Department  operates a tobacco cessation and education program in  conjunction with the Tobacco Alliance.    Senator Hoffman reminded that the previous tobacco tax  legislation required funds to be spent on anti-smoking  advertisements, and he attested that that effort was responsible  for a downturn in cigarette consumption. Therefore, he  questioned the reason that a similar effort is not included in  this legislation.    Commissioner Gilbertson replied that a price increase is a  "tremendous deterrent" in that studies indicate that for every  ten percent price increase in the cost of a cigarette product,  there is a corresponding three-point-seven (3.7) percent  decrease in consumption. He concurred that the media campaign  was successful and would continue to be effective in reducing  general tobacco consumption; however, he stated that this  legislation does not allocate funds toward that effort. He  stated that the Governor could propose and the Legislature could  fund those efforts.    Senator Hoffman, referring to the high number of Native smokers,  asked what efforts would be exerted to reduce tobacco usage in  this group.    Commissioner Gilbertson responded that while there is a large  variety of health disparities in this State, the disparity  between cigarette consumption between Native and non-Native  populations is an important issue. He specified that the Tobacco  Control program has dedicated funds to target tobacco usage in  Natives via outreach efforts in conjunction with such groups as  the Alaska Native Tribal Health Consortium. Furthermore, he  stated, the Native Health Board, the Alaska Native Tribal Health  Consortium and other public health consortiums have been  supportive of this legislation and have agreed that increasing  the cost of tobacco products would be an effective public health  tool. He also noted that they have testified in support of this  legislation. He declared that while stronger efforts could be  exerted, efforts have been made in this regard.    Senator Hoffman understood therefore that this legislation does  not contain specific measures to address the Native tobacco use  issue.    Co-Chair Green communicated that dedicated funds should not be  an issue "at this table." On another note, she asked regarding  the success of "sting operation" efforts in urban and rural  areas.    Commissioner Gilbertson stated that tobacco enforcement efforts  have been successful throughout the State. He explained that  each state receives federal alcohol and mental health block  grant funds, the amount of which is contingent on the State's  successful implementation of a tobacco enforcement program. He  defined success "as a lower than 20 percent sales rate to  underage minors who attempt to purchase tobacco products." Were  this level of enforcement not obtained, he continued, the State  could loose up to 40-percent of its block grant funding. He  shared that the State has been non-compliant for last five years  in that its compliant rate has exceeded 30 percent per year. He  stated that this is unacceptably high and that as a result the  State has had to dedicate funds in the form of a cumulative  penalty, reaching approximately one million dollars in recent  years, so as not to loose the block grants in their entirety. In  the meantime, he communicated, the Department has worked with  retailers and others to raise awareness, improve training, and  improve enforcement efforts in this regard. He noted that, as a  result of these efforts, the illegal sales rate has recently  declined to ten percent.    Senator Olson noted that the graph titled "Cigarette  Importations FY 1996 - FY 2002 and Cigarette Stockpiling in FY  1998" [copy on file] reflects a dramatic decease in 1997 when  the cigarette tax was increased to one dollar per pack. However,  he noted that since 1997, the volume of cigarettes being  purchased has continued to increase. He questioned whether the  slope of the increase would indicate that over time, any  positive impact of the proposed two-dollar a pack tax would  diminish.    Commissioner Gilbertson responded that he could not adequately  provide a statistical answer; however, he noted that while the  number of cigarettes being imported into the State is  increasing, overall it is a minor issue as 95 percent of the  tobacco products consumed in the State are bought through local  licensed retailers in the State.    DORIS ROBBINS, Volunteer, Juneau Clean Air and Alaskans for  Tobacco Free Kids, noted that the Governor has requested that 20  percent of the Master Tobacco Settlement fund be spent on  education and cessation efforts in FY 05. On behalf of the  organizations she represents, she voiced support for the  proposed tobacco tax increase, as, she declared, it would assist  in stopping a large number of people, primarily youth, from  smoking. Were the legislation passed, she approximated that  9,100 kids would not start smoking. She stated that the majority  of smokers begin to smoke when they were children, and she  continued, were the price to deter youth from smoking, it would  serve to reduce the number of "next generation smokers." She  stated that other benefits would include a reduction in smoking  affected births; would save lives of numerous adults who  currently smoke; and would result in lowering long term medical  expenses. She noted that in order to adequately cover today's  medical expenses, the tax level should be $6.38 per pack, as she  shared that $60 million is required annually by Medicaid to  provide for tobacco related illness care. She stated that  