Legislature(2003 - 2004)

06/23/2004 03:43 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JOINT RESOLUTION NO. 102                                                                                                
     Proposing  amendments to the  Constitution of  the State                                                                   
     of Alaska  relating to and limiting  appropriations from                                                                   
     the Alaska  permanent fund based on an  averaged percent                                                                   
     of the fund market value  and relating to permanent fund                                                                   
     dividend payments.                                                                                                         
Representative  Foster  MOVED   to  report  HJR  102  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying  fiscal notes. There  was objection  for purpose                                                                   
of discussion.                                                                                                                  
CHERYL  FRASCA, DIRECTOR,  DIVISION OF  MANAGEMENT &  BUDGET,                                                                   
OFFICE  OF THE  GOVERNOR,  explained  the bill,  which  would                                                                   
provide  a constitutional  distribution of  5 Percent  of the                                                                   
Market Value (POMV) of the Permanent  Fund: 50% to dividends,                                                                   
45% to education and 5% as a community  dividend. There would                                                                   
be a ten-year  sunset provision. Ms. Frasca  noted, "it would                                                                   
be up to  a legislature a decade  from now to decide  what it                                                                   
wanted to bring back to the voters."                                                                                            
Representative Stoltze  stated that he had a  problem putting                                                                   
a  sunset provision  into the  Alaska  Constitution. He  felt                                                                   
that it  would erode public  confidence and pointed  out that                                                                   
any  Committee Chair  could "obliterate"  all  the plans  and                                                                   
protections  [provided  under  the legislation]  through  the                                                                   
legislative process.                                                                                                            
Representative  Joule MOVED to  ADOPT a conceptual  amendment                                                                   
changing  the distribution  to:  60% to  dividends, 32.5%  to                                                                   
state  functions,  and  7.5%  to  municipalities.    Co-Chair                                                                   
Williams OBJECTED.                                                                                                              
Co-Chair  Williams referred  to  the constitutional  approach                                                                   
and noted  that it would take  two years to implement  due to                                                                   
voting requirement.                                                                                                             
In  response  to  a question  by  Representative  Croft,  Ms.                                                                   
Frasca  clarified that  the legislation  was  drafted with  a                                                                   
sunset.  A future  legislature  would have  to  place on  the                                                                   
ballot either the same proposal  or a new proposal. "The idea                                                                   
was, is  that, when  we look  forward over  a decade,  in ten                                                                   
years we don't know what Alaska  is going to be like." Future                                                                   
revenues  are  anticipated  from  resource  development.  The                                                                   
Administration  felt  it  was  important  to  give  a  future                                                                   
legislature the  latitude to determine  what is the  best fit                                                                   
for the circumstances  at that time. A  ratification approach                                                                   
would only allow the continuation  of the process that was in                                                                   
place in 2004.                                                                                                                  
Representative  Croft  concluded  that the  entire  committee                                                                   
process  would  have to  [be  repeated]  in 2014  [under  the                                                                   
constitutional approach].                                                                                                       
Representative Hawker pointed  out that the ballot initiative                                                                   
to establish the Permanent Fund  stressed that the Fund would                                                                   
be used  to establish stable state  funding when oil  and gas                                                                   
revenues were gone. He observed  that the proposal would take                                                                   
50% of these funds off the table for dividends.                                                                                 
Ms.  Frasca  responded  that the  creation  of  the  dividend                                                                   
expanded the use  of the Fund. The interpretation  that a use                                                                   
of  the Fund  should be  for dividends  is  supported by  the                                                                   
statutory actions  of the legislature. The  legislation would                                                                   
put into the  Constitution what has become practice  in terms                                                                   
of dividends and education.                                                                                                     
Representative  Hawker questioned  if the Administration  was                                                                   
comfortable  in  placing dividends  as  the  top priority  of                                                                   
state funding.                                                                                                                  
Ms. Frasca noted that the Administration  is comfortable with                                                                   
