Legislature(2003 - 2004)
06/23/2004 09:10 AM House JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HJR103 - CONST AM: APPROPRIATION LIMIT HJR101 - CONST. AM: PERM FUND P.O.M.V. HJR102 - CONST. AM: PERM FUND P.O.M.V.; DIVIDENDS Number 0125 CHAIR McGUIRE announced that the committee would take up HOUSE JOINT RESOLUTION NO. 103, Proposing amendments to the Constitution of the State of Alaska relating to an appropriation limit; HOUSE JOINT RESOLUTION NO. 101, 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 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. CHAIR McGUIRE asked the committee to focus on the constitutional aspects of the resolutions, and noted that HJR 103, HJR 101, and HJR 102 mirror other pieces of legislation that passed the House earlier in the year. Number 0231 CHERYL FRASCA, Director, Office of Management & Budget (OMB), Office of the Governor, mentioned that HJR 103 is the same as HJR 9, though is slightly different than the resolution being introduced in the Senate; that HJR 101 is similar to HJR 26; and that HJR 102 contains the same formula found in HB 298, though it is a constitutional amendment, contains a requirement that permanent fund dividends (PFDs) be at least $1,000 or 50 percent of "the payout" - whichever is greater - and contains a 10-year sunset provision. She suggested that the sunset provision will allow future legislatures to assess the formula's efficacy. [The committee then began discussion specific to HJR 103; HJR 101 and HJR 102 were discussed later in the meeting.] HJR103 - CONST AM: APPROPRIATION LIMIT [Contains reference to HJR 9, the resolution that HJR 103 mirrors.] Number 0365 CHAIR McGUIRE asked the committee to focus attention on HJR 103 first. REPRESENTATIVE SAMUELS asked what the differences are between HJR 103 and the version of HJR 9 that passed the House Judiciary Standing Committee. Number 0397 CHERYL FRASCA, Director, Office of Management & Budget (OMB), Office of the Governor, relayed that the House Finance Committee changed HJR 9, adding debt service as an exclusion, and that a four-year sunset was added on the House floor; HJR 103 now mirrors the version of HJR 9 that passed the House. REPRESENTATIVE GARA turned attention to page 3, line 28, of HJR 103 and asked how the amount listed - $3,400,000,000 - relates to the amount actually appropriated minus the exclusions listed in proposed Article IX, Section 16(d). MS. FRASCA said it is approximately $362 million above the amount being appropriated for fiscal year (FY) 05. CHAIR McGUIRE noted that members' packets include a copy of SJR 103. MS. FRASCA added that members' packets also include a comparison between the version of HJR 9 that passed the House - what became HJR 103 - and the version that was before the Senate - what became SJR 103 - and sectional analyses of both versions. Number 0677 REPRESENTATIVE GARA made a motion to adopt Amendment 1, labeled 23-GH2167\A.2, Cook, 6/22/04, which read: Page 1, lines 9 - 10: Delete "the lesser of (1) seventy-five percent of" Page 1, line 11: Delete "(A)" Insert "(1)" Page 1, line 14: Delete "(B)" Insert "(2)" Page 2, line 1: Delete "; or" Insert "." Page 2, lines 2 - 4: Delete all material. Page 3, line 16: Delete "." Insert ";" Page 3, following line 16: Insert a new paragraph to read: "(15) that portion of an appropriation for elementary or secondary public school operations that exceeds the amount appropriated for the immediately preceding fiscal year for elementary or secondary public school operations." Number 0683 CHAIR McGUIRE objected for the purpose of discussion. REPRESENTATIVE GARA offered his understanding that HJR 103 says that spending may only increase by three-quarters of the rate of inflation and the rate of population growth, or by the percentage of change in personal income. He explained that Amendment 1 would change the proposed constitutional spending cap - currently outlined in proposed Article IX, Section 16(a) - such that spending shall not go above the rate of inflation and population growth, but will allow the legislature to increase spending in order to account for such. He shared his concern that if, in real dollars, on a per-person basis, the legislature provides less and less money every year for public services, it will become very difficult to make appropriate changes to Alaska's public education system, and opined that spending should keep pace with inflation and population growth. He also explained that Amendment 1 would add another item - a paragraph (15) - to the list of exemptions in proposed Article IX, Section 16(d), regarding certain appropriations for elementary or secondary public school operations, so that class size could be reduced without exceeding the proposed spending cap. REPRESENTATIVE GRUENBERG offered his understanding that Amendment 1 would also delete the provision - in proposed Article IX, Section 