efforts are being developed to educate children at an early age  of the health dangers associated with tobacco use. She also  stated that it is "a myth" that crewing tobacco would not affect  a baby. She recounted Doctor Robert Urata's testimony to a House  of Representatives committee in which he declared that tobacco  products are "so poisonous" that were they would fail to receive  federal Food and Drug Administration approval were they to apply  for authorization today. She stated that 82 percent of Alaskan  voters are very concerned about the use of tobacco products by  young people. She urged the Committee to pass this legislation  and also consider supporting the Governor's proposal to spend 20  percent of the Tobacco Settlement money on tobacco education  programs. In summary, she noted that the state of Mississippi  spends more on tobacco prevention that the State of Alaska does.    JENNFIER APP, Advocacy Director, American Heart Association,  testified via teleconference from an offnet site, and shared  that the American Heart Association's mission is to reduce  disabilities, cardiovascular disease and stokes. She reiterated  that tobacco use is the number one preventable cause of death in  the State, and she stated that it is also the number one  preventable cause of cardiovascular disease in the State. She  stated that the Association is in "very strong support" of an  increase in the tobacco tax because, she attested, as the price  increases, more adults attempt to quit.      SFC 04 # 69, Side B 09:51 AM      Ms. App continued that most smokers begin smoking between the  ages of ten and twenty, and she noted that the average smoker in  Alaska began at the age of 14.5 years. She attested that "this  is also the age group that is most sensitive to price  increases." Therefore, she stated that this price increase would  result, over the long-term, in a decline in smokers in the  State. Furthermore, she attested that the tax would also assist  in reducing the approximate $130 million a year the State spends  on direct costs associated with smoking, including approximately  $60 million the State pays in support of the Medicaid program.  She affirmed that Alaskan businesses are losing approximately  $130 million annually in lost productivity related to smoking.  She calculated that to cover these expenses, the tax should be  $6.38 per pack; therefore, she concluded that even with the  implementation of a two-dollar per pack tax, the State would  continue "to be subsidizing these costs." However, she stressed  that the proposed tax would be an improvement over the current  situation and would result "in a win/win situation" as it would  assist in saving lives by deterring youth from smoking and the  State would also save money through the reduction of smoking  related expenses.    RUTHAMAE KARR, Chair, Alaska Tobacco Control Alliance (ATCA),  testified via teleconference from Fairbanks and shared that  while more funding would be appreciated, the ATCA has  experienced success in the State in its efforts, via a good  media campaign, to publicize the negative affects of smoking  such as second hand smoke. She affirmed that Alaska is ranked  "very high" in its number of tobacco users, and she voiced  additional concern that even with the educational efforts,  smokeless tobacco rates are increasing because people believe  smokeless alternatives are safer than cigarettes. She agreed  that an increase in the Other Tobacco Products prices would also  result in a decrease in young smoker use and would assist  people's efforts to quit smoking. She also stated that this  would result in a win/win situation, as it would assist the  State in reducing smoking related health expenses and increase  revenues for the State. She expressed support for the  legislation.    PAT LUBY, AARP Alaska, testified via teleconference from  Anchorage and stated that this legislation is favored by AARP.  He shared that research supports the position that a higher tax  would assist in curbing youth from smoking and would encourage  existing smokers to stop. He shared that grandparents love,  support, and enjoy their grandchildren and are saddened to see  them smoke. Therefore, he stressed that any program that would  assist in preventing kids from smoking would be supported by  AARP. He voiced concern regarding the information in the  Governor's transmittal letter that denotes that Alaska Natives,  and particularly Alaska Native youth, are smoking in numbers  higher than the State's norm, and he urged that some of the  anticipated revenue from this tax be used to address this issue.  He shared that a recent Medicare Trustees annual report stated  that the State's health care costs rose "significantly beyond  expectations," primarily as a result of smoking related  illnesses. Therefore, he surmised, that were fewer kids to  smoke, the long-term affect on lowering Medicare and Medicaid  expenses "would be significant." He stated that this legislation  is both "good economic policy and good health policy, it makes  sense and it's fair." On behalf of AARP, he urged passage of the  bill.    Co-Chair Wilken noted that the April 4, 2004 letter [copy on  file] from AARP is included in Members' packets.    