Legislature(2017 - 2018)HOUSE FINANCE 519

03/01/2017 01:30 PM House FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
02:35:20 PM Start
02:35:54 PM HB57 || HB59
03:19:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 2:30 PM --
Heard & Held
Heard & Held
+ Committee Substitutes TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 57                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     supplemental  appropriations and  reappropriations, and                                                                    
     making  appropriations  under   art.  IX,  sec.  17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
HOUSE BILL NO. 59                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
2:35:54 PM                                                                                                                    
Co-Chair  Seaton  explained   the  information  provided  to                                                                    
members.  He   underscored  that   the  bill   versions  for                                                                    
consideration  were  not  finals.  The  committee  would  be                                                                    
hearing  public  testimony  the  following  three  days.  He                                                                    
addressed the schedule for the  following week pertaining to                                                                    
2:41:13 PM                                                                                                                    
Representative  Wilson   asked  about  the   chair's  intent                                                                    
regarding  public  testimony  and wanted  to  ensure  people                                                                    
testifying had time to express their comments.                                                                                  
Co-Chair Seaton  relayed that testifiers who  were not heard                                                                    
by the  end of their  communities' allotted  time-slot would                                                                    
be rolled to the end of public testimony.                                                                                       
Representative  Wilson requested  more  time for  amendments                                                                    
following public testimony.                                                                                                     
Co-Chair  Seaton  thanked   Representative  Wilson  for  her                                                                    
comments,  but   maintained  the   5:00  p.m.   deadline  on                                                                    
Saturday, March 4.                                                                                                              
2:44:29 PM                                                                                                                    
Co-Chair  Foster  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute (CS) for HB 57,  Work Draft 30-GH1855\U (Wallace,                                                                    
Representative Wilson OBJECTED.                                                                                                 
2:44:59 PM                                                                                                                    
AT EASE                                                                                                                         
2:45:39 PM                                                                                                                    
Representative   Wilson   spoke   to  her   objection.   She                                                                    
referenced an  article put forward  by Governor  Bill Walker                                                                    
[Alaska Dispatch News, May 14,  2016], in which he expressed                                                                    
his  views on  the $4  billion  draw on  the Permanent  Fund                                                                    
Earnings Reserve Account (ERA),  where he opined that taking                                                                    
out  $4 billion  in a  single  fiscal year  would erode  the                                                                    
value of  the fund  and its earning  potential. She  read an                                                                    
excerpt from the article:                                                                                                       
     A fast and large drawdown does not allow for the fund                                                                      
     to keep up with inflation-and reduces the fund's                                                                           
     purchasing power.                                                                                                          
     It would leave us with $150 million to $200 million                                                                        
     less that can be drawn annually under a rules-based                                                                        
Representative Wilson  also  mentioned a memorandum provided                                                                    
in response  to a  list of  questions asked  of Commissioner                                                                    
Randall   Hoffbeck,   Department  of   Revenue   [memorandum                                                                    
addressed to  staff to  Representative Steve  Thompson dated                                                                    
January 27,  2017 (copy on  file)]. She referenced  answer 7                                                                    
[page  5  of  the memorandum]  where  Commissioner  Hoffbeck                                                                    
specified that  taking out  $4 billion or  more in  a single                                                                    
fiscal year  would inevitably  erode the  value of  the fund                                                                    
and  hurt   its  future  ability  to   provide  support  for                                                                    
dividends and  government. She wondered  how the  draw would                                                                    
affect the ERA and the dividend in future years.                                                                                
Co-Chair Seaton  corrected that the items  were addressing a                                                                    
$4 billion  ad hoc draw at  a single time, whereas  the bill                                                                    
proposed a  draw over  two fiscal years,  2017 and  2018. He                                                                    
also mentioned  that according  to Angela  Rodell, Executive                                                                    
Director,  Alaska  Permanent  Fund Corporation  (APFC),  the                                                                    
schedule was  in August of each  year, so that it  would not                                                                    
be an ad hoc draw. He understood the point, but disagreed.                                                                      
Representative  Wilson   explained  it  was  not   only  the                                                                    
specific portion  of the draw,  or whether it  occurred over                                                                    
one  year or  two  years, but  that  it would  substantially                                                                    