16(a) - pertaining to an increase based on the percentage rate of change in personal income. REPRESENTATIVE GARA concurred, adding that he did not see how a change in personal income can be accurately measured in Alaska, particularly given that currently there is no state income tax. REPRESENTATIVE GRUENBERG suggested dividing Amendment 1 such that the portion adding a new paragraph (15) to proposed Article IX, Section 16(d), be considered separately. REPRESENTATIVE GARA said he has no objection to dividing Amendment 1 in that manner. Number 0939 REPRESENTATIVE GRUENBERG made a motion to divide Amendment 1. There being no objection, Amendment 1 was divided into Amendment 1A - which would make the aforementioned changes to proposed Article IX, Section 16(a) - and Amendment [1B] - which would add a new paragraph (15) to proposed Article IX, Section 16(d). Number 0979 REPRESENTATIVE GARA made a motion to adopt Amendment 1A. CHAIR McGUIRE objected for the purpose of discussion. MS. FRASCA said that the administration's concern is that revenues don't automatically rise based on inflation and population growth, and this raises the question of how to fund a budget higher than what's been predicted thus far. With regard to the question of how changes in personal income would be calculated, she explained that federal income tax information would be used as the data source, adding that other states have used changes in personal income in their calculations. She indicated that it is the administration's preference to tie the state's ability to spend money to how well citizens are doing in terms of their income. REPRESENTATIVE GARA pointed out, however, that there is no relationship between the state's revenue, which is currently based on oil revenue and might in the future be based on gas- pipeline revenue, and personal income. He opined that they should understand and accept the reality that people live with inflation, that schools suffer from inflation, and that senior services suffer from inflation. Number 1156 A roll call vote was taken. Representatives Gara and Gruenberg voted in favor of Amendment 1A. Representatives Ogg, Samuels, Holm, Anderson, and McGuire voted against it. Therefore, Amendment 1A failed by a vote of 2-5. Number 1199 REPRESENTATIVE GARA made a motion to adopt Amendment 1B. Number 1204 CHAIR McGUIRE objected. REPRESENTATIVE OGG said, "Question." REPRESENTATIVE GARA mentioned that he has a legislative research report that speaks to the issue of how far education funding has lagged behind inflation - approximately $50 million over the last five years. He said he is worried that with a spending cap, education funding will suffer unless the legislature has the ability to exempt funding increases based on class size. MS. FRASCA offered her belief that education is a priority of the governor and is one of the first things that gets funded. She added, "We don't just have more revenues just because we may have a spending limit; ... the challenge will be to prioritize, into the future, the use of those revenues, and it's the foundation formula that's going to allow ... the future increases, not the spending limit ...." REPRESENTATIVE GRUENBERG suggested that another reason to support adoption of Amendment 1B is because the proposed constitutional amendment is illogical as currently written. He drew attention to page 3, lines 8-9, and noted that the language therein specifies that appropriations of money from tuition of the University of Alaska is exempt, and this is a large part of what supports the university; in addition, the language on page 2, line 31, exempts federal money, which can include money for [military] base children and money for Native children. He opined that it is illogical to "exempt them and not to exempt other educational funding," adding that such is neither fair nor consistent. REPRESENTATIVE GARA concluded by saying that because the No Child Left Behind Act of 2001 (NCLB Act) is an underfunded mandate and thus the state is going to struggling under it, and because Amendment 1A was not adopted and thus funding will go up less than the rate of inflation and population growth, it is very important to exempt school funding increases from the calculation that determines the spending cap. Number 1342 A roll call vote was taken. Representatives Gara, Gruenberg, and McGuire voted in favor of Amendment 1B. Representatives Ogg, Samuels, Holm, and Anderson voted against it. Therefore, Amendment 1B failed by a vote of 3-4. REPRESENTATIVE GRUENBERG asked to be listed as a cosponsor of Amendment 1B. Number 1439 REPRESENTATIVE GARA made a motion to adopt Amendment 2, to replace the language currently in HJR 103 with: * Section 1. Article IX, sec. 16, Constitution of the State of Alaska, is repealed and readopted to read: Section 16. Appropriation Limit. General fund appropriations by the legislature shall not