MICHELLE TOOHEY, Director of Public Advocacy, American Lung  Association of Alaska, testified via teleconference from  Anchorage and addressed Ms. Bales' comments regarding the  Tobacco Master Settlement Agreement (MSA) by stating that "it is  true" that the agreement does not require that money be  allocated toward tobacco prevention "because Attorneys General  have no power of appropriation; however, there was absolutely an  intent in the settlement for these dollars to go to programs to  prevent kids from smoking and to help adults quit." Furthermore,  she attested that "this commitment was stated publicly when  Alaska settled, in fact, Alaska's Attorney General was  successful in negotiating an extra $200 million for our State in  consideration of the vastness of Alaska and the logistic  complications associated with administering tobacco prevention  programs in Rural Alaska. Further, in 2001, the Legislature  created the Tobacco Use Education and Cessation Fund to set  aside the remaining non-securitized 20-percent of the MSA funds  to provide a source to finance comprehensive smoking education,  tobacco use prevention, and tobacco control programs."  Therefore, she concluded that while the agreement does not  specify a requirement to fund prevention programs, "public  commitment has been made from the beginning to use these funds  in this manner."    Senator Hoffman commented that while there might have been  "public commitment to spend those dollars," the Commissioner of  the Department of Health and Social Services has communicated  that, "there are no additional dollars in the budget for that  effort." Continuing, he calculated that 20-percent of $40  million would amount to $8 million in additional funding that  should be specified for cessation efforts.    EMILY NENON, Alaska Advocacy Manager, American Cancer Society,  testified via teleconference from Anchorage that the American  Cancer Society (ACS) "recognizes tobacco taxes as one of the  most effective ways to reduce youth smoking and save lives." She  stressed that both State and national studies support this  claim. She stated that the mission of ACS "is to eliminate  cancer as the major health problem by preventing cancers, saving  lives, and diminishing suffering from cancer." She noted that  cancer is the second leading cause of death for Alaskans and the  leading cause of death for Alaska Natives, and she attested that  one-third of all cancers are tobacco related. She affirmed that  the majority of tobacco users become addicted as children.  Therefore, she supported testimony that increased taxes would  discourage youth from smoking. She stressed that this bill is  unique in that, in addition to having a tremendous health  impact, it has large public support throughout the State. She  urged the Committee to support this bill.    PATRICIA SENNER, Family Nurse Practitioner, testified via  teleconference from Anchorage in support of increasing the  tobacco tax in order to discourage youth from smoking. She  agreed with Senator Hoffman's comments that money be specified  for an anti-smoking advertising campaign as she attested that a  "two-pronged approach" must be taken to address the issue.  Furthermore, she informed that Committee that one of the most  common requests she experiences when working with homeless youth  is the request for assistance in stopping smoking. She noted  that Medicaid does not provide funding to assist people with  such cessation aides as nicotine patches. Therefore, she voiced  that access to such things would be helpful in this endeavor.  She also encouraged the Committee to address the illegal  bootlegging and importation of tobacco products.    JOELLE HALL, Parent, testified via teleconference from Anchorage  in support of the tax. She stressed that no one has more need  for this bill than "our children." She charged that parents'  role is to teach their children the dangers of smoking and that  the Legislature's role is to promote legislation such as this  tobacco tax increase in order to assist efforts to halting youth  from smoking. She voiced that while she is glad to have smokers  contribute via paying a tax toward the expenses incurred from  tobacco related expenses, her primary reason for support was to  discourage use. She urged the Committee to report the bill from  Committee.    KATTARYNA STILES, Representative, Alaska Native Health Board,  testified via teleconference from Anchorage in support of the  bill, as she attested, it "would save lives by reducing and  preventing tobacco use." Echoing Senator Hoffman's concerns, she  stated that the high percent of Native youth who smoke is  unacceptable. She stated that raising the price of tobacco  products would assist in the endeavor of discouraging youth to  smoke. She noted Commissioner Gilbertson's comments that the tax  would also alter smoking behaviors of adults. She stressed that  efforts to discourage pregnant women from smoking would be  important, as she noted that in western Alaska, there is an  "unacceptable" smoking rate of up to 67-percent among pregnant  women. She stated that by using Tobacco Master Settlement  Agreement Funds, grants, and other funds, a multitude of  agencies are working together to educate Native Alaskans to the  dangers of smoking. She stated that adoption of this legislation  would only increase the success of the efforts that are  currently in place to prevent use of tobacco in Native Youth.    Senator Hoffman asked whether the Alaska Native Health Board  could utilize additional dollars to assist in prevention  efforts.    Ms. Stiles replied in the affirmative; however, she clarified  that the purpose of her testimony today is to support this bill,  "not for the money, its because the goal of the tobacco tax  itself is to prevent use."    Senator Bunde questioned whether any polls have been conducted  to gauge public support for this tobacco tax; and if so, he  asked whether a one-dollar or a $1.50 tax increase was  preferred.    