impact  the Permanent  Fund. She  found it  very interesting                                                                    
that  Ms. Rodell's  testimony had  been different  the prior                                                                    
day  compared to  the prior  week,  when she  had been  very                                                                    
cautious about  how much  money would have  to be  taken out                                                                    
and how  investment would change  if the state was  going to                                                                    
start  using the  Permanent Fund  as its  general fund.  She                                                                    
underscored  that  although  the bill  proposed  taking  the                                                                    
funds  out over  a  two-year period,  the  action was  being                                                                    
taken before knowing  the final budget. She  believed it was                                                                    
indisputable that using  the funds took savings  away from a                                                                    
fund  with the  biggest earning  potential (compared  to the                                                                    
Constitutional Budget  Reserve (CBR), which was  invested in                                                                    
safer [lower  earning] investments). She thought  the public                                                                    
needed to  understand there had been  significant talk about                                                                    
essentially  "reaching  your hand  in  the  cookie jar"  and                                                                    
taking out a certain amount of  money. She noted that a two-                                                                    
minute   time  limit   on  public   testimony  was   minimal                                                                    
considering the size  of the bill. She  continued to discuss                                                                    
the  negative effects  a draw  would have  on the  Permanent                                                                    
Fund,  particularly if  the stock  market  plummeted in  the                                                                    
future. She  added that the  bill would also mean  the funds                                                                    
would be placed  in an account that would earn  little to no                                                                    
2:51:08 PM                                                                                                                    
Vice-Chair   Gara  understood   the  disagreement   and  the                                                                    
frustration. He remarked on his  past experience as a member                                                                    
of  the House  Minority. He  brought up  a discussion  about                                                                    
something that  had occurred  a few  years back  compared to                                                                    
the  present.  He stated  it  was  "not an  apples-to-apples                                                                    
comparison." He elaborated that  two years earlier there had                                                                    
been an  attempt by the  former Majority to take  $5 billion                                                                    
from the ERA.                                                                                                                   
2:52:18 PM                                                                                                                    
AT EASE                                                                                                                         
2:52:55 PM                                                                                                                    
Vice-Chair Gara  listed some  of the items  in the  bill. He                                                                    
remarked that  he would personally  like a  larger dividend.                                                                    
The current bill contained a  $1,100 Permanent Fund Dividend                                                                    
(PFD), which  was larger than  those in other  proposals. He                                                                    
stated that  the budget  before the  committee did  what the                                                                    
legislature had  historically done until the  previous year;                                                                    
put funds into  the Public Education Fund.  That money would                                                                    
be the  full amount to  pay for the Base  Student Allocation                                                                    
(BSA). He wanted to see a bigger BSA.                                                                                           
2:55:09 PM                                                                                                                    
Representative Pruitt  described his  opposition to  the CS.                                                                    
He  emphasized  that the  committee  was  trying to  pass  a                                                                    
budget based  on bills  that had not  passed, by  creating a                                                                    
framework through which  bills that may not  pass would have                                                                    
been included in  the amendments. He spoke to  an attempt to                                                                    
remove the role of the  Minority in crafting the budget, for                                                                    
example by  removing the CBR discussion.  He underlined that                                                                    
he was  not referencing a  letter that had come  forward two                                                                    
years previous, but  stated that it had been  objected to at                                                                    
the time, but  was somehow acceptable at  the current stage.                                                                    
He was challenged  with the process at  hand. Amendments had                                                                    
been offered by  Majority members and the  public would then                                                                    
testify on  those amendments and  on the bill.  The Minority                                                                    
members  had  not  been  given   the  opportunity  to  offer                                                                    
amendments   before  public   testimony.   He  thought   all                                                                    
amendments should  be offered either before  or after public                                                                    
testimony. He  pointed to a separation  between Majority and                                                                    
Minority  participation  and  called  for  a  discussion  of                                                                    
amendments  in  committee whether  they  passed  or not.  He                                                                    
recognized colleagues in the audience.                                                                                          