exceed anticipated revenue. * Sec. 2. The amendment proposed by this resolution shall be placed before the voters of the state at the next general election in conformity with art. XIII, sec. 1, Constitution of the State of Alaska, and the election laws of the state. REPRESENTATIVE GARA recapped the current language in HJR 103 and noted that the concept of Amendment 2 was introduced by Representative Berkowitz on the House floor. Representative Gara offered his belief that people will understand the concept that the state must not spend more money than it has; Amendment 2 could be looked upon as a "balanced budget" amendment to the Alaska State constitution, and its language does not include the host of exemptions currently listed in HJR 103. He went on to describe the concept embodied in Amendment 2 as short, clean, and a little bit regal. CHAIR McGUIRE mentioned that she'd had a similar amendment drafted, and relayed that according to conversations she's had with Legislative Legal and Research Services, there are some potential problems with the concept. MS. FRASCA asked how "general funds" would be defined. She said that according to her interpretation of the language in Amendment 2, the monies in the Constitutional Budget Reserve Fund (CBRF) would not be considered general funds and therefore use of the CBRF would not be permitted under the proposed spending limit. CHAIR McGUIRE noted that Amendment 2 makes no exception for amounts in or transferred from the permanent fund, and this lack could create problems. MS. FRASCA remarked that Amendment 2 does not take into account "general fund match" or "general fund mental health." CHAIR McGUIRE offered her belief that the language currently in HJR 103 goes a long way towards the concept embodied in Amendment 2. Number 1567 REPRESENTATIVE GARA made a motion to amend Amendment 2, to make it conceptual and to say, "state appropriations shall not exceed state revenues". There being no objection, Amendment 2 was amended. REPRESENTATIVE SAMUELS cautioned against making a conceptual constitutional amendment. He asked whether anticipated earnings of the permanent fund would be included in the calculation proposed by Conceptual Amendment 2, as amended. REPRESENTATIVE HOLM asked who would be calculating anticipated revenue. He offered his belief that under Conceptual Amendment 2, as amended, it will be difficult to fund the Public Employees' Retirement System (PERS) and the Teachers' Retirement System (TRS). REPRESENTATIVE OGG noted that Conceptual Amendment 2, as amended, does not address the issue of debt, and asked how the proposed change differs from the existing constitution. REPRESENTATIVE GARA pointed out that staff at Legislative Legal and Research Services can help draft appropriate language to satisfy a conceptual amendment should the committee adopt such; opined that the principle of the permanent fund should not be counted as revenue; and offered his belief that the Alaska State Constitution currently has no real spending restrictions, with the exception of the principal of the permanent fund, and has a current spending cap far exceeding the amount that has been spent for many years and is thus considered unenforceable. REPRESENTATIVE OGG offered his understanding that the Alaska State Constitution already prohibits spending more money than is taken in and, thus, adopting Conceptual Amendment 2, as amended, would be redundant and not accomplish anything. MS. FRASCA offered her understanding that the Alaska State Constitution currently says that the state cannot incur debt without a vote of the people, adding that this has been interpreted as a requirement for a balanced budget - spending cannot exceed revenues. For this reason, the governor's budget identifies the revenues that will support the administration's proposed spending. CHAIR McGUIRE reiterated that she's had conversations with Legislative Legal and Research Services during which potential problems with concepts such as that proposed via Conceptual Amendment 2, as amended, were highlighted. She suggested that perhaps the House Finance Committee could better address this issue. REPRESENTATIVE GARA, noting that both a spending cap and a balanced budget requirement already exist in the Alaska State Constitution, opined that there is no need to clutter up the Alaska State Constitution with another spending cap. The committee took an at-ease from 9:40 a.m. to 9:45 a.m. Number 1867 A roll call vote was taken. Representatives Gara and Gruenberg voted in favor of Conceptual Amendment 2, as amended. Representatives Ogg, Samuels, Holm, Anderson, and McGuire voted against it. Therefore, Conceptual Amendment 2, as amended failed by a vote of 2-5. Number 1873 REPRESENTATIVE SAMUELS moved to report HJR 103 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HJR 103 was reported from the House Judiciary Standing Committee.