Ms. Nenon responded that the American Cancer Society conducted a  poll with the result being equal support for either a $1.00 or  $1.50 increase.    Senator Bunde asked the level of support favoring an increase.    Ms. Nenon relied that 67-percent of those polled supported a tax  increase.    Senator Bunde reiterated that an amendment should be considered  to incorporate all tobacco products into the bill.    Co-Chair Wilken suggested that Senator Bunde develop an  amendment and present it at the bill's next Committee hearing.    There being no further testimony, Co-Chair Wilken ordered the  bill HELD in Committee.    AT EASE 10:14 AM / 10:16 AM    #sjr3    CS FOR SENATE JOINT RESOLUTION NO. 3(JUD)  Proposing an amendment to the Constitution of the State of  Alaska relating to an appropriation limit and a spending  limit.      This was the tenth hearing for this bill in the Senate Finance  Committee.    Co-Chair Wilken specified that this legislation would implement  a Constitutional spending limit.    Senator Dyson moved to adopt the committee substitute, Version  23-LS0296\Z as the working document.    Senator Hoffman asked for confirmation that the Version "Z"  committee substitute encompasses previously adopted amendments.    Senator Dyson responded affirmatively.    There being no objection, the Version "Z" committee substitute  was adopted as the working document.    Senator Dyson, the bill's sponsor, noted that the Administration  has explained that due to four years of "budget restraints,"  there is "an artificial distortion in the application of the  formula in the out years." Therefore, he continued, the  Administration had requested that the base years' numbers be  adjusted "in order to make the formulas smooth and work for the  expected and reasonable expansion of the budget." He attested  that this had been done. Subsequent to that, he continued, the  adoption of Amendment #12 at the previous meeting, "distorted  how the formula works" in that it exempted all University  receipts from the appropriations calculation.    CHERYL FRASCA, Director, Office of Management and Budget, Office  of the Governor, noted that the action of "amending out the  University of Alaska's receipts had the affect of removing" $150  million of spending from the total amounts available for  appropriation for FY 04 and FY 05. Therefore, she recommended  that $150 million be removed from the appropriation calculation  formula base years of FY 2004 and FY 2005 as specified in Sec.  2, subsection Section 30 (1) and (2) on page three, lines 21 and  22 in Version "Z". She specified that this would reduce these  numbers to $3,150,000,000 and $3,250,000,000, respectfully.    Ms. Frasca also noted that a grammatical correction should occur  in Section 1, subsections Section 16 (1) on page one, lines 13  and 15, and Section 16 (2) on page two, line 3, in which the  words "second" and "third" should be replaced with the word  "two." This language currently reads as follows.     (1) the percentage rate of change in the Consumer  Price Index for all urban consumers for the Anchorage  metropolitan area compiled by a federal agency during the  second and third calendar years preceding the calendar year  during which the immediately preceding fiscal year began,  but not to exceed the percentage change in personal income  of State residents during the second and third calendar  years preceding the calendar year during which the  immediately preceding fiscal year begins; plus   (2) the percentage rate of change in the State  population during the second and third calendar years  preceding the calendar year during which the immediately  preceding fiscal year began compiled by a State department.    Co-Chair Green asked whether changing this language would have  an affect on the calculation formula.    Ms. Frasca responded that it would not.    Amendment #13: As a result of exempting University of Alaska  receipts from the appropriations calculation, this amendment  reduces the total FY 04 and FY 05 appropriation amounts  reflected on page three, lines 21 and 22 from $3,300,000,000 to  $3,150,000,000 and from $3,400,000,000 to $3,250,000,000,  respectfully.    Co-Chair Green moved for the adoption of Amendment #13 and  objected for discussion.    Co-Chair Green asked for a review of the calculation formula  from which the original FY 04 and FY 05 base year levels of  $3,300,000,000 and $3,400,000,000 were derived.    BRUCE TANGEMAN, Fiscal Analyst, Legislative Finance Division,  informed the Committee that these amounts were determined by  reviewing the appropriation amounts for several years prior to  FY 2004, as he informed, the FY 2004 and FY 2005 amounts were  unavailable. He stated that the resulting calculation provided a  base to which a growth factor was applied. Therefore, he  concluded that the formula provided "a safe, fairly known  calculation for what's going to happen in 06."    Co-Chair Green understood therefore, that this methodology  provided a "floor" from which to determine future calculations.    Senator Dyson stated that Co-Chair Green's comment is correct.  Continuing, he clarified that this legislation would establish a  "floor on the spending limit, not on our spending."    LUCKY SCHULTZ, Staff to Senator Fred Dyson, noted that another  consideration in the "adjusted base year" calculation was to  determine an amount that would provide adequate growth,  respectful of the funding reductions that occurred over the past  several fiscal years and of how the "no ratchet down provision  is written." He continued that were these adjustments not  incorporated, the end result would have been a "no-growth limit"  for the first several years after the legislation's enactment,  which, he attested, would have resulted in a difficult situation  under which to operate.    