2:58:19 PM                                                                                                                    
Co-Chair  Seaton clarified  that every  Minority member  had                                                                    
been  on  finance  subcommittees  and  that  all  amendments                                                                    
offered were  subcommittee amendments. He specified  that no                                                                    
personal amendments had been  put forward, only subcommittee                                                                    
amendments.  He   had  chaired  the  subcommittee   for  the                                                                    
language   amendments   and   had  offered   them   as   the                                                                    
subcommittee chair. He detailed  that subcommittees had been                                                                    
composed  of policy  committees which  were all  composed of                                                                    
members  of the  Majority and  the Minority.   He  disagreed                                                                    
with the comments made. He  addressed an earlier point Vice-                                                                    
Chair  Gara  had  wanted  to make  and  clarified  that  the                                                                    
subject  of   the letter  from  two years  earlier had  been                                                                    
brought up previously; therefore,  he would allow Vice-Chair                                                                    
Gara  to address  the issue.  Co-Chair Seaton  described the                                                                    
proposed actions  of the previous  Majority, that  wanted to                                                                    
transfer a one-time sum of $4.5  billion from the ERA to the                                                                    
corpus of the fund, and  a second transfer for the following                                                                    
year to  the amount of  $1.5 billion; the action  would have                                                                    
made the  funds unavailable for appropriation.  He suggested                                                                    
that a  discussion of overdraws  would have to  include that                                                                    
proposal  two  years  ago  by the  then  Majority  that  was                                                                    
objected  to  by several  members,  including  himself,   as                                                                    
depleting savings  to the  point where a  PFD may  no longer                                                                    
have  been an  option. The  current bill  took a  structured                                                                    
draw and reflected the same  proposal by the governor in the                                                                    
amount of  5.25 percent  of the market  value draw  from the                                                                    
ERA in  2017, and 5.25  percent draw in 2018.  He reiterated                                                                    
that Ms.  Rodell had  stated that  the proposed  draw amount                                                                    
would not influence APFC's investment strategies.                                                                               
3:02:10 PM                                                                                                                    
Representative  Pruitt read  from  a subcommittee  narrative                                                                    
that   the  budget   amendments   were   submitted  by   the                                                                    
subcommittee  chair.   He  maintained   that  many   of  his                                                                    
colleagues were ready  to be a part of the  process and felt                                                                    
that they were not fully able  to be. He stated that in some                                                                    
instances there were opportunities  to offer amendments, and                                                                    
in  other  cases  there  were not.  He  disagreed  with  the                                                                    
statements made  previously. He  asked about  a subcommittee                                                                    
related to language. He had never heard of it.                                                                                  
Co-Chair  Seaton  agreed.  The   language  section  was  the                                                                    
purview of  the operating budget chair.  He highlighted that                                                                    
the procedure  had previously been  rolled into a  CS behind                                                                    
closed doors, whereas  now the CS only  contained changes to                                                                    
the governor's budget and amendments  that had been voted on                                                                    
by the committee.                                                                                                               
3:04:46 PM                                                                                                                    
Representative  Thompson spoke  to a  gigantic draw  of $4.2                                                                    
billion from the  ERA. He believed Co-Chair  Seaton had made                                                                    
a misstatement  related to Ms. Rodell's  prior testimony. He                                                                    
corrected that Ms.  Rodell had stated that the  draw for the                                                                    
PFD  checks was  made in  August and  that the  $1.7 billion                                                                    
draw for  the education fund would  be made on the  first of                                                                    
July. The size  of the draw and the effect  of lost earnings                                                                    
amounted  to   $200  million  to  $400   million  per  year.                                                                    
Currently  the   Permanent  Fund  was  earning   18  percent                                                                    
returns. He was disappointed in  the process. He also wished                                                                    
to recognize the other House members present.                                                                                   
3:06:38 PM                                                                                                                    
Co-Chair  Seaton clarified  that  Ms.  Rodell had  testified                                                                    
that the  $1.7 billion  draw would  be structured  over time                                                                    
and  it  would  not  pose   a  cash  problem  for  APFC.  He                                                                    
recognized   Representatives   Jennifer  Johnston,   Colleen                                                                    
Sullivan-Leonard,  Charisse  Millett,  Dan  Saddler,  George                                                                    
Rauscher,  DeLena Johnson,  Chris  Birch,  Chuck Kopp,  Dave                                                                    