the use of funds  for dividends and education.  The 5 percent                                                                   
payout for municipalities establishes a new program.                                                                            
REPRESENTATIVE  ETHAN  BERKOWITZ  questioned  if  anyone  had                                                                   
looked at increasing  the 25 percent [deposit  into the Fund]                                                                   
from mineral leases to 50 to 100 percent.                                                                                       
ROBERT D. STORER,  EXECUTIVE DIRECTOR, ALASKA  PERMANENT FUND                                                                   
CORPORATION,  DEPARTMENT  OF REVENUE,  stated  that he  could                                                                   
provide the  information, but  speculated that the  Fund size                                                                   
and income from the Fund would increase.                                                                                        
In response  to a question  by Representative  Berkowitz, Ms.                                                                   
Frasca was not  aware of any proposals by  the Administration                                                                   
to increase  the deposit  amount [from  mineral leases].  She                                                                   
questioned  if  the suggestion  by  Representative  Berkowitz                                                                   
would  be for all  revenues to  go into  the Permanent  Fund.                                                                   
Representative Berkowitz stated  that he wanted to consider a                                                                   
change  and  asked  for  additional  information,  which  Mr.                                                                   
Storer promised to provide.                                                                                                     
Representative Joule reiterated  his conceptual amendment for                                                                   
distribution of a 5 percent POMV:  60 personal dividend, 35.2                                                                   
percent to state spending, and 7.5 for municipalities.                                                                          
Representative Hawker stated that  he would be in favor of an                                                                   
increased  municipal  dividend  with a  50  percent  dividend                                                                   
Representative Joule noted that  constituents seem to favor a                                                                   
distribution of 60 percent to  dividends. He spoke in support                                                                   
of the amendment.                                                                                                               
Vice-Chair Meyer  spoke in support  of a 50 percent  dividend                                                                   
and a 10 percent municipal dividend.                                                                                            
Representative  Croft spoke in  support of the  amendment. He                                                                   
noted that  a third of  the payout would  be upwards  of $425                                                                   
million  dollars  [for  state  spending].  Communities  would                                                                   
receive approximately  $105 million  dollars, which  is close                                                                   
to  the  amount  paid by  the  municipal  assistance  program                                                                   
before reductions.                                                                                                              
A roll  call vote was taken  on the motion  by Representative                                                                   
Joule to change the distribution amounts.                                                                                       
IN FAVOR: Croft, Foster, Joule, Moses, Stotlze                                                                                  
OPPOSED: Fate, Hawker, Meyer, Chenault, Williams                                                                                
Co-Chair Harris was absent from the vote.                                                                                       
The MOTION FAILED (5-5).                                                                                                        
Representative  Foster  MOVED   to  report  HJR  102  out  of                                                                   
Committee with the accompanying  fiscal notes. Representative                                                                   
Fate  OBJECTED. He  spoke against  eroding the  power of  the                                                                   
Vice-Chair  Meyer   stressed  the  importance   of  the  POMV                                                                   
approach.  He felt  that  it merited  further  debate on  the                                                                   
House Floor.                                                                                                                    
Representative Stoltze and Representative  Hawker agreed with                                                                   
the remarks of Vice-Chair Meyer.                                                                                                
Representative  Joule  noted  that  the public  needs  to  be                                                                   
convinced of the importance of the POMV.                                                                                        
REPRESENTATIVE NICK STEPOVICH  pointed out that the public is                                                                   
wary of the way the legislature spends its money.                                                                               
A roll  call vote was  taken on the  motion to move  the bill                                                                   
from Committee.                                                                                                                 
IN FAVOR: Foster, Hawker, Joule, Meyer, Stoltze, Williams                                                                       
OPPOSED: Fate, Chenault, Croft, Moses                                                                                           
Co-Chair Harris was absent from the vote.                                                                                       
The MOTION PASSED (6-4).                                                                                                        
HJR 102  was REPORTED out of  Committee with a "do  not pass"                                                                   
recommendation and with a zero  fiscal note by the Department                                                                   
of Revenue  and a  fiscal impact  note by  the Office  of the                                                                   
Lieutenant Governor.                                                                                                            

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