Co-Chair Green ascertained therefore, that, rather than  incorporating two formulas, the calculation was adjusted to  provide for FY 04 and FY 05.    Senator Dyson agreed and noted that this is addressed in the  bill via the term "transition."    Senator Hoffman asked whether a chart has been provided to  reflect the funding reductions proposed in this amendment.    Mr. Tangeman responded that a corresponding chart has not, of  yet, been provided.    Senator Dyson pointed out that the slope of line would be the  identical to that depicted in the CS SJR 3 chart [copy on file]  except that the line would be positioned approximately $150  million lower on the graph. He noted that an updated chart would  be provided.    Senator B. Stevens asked what constitutes the $150 million in  University receipts.    Ms. Frasca responded that, originally, the University receipts  category amounted to approximately $200 million. She reminded  that earlier Committee action exempted the University's tuition  revenue, amounting to approximately $50 million, from the  calculation. Therefore, she stated, Amendment #12 served to  exclude the remaining $150 million balance.    Senator Hoffman inquired whether inflation-proofing and  population projections attributed to the decision to exempt  University receipts from the calculation.    Ms. Frasca responded that she could not provide an answer, as  rather than being an amendment proposed by the Administration,  the amendment was proposed by a Committee member.    Co-Chair Green asked for confirmation that the University's  previous years' receipt revenues had been excluded from the  calculation used to determine the adjusted base year levels.    Mr. Tangeman assured that they had been.    Senator Dyson, responding to Senator Hoffman's question,  characterized the University receipts being excluded as  "enterprise activity" receipts generated from such things as  ticket proceeds from hockey programs or book sales. He viewed  these activities as having "no impact on the general fund," and  furthermore, he stated, were the University's economic analysis  to reflect that they should or could charge more for activities,  the Legislature should not restrict them from doing so.    Co-Chair Green asked whether other State entities might request  similar exemptions.    Ms. Frasca responded that no others had opted to make a request  of this nature to the Administration. Furthermore, she stated  that the Administration's "challenge" is to provide sufficient  "general fund dollars to support core responsibilities of  government." Continuing, she noted that several State programs,  such as the Division of Motor Vehicles, generate receipts in  excess of "what it costs to perform their functions." Therefore,  she continued, it would be expected that were excess receipts  generated by a program, that program would not be entitled to  spending the excess funds as some contribution to core  government services, such as the Department of Corrections which  does not generate receipts, should be expected. She stated that  a program's ability to generate revenues does not signify that  the program has "first claim," to spending them. Therefore, she  concluded that every program "should compete to the degree  that's appropriate" for general fund dollars.    Co-Chair Green commented that general fund monies are annually  distributed based on competing needs via the appropriation and  priority process.    Ms. Frasca agreed and stated that a "scrutiny" process evolves  from which a determination of expenditures is made. She noted  that other legislation is pending that proposes to reclassify  designated funds and deposit them into the general fund column.    Co-Chair Wilken reviewed the effects of the amendment on the  amounts detailed in the FY 04 D-24 component, the FY 05 E-24  component, the FY 06 F-24 component, and the FY 07 G-24  component of the "SJR 3" chart [copy on file] that was provided  by Legislative Finance.    Mr. Tangeman replied that the FY 04 D-24 component and the FY 05  E-24 component on the aforementioned chart would each be reduced  $150 million, to $3,150,000,000 and $3,250,000,000,  respectfully; the FY 06 F-24 component would be reduced to  approximately $3,330,000,000; and the FY 07 G-24 component would  change to an undetermined amount.    Co-Chair Green removed her objection.    There being no further objection, Amendment #13 was ADOPTED.    Conceptual Amendment #14: This amendment changes language in  Section 1, subsections Section 16 (1) on page one, lines 13 and  15, and Section 16 (2) on page two, line three, in that the  words "second" and "third" would be replaced with the word  "two." This language would read as follows.     (1) the percentage rate of change in the Consumer  Price Index for all urban consumers for the Anchorage  metropolitan area compiled by a federal agency during the  two calendar years preceding the calendar year during which  the immediately preceding fiscal year began, but not to  exceed the percentage change in personal income of State  residents during the two calendar years preceding the  calendar year during which the immediately preceding fiscal  year begins; plus   (2) the percentage rate of change in the State  population during the two calendar years preceding the  calendar year during which the immediately preceding fiscal  year began compiled by a State department.    Co-Chair Wilken moved to adopt Amendment #14.    There being no objection, Amendment #14 was ADOPTED.    Co-Chair Wilken asked for further information regarding the Fund  Code language that is included as depicted in the handout titled  "Fund Codes Included in Limit" [copy on file]; specifically  whether the reference to such things as the Alaska Marine  Highway (AMH), code 1076, would signify that an increase in the  passenger fares or ridership would be subject to the spending  limit.    Mr. Tangeman confirmed that they would be.    Co-Chair Wilken questioned the rationale for this provision.    Ms. Frasca theorized that an increase in AMH revenue as a result  of increased fares or ridership might result in AMH requiring  fewer general fund dollars as those monies would be deposited  into the AMH fund to fund AMH operation expenses. She  additionally noted that this legislation is a limit on spending  as opposed to limiting fund sources.    Co-Chair Wilken asked whether the $91 million denoted for the  International Airport Fund, Code 1027, is an enterprise fund  comprised of such things as landing fees.    Ms. Frasca affirmed.    Co-Chair Wilken asked the rationale for its inclusion, as he  likened it to "discretionary funding on behalf of the  Legislature."    Ms. Frasca noted that the proceeds from bonds that were sold,  and whose the debt service was paid by the International Airport  Fund, are excluded in the Capital Budget. Continuing, she  pointed out that the Fund Code list includes several fund  sources that would continue into the future. Furthermore, she  stated that the question is how much would they increase from  one year to the next. She exampled that were a new terminal to  open within the next four years and result in a significant  increase in revenue, it might "cause some concern."    Co-Chair Wilken asked regarding the Alaska Aeronautical  Development Corporation (AADC), Fund Code 1101, whose "budget is  characterized by feast or famine" in that it might receive ten  million dollars one year and zero the next.    Ms. Frasca responded that AADC funding primarily consists of  federal receipts, which are exempt from the limit. She noted  that revenue from such things as contracts with private firms  for certain services would also be exempt.    Mr. Tangeman also noted that these fund sources reflect current  funding conditions. He noted that were this legislation to be  adopted, more in-depth analysis would be conducted on the  components of each fund source as he exampled that included in  the AADC Fund Code 1101 might be a combination of revenues such  as private contract revenue.    Co-Chair Wilken asked whether the sale of State land,  specifically Fund Code 1153, would count against the general  fund spending limitation.    Ms. Frasca responded that currently it would. However, she noted  that the proceeds from those sales would normally support  functions within the Department of Natural Resources. Continuing  she noted that general fund dollars have been supplanted with  the State land proceeds. She reiterated that this legislation  addresses how funds are spent rather than how funds are  generated.    Ms. Frasca further noted that the International Airport Fund  Code might consist of contractual relationship between the  airlines and the airport, which she reiterated would be exempt  from the limit.    Senator Dyson commented that this is an informative list as it  "really is the delta between the numbers that we see and what we  generally think of as general fund."    Co-Chair Wilken asked the identity of the Fund Cod 1180 A/D P&T  Fd as listed on the list.    Ms. Frasca identified it as the Alcohol and Drug Prevention and  Treatment Fund.    Co-Chair Wilken asked regarding Fund Code 1168 Tob ED/CES and  Fund Code 1170 SBED RLF.    Ms. Frasca, Mr. Schultz, and Committee Members identified those  Fund Codes as the Tobacco Education and Cessation Fund and the  Small Business Economic Development Revolving Loan Fund.    Senator B. Stevens asked whether any Fund codes were excluded  from the list.    Mr. Tangeman replied that the Fund codes not included in the  list would be those of the university; those that are federally  funded; trust funds; and approximately 15 dedicated fund codes.    Ms. Frasca stated that approximately 20 fund codes not are  included.    Senator B. Stevens asked for confirmation that the fund code  identified as 1179 PFC is the Permanent Fund Corporation.    Ms. Frasca replied that this Fund code pertains to the operation  of the Corporation itself.    Senator B. Stevens asked for further information, such as  whether this Code pertains to billable amounts or is the result  of a formula distribution.    Ms. Frasca responded that it is based on the budget.      SFC 04 # 70, Side A 10:42 AM      Senator B. Stevens asked for specific information regarding how  the amount was determined.    Ms. Frasca responded that in terms of the Corporation itself,  the number is based on the budget approved by the Legislature.  Continuing, she noted that this item might be related to  management fees of the Permanent Fund. She noted that were a  large amount being invested, "there is the potential for it to  be extraordinary." This situation, she stated might require  Legislative action.    Co-Chair Wilken stated that staff has informed him that rather  than Fund Code 1179 pertaining to the Permanent Fund Corporation  it pertains to Passenger Facility Charges.    