Talerico,  Gary Knopp,  David Eastman,  Mike Chenault,  Mark                                                                    
Neuman, and Lora Reinbold in the audience.                                                                                      
3:07:50 PM                                                                                                                    
Representative  Tilton spoke  to her  opposition to  the CS.                                                                    
She was opposed to including  bills in the document that had                                                                    
not passed. She remarked on the  dividend rate set in the CS                                                                    
that  had not  heard discussion  and on  the removal  of the                                                                    
CBR. She was  concerned that Mat-Su testifiers  would not be                                                                    
able to examine  the bill in time for  public testimony. She                                                                    
did not believe  her colleagues had received  the voice they                                                                    
should have  and that the  committee had been told  that the                                                                    
subcommittee  would  not  hear amendments  the  subcommittee                                                                    
chair did not like.                                                                                                             
3:10:05 PM                                                                                                                    
Vice-Chair Gara  discussed the  prior years'  budget process                                                                    
in the  committee. He  understood not  being happy  with the                                                                    
budget. He explained that in  the past, the committee chair,                                                                    
without  consultation  with  anyone  in  the  Minority,  had                                                                    
written the language  section of the CS, put it  into a two-                                                                    
hundred  page document,  and  put it  forward.  Some of  the                                                                    
material would  be read through,  some of it  was confusing,                                                                    
but  there had  been  no  real debate.  He  added that  some                                                                    
subcommittees had not allowed  amendments and others had. He                                                                    
underscored that in this case,  all of the amendments in the                                                                    
CS had  been discussed  by the committee  and had  been more                                                                    
openly discussed than in the  past. He contended the present                                                                    
system was not perfect but was better than previous ones.                                                                       
3:13:39 PM                                                                                                                    
Representative   Wilson   clarified   that   comments   from                                                                    
Commissioner  Hoffbeck were  made on  January 27,  2017, and                                                                    
that Governor  Walker's article  was from  May 14,  2016, so                                                                    
both were  relatively recent.  She stated  that in  the past                                                                    
the purpose of the draw had  been to put money back into the                                                                    
corpus  of   the  Permanent  Fund,   not  to  be   spent  on                                                                    
government. She mentioned that there  was a section that was                                                                    
much bigger  than she had  ever seen  in a budget  bill; one                                                                    
amendment  had contained  six parts.  She believed  Co-Chair                                                                    
Seaton  had   done  things  differently  and   she  was  not                                                                    
complaining, but that  she wanted to ensure  that the people                                                                    
of Alaska understood and would be  able to comment on all of                                                                    
the amendments. She MAINTAINED her OBJECTION.                                                                                   
Co-Chair Seaton  clarified that the  proposed draw  from the                                                                    
ERA  was  less  than  that proposed  by  the  governor.  The                                                                    
governor proposed, in 2017, 5.25  percent in addition to the                                                                    
PFD that was  paid in 2017. This bill reduced  the amount of                                                                    
the draw so that it was  5.25 percent of the value minus the                                                                    
amount of $695 million paid  out in dividends. He understood                                                                    
the objection, but  stated that it was an  objection to what                                                                    
the  governor had  originally  put forward  and  not to  the                                                                    
3:17:32 PM                                                                                                                    
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Gara, Grenn, Guttenberg,  Kawasaki, Ortiz, Seaton,                                                                    
OPPOSED: Tilton, Wilson, Pruitt, Thompson                                                                                       
The MOTION  PASSED (7/4). There being  NO further OBJECTION,                                                                    
Work Draft 30-GH1855\U was ADOPTED.                                                                                             
3:18:20 PM                                                                                                                    
Co-Chair Foster MOVED to ADOPT the proposed committee                                                                           
substitute for HB 59, Work Draft 30-GH1856\J (Wallace,                                                                          
2/28/17). There being NO OBJECTION, it was so ordered.                                                                          
HB 57 was HEARD and HELD in committee for further                                                                               
HB 59 was HEARD and HELD in committee for further                                                                               
Co-Chair Seaton discussed the schedule for the following                                                                        

Document Name Date/Time Subjects
HB 59 CS WORKDRAFT 2-28-17 vJ.pdf HFIN 3/1/2017 1:30:00 PM
HB 59
HB 59 3-1-17 11am MH Bill Doc Compare vD to vJ Numbers and Language.pdf HFIN 3/1/2017 1:30:00 PM
HB 59
HB 57 CS WORKDRAFT 3-1-17 vU.pdf HFIN 3/1/2017 1:30:00 PM
HB 57
HB 57 CS 3-1-17 1pm OP Bill Compare between vJ and vU Numbers and Lang.pdf HFIN 3/1/2017 1:30:00 PM
HB 57