Legislature(2003 - 2004)

02/18/2004 07:02 AM W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HJR 31-CONST AM: PERMANENT FUND                                                                                               
                                                                                                                                
Number 0032                                                                                                                     
                                                                                                                                
CHAIR HAWKER announced that the  first order of business would be                                                               
HOUSE  JOINT  RESOLUTION  NO. 31,  Proposing  amendments  to  the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund  and to payments  to certain state  residents from                                                               
the Alaska  permanent fund; and  providing for an  effective date                                                               
for  the amendments.   He  noted that  Version U  was before  the                                                               
committee,  having been  adopted for  discussion purposes  at the                                                               
last meeting.                                                                                                                   
                                                                                                                                
Number 0200                                                                                                                     
                                                                                                                                
REPRESENTATIVE  JIM HOLM,  Alaska State  Legislature, sponsor  of                                                               
HJR  31, explained  his intention  to offer  an amendment  to the                                                               
proposed committee substitute (CS).                                                                                             
                                                                                                                                
Number 0228                                                                                                                     
                                                                                                                                
REPRESENTATIVE   WILSON  moved   to   adopt  the   aforementioned                                                               
amendment  as  Amendment  1,  which  read  [original  punctuation                                                               
provided, some formatting changes made]:                                                                                        
                                                                                                                                
     Pg.2, line 23, insert new paragraph (c) to read:                                                                           
          (c) Section 15 of Article IX as it read on June                                                                       
     30,  2004, applies  to appropriations  for fiscal  year                                                                    
     2005.   Notwithstanding  Section 15(b)  of Article  IX,                                                                    
     appropriations from  the permanent fund may  not exceed                                                                    
     the following amounts for the following fiscal years:                                                                      
               (1) fiscal year 2006 - five percent of the                                                                       
     market value of the fund on June 30, 2005;                                                                                 
               (2) fiscal year 2007 - five percent of the                                                                       
     average of  the market values  of the fund on  June 30,                                                                    
     2005, and June 30, 2006;                                                                                                   
               (3) fiscal year 2008 - five percent of the                                                                       
     average of the  market values of the fun  [sic] on June                                                                    
     30, 2005, June 30, 2006, and June 30, 2007;                                                                                
               (4) fiscal year 2009 - five percent of the                                                                       
     average of  the market values  of the fund on  June 30,                                                                    
     2005, June 30, 2006, June 30, 2007, and June 30, 2008;                                                                     
               (5) fiscal year 2010 - five percent of the                                                                       
     average of  the market values  of the fund on  June 30,                                                                    
     2005, June 30,  2006, June 30, 2007 June  30, 2008, and                                                                    
     June 30, 2009.                                                                                                             
                                                                                                                                
CHAIR HAWKER objected to Amendment 1 for discussion purposes.                                                                   
                                                                                                                                
REPRESENTATIVE HOLM explained that  Amendment 1 is a transitional                                                               
clause amendment  - there is  no "look  back provision" -  and it                                                               
"starts from the time  that the fund is left --  that will be the                                                               
balance for the five-year [percent of market value] (POMV)."                                                                    
                                                                                                                                
CHAIR HAWKER asked Representative  Holm what his original concern                                                               
was.                                                                                                                            
                                                                                                                                
REPRESENTATIVE HOLM answered, "The balance  at 5 percent would be                                                               
based  upon the  five proceeding  years, which  would be  the $27                                                               
billion to  $28 billion it is  today, plus the year  before this,                                                               
and what  we're saying  [is] it  just goes  forward for  the time                                                               
it's left and, eventually, it evens itself out."                                                                                
                                                                                                                                
Number 0334                                                                                                                     
                                                                                                                                
CHAIR HAWKER  asked if  his understanding  is correct,  "That the                                                               
language  is intended,  that as  we  go forward  with this  newly                                                               
established  balance  level, we  phase  in  every year  doing  an                                                               
average until we reach the five-year look back."                                                                                
                                                                                                                                
REPRESENTATIVE HOLM replied that is correct.                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON noted  that when  the bill  was previously                                                               
discussed the price of oil was  $32 a barrel, so 5 percent, using                                                               
the POMV  methodology, was  $800 million.   She inquired  if that                                                               
number is still the same.                                                                                                       
                                                                                                                                
Number 0420                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  explained that the amount  changes depending                                                               
on how much is  left over.  He said in the Version  U of the bill                                                               
the amount is capped at $20,000.  He continued:                                                                                 
                                                                                                                                
     If you  take the number  of people that  would qualify,                                                                    
     and you multiply that times  $20,000, and you take that                                                                    
     amount of money out of the  corpus of the fund, and the                                                                    
     earnings, --  so it starts  with one base.   Then, from                                                                    
     that point forward  we don't know what  the numbers are                                                                    
     going to be  at this point because it  keeps growing at                                                                    
     [the] oil price.                                                                                                           
                                                                                                                                
REPRESENTATIVE  WILSON said  she understood,  but responded  that                                                               
last time the amount was specific.                                                                                              
                                                                                                                                
REPRESENTATIVE HOLM stated that  [the amount] has changed because                                                               
the size of the permanent fund  left is unknown.  The only number                                                               
known is the $20,000 payout.  He  said it was the reverse of what                                                               
it used to be.                                                                                                                  
                                                                                                                                
REPRESENTATIVE WILSON asked for further clarification.                                                                          
                                                                                                                                
REPRESENTATIVE HOLM  replied that  if there  were $17  billion it                                                               
could be computed.                                                                                                              
                                                                                                                                
CHAIR HAWKER explained that the  CS before the committee reversed                                                               
the   calculation   mechanism   for  the   distribution.      The                                                               
distribution now is  sum certain and the  residual, whatever that                                                               
might be,  is left  in the  fund.   He said  it is  a significant                                                               
change in the methodology.                                                                                                      
                                                                                                                                
Number 0615                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON requested  further  discussion to  clarify                                                               
the issue for people listening online.                                                                                          
                                                                                                                                
CHAIR  HAWKER  asked  if  there was  any  further  discussion  of                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH   asked  Representative  Holm   if  the                                                               
amendment maintains  the lock-in for  who is eligible  to receive                                                               
the payout, or if people would become eligible every year.                                                                      
                                                                                                                                
REPRESENTATIVE HOLM stated  that [Amendment 1] has  no bearing on                                                               
who is eligible.                                                                                                                
                                                                                                                                
Number 0700                                                                                                                     
                                                                                                                                
CHAIR  HAWKER removed  his objection  to Amendment  1.   He asked                                                               
whether there was any further  objection to adopting Amendment 1.                                                               
Hearing none, it was so ordered.                                                                                                
                                                                                                                                
Number 0705                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGG  moved  to  adopt  Amendment  2,  which  read                                                               
[original punctuation provided, some formatting changes made]:                                                                  
                                                                                                                                
     BILL ID: HJR 31                                                                                                            
       00        HOUSE JOINT RESOLUTION NO. 31                                                                                  
       01 Proposing amendments to the Constitution of the                                                                       
     State of Alaska relating to the Alaska                                                                                     
       02 permanent fund, education fund, and to payments                                                                     
     to certain state residents from the Alaska permanent                                                                       
      03 fund; and providing for an effective date for the                                                                      
     amendments.                                                                                                                
       04 BE IT RESOLVED BY  THE LEGISLATURE OF THE