Mr. Tangeman concurred that Fund Code 1179 is, in fact,  Passenger Facility Charges [PFC] and that Fund Codes 1041 and  1105, which are not included on the list, pertain to the  Permanent Fund Corporation.    Senator B. Stevens asked whether the Passenger Facility Charges  Fund Code is a component of the Alaska Marine Highway System or  the Department of Transportation and Public Facilities.    TRACI CARPENTER, Staff to Senator Green, responded that the  Passenger Facility Charges are airport fees.    Senator B. Stevens questioned therefore, whether the inclusion  of this Fund in the Appropriation Limit would negatively affect  the spending limit were an increase in international or tourism  travel to occur as a result "of success in a non-government  entity."    Ms. Frasca responded that that could occur.    Senator B. Stevens asked, therefore, that the PFC component's  inclusion in the Limit be further reviewed. Continuing, he asked  whether "encouraging non-government enterprise to utilize  renewable resources," such as the Timber Receipts Fund Code  1155, for example, could have the same result as the PFC  component.    Mr. Tangeman concurred that it would.    Senator B. Stevens voiced the understanding that this  legislation is a limit on spending as opposed to a limit on  revenue. However, he voiced concern regarding the process were  an increase in revenue to occur. He asked for verification that  the revenues generated from various Fund Codes would be  deposited into the general fund.    Ms. Frasca responded that while the revenue would be deposited  into the general fund, it would be allocated to these designated  Receipt Funds, which have been established by the Legislature.    Senator B. Stevens surmised therefore that these Fund Source  Codes are established to fund such things as the Department of  Natural Resources "or some other mechanism."    Ms. Frasca affirmed. She stressed that the challenge is how to  place a limit on how much the State could spend regardless of  where the funds generated. She attested that "this is the  spending side of the equation."    Senator Dyson reminded that, in the State's "foreseeable  future," what would be diminished were a spending limit in  place, would be the amount spent from the Constitutional Budget  Reserve (CBR). Continuing, he stated that rather than "limiting  new business and new enterprises and growth" in the future this  legislation would limit the amount of money that the State would  have "to borrow ? while significantly increasing our financial  stability and our wealth."    Co-Chair Wilken asked, for clarification, whether an "available  annual growth" increase of one million dollars from the FY 05  level of $12.4 million to an FY 06 level of $13.4 million in  Fund Code 1179 PFC would decrease the overall FY 06 amount  available for appropriation by the same amount.    Mr. Tangeman responded that this scenario might not be accurate  as he noted that while the FY 05 base is $3.25 billion, it does  not mean that the entire amount would be appropriated. He stated  that were the actual appropriation to be less and were the FY 06  appropriation to be to the limit, then the affect would be an  increase above the FY 05 limit of $86 million. He reminded that  the FY 06 amount is based on estimates for FY 04 and FY 05.  Therefore, he declared that the FY 06 number would be affected  by how much was actually appropriated in FY 04 and FY 05.    Co-Chair Wilken advanced, therefore, to the FY 09 fiscal year  limit specified on the aforementioned CS SJR 3 chart, and noted  that the information depicts that $95 million would be available  in FY 09. Continuing, he asked whether a one million dollar  increase in the PFD Fund Code in FY 09 would serve to reduce the  $95 million to $94 million.    Mr. Tangeman asked that the question be further clarified.    Co-Chair Wilken clarified that it has been experienced in the  past, that when the State received a grant or when the State  "increased the cost of providing government service directly to  the provider," a problem arose in "that that counted as State  spending" with the result being that the State was required to  reduce State spending "somewhere else in the budget an equal  amount." Therefore, he restated his question by asking whether a  one million dollar increase in the PFC Fund would require a one  million dollar reduction somewhere else in the budget such as in  K-12 education.    Mr. Tangeman responded that were the State's spending to be at  the appropriation limit, yes.    Co-Chair Wilken understood, therefore, that were any of the Fund  Code components that are included in the Limit to increase, a  dollar for dollar decrease in the amount available to spend in  that fiscal year would be required.    Ms. Frasca responded that the assumption is that were another  dollar raised, another dollar could be spent by a program.  However, she continued, "the challenge is to say that these  activities don't necessarily have first claim on every dollar  that they bring in. It could be that they also have a general  fund subsidy that is supporting the program." Therefore, she  stated, that general fund subsidy dollar could be replaced with  the excess money raised by the Fund, and the general fund  subsidy could be used, for instance, to support another program  such as K-12 education. That, she attested, is the balance that  could be applied.    Senator Hoffman stated, "therein lies the problem," as he  exampled that were a Legislature's majority party to not support  a certain department's budget, rather than supporting one of the  department's program with excess money the aforementioned  scenario might produce, whatever is determined by the majority  "to be a priority area" would be the area that would receive  that additional funding. This he declared "is a key problem."    Senator Dyson reiterated that for the four-years this  legislation would be in effect, the money that would be reduced  is the money that would be withdrawn from the CBR, and in  addition, he stressed, State debt would be reduced. He declared  that both he and Senator B. Stevens desire that the money that  has been withdrawn from the CBR should be repaid in order "to  rebuild that bridge to the future, and be promise keepers." He  stressed that "the focus" should be that any additional revenues  from these Fund Code sources should "be going to build fiscal  stability, reduce our borrowing, and repay our Rainy Day  accounts. " He declared that, "this is very, very important to a  State that depends so much on the sale of natural resources that  are sold on a world commodity market."    Senator Bunde announced that this legislation "would not result  in a problem that does not already exist," as a Legislative  majority could increase or "attempt to control spending"  regardless of whether a spending limit were in effect. He stated  that were the CBR unavailable then more control might be  exerted, based on "philosophical points of view."    Senator Hoffman responded that "therein lays the argument for  having a spending limit."    Senator Hoffman asked how a one-time emergency or extraordinary  circumstance would be addressed were this legislation enacted,  as he remarked that it is unclear whether the appropriation  language pertaining to emergencies and extraordinary  circumstances, as identified in Section 16, subsection (2)(d)  and (e) located on page two, line 27 through page three, line  five, would be considered a component of the base.    Mr. Shultz pointed out that language in Section 16, on page one,  lines six through ten "is meant to indicate" that emergencies  and extraordinary circumstances would be exempt from the  establishment of a base, and that the base would be the amount  appropriated the previous year.    Senator Hoffman asked whether "the substantial changes" being  made this year to the education budget to address the Public  Employees Retirement System (PERS) /Teachers Retirement System  (TRS) and the student base foundation funding formula would be  considered a component of the base or would, on an annual basis,  be addressed as an extraordinary circumstance.    Mr. Shultz responded that were the expenditure to exceed the  appropriation limit, then it would be required to be considered  as an extraordinary circumstance.    Co-Chair Wilken referred to the aforementioned chart and asked  whether an approximate $50 million dollar PERS/TRS obligation is  included in the FY 06 appropriation limit of approximately $86  million, as identified in Cell (f) (25) of the chart.    Mr. Shultz responded that the base year numbers would allow some  "headroom" for the PERS/TRS obligation for FY 06 and FY 07.    Co-Chair Wilken noted that a $50 million TRS obligation would be  expected for several forthcoming fiscal years. He asked whether  this has been accounted for in the chart.    Mr. Shultz responded in the affirmative. He noted, however, that  the FY 06 number, rather than being the actual number, is  elevated as it is based on an adjusted base year.    Senator Bunde moved to report the committee substitute for SJR  3, Version "Z," as amended, from Committee with individual  recommendations and accompanying fiscal notes.    Co-Chair Wilken objected for discussion.    Senator Hoffman objected. He characterized the Legislature as  being fugal, as it has not budgeted to an established spending  limit in the past. Furthermore, he stated that as priorities are  determined, the Legislature would budget accordingly. While he  understood that this legislation would establish a four-year  spending limit that would be reviewed; he declared, "that the  current system is working quite well." He removed his objection.    Co-Chair Wilken stated that an updated chart and a population  change analysis would be forthcoming to accompany the bill as it  progresses.    Senator Dyson voiced that it would be useful to have "a general  graph" developed to reflect how current spending would be  portrayed were a spending limit in place. He voiced that the  graph should start in the early 1970's in order to reflect the  boom years the State underwent with its oil wealth. However, he  noted that this suggestion has been characterized as being  difficult to produce.    Co-Chair Green asserted that this chart would be "woefully  difficult" to develop as every piece of legislation that  affected the budget would require analysis. She, therefore,  remarked that the current information is adequate.    Co-Chair Wilken remarked that this request would be considered  by Legislative Finance staff.    Senator Hoffman recalled that when the State had a large  quantity of "extraordinary income," and a tremendous amount of  money was available, most votes to use discretionary funds for  such things, as capital projects were unanimous.    Co-Chair Wilken removed his objection.    There being no further objection, CS SJR 3 (FIN) was REPORTED  from Committee with a new $1,500 fiscal note from the Division  of Elections, dated January 28, 2004.    [NOTE: SJR 3 was referred back to the Finance Committee on April  13, 2004. No further hearing on it was conducted.]  #    ADJOURNMENT  Co-Chair Gary Wilken adjourned the meeting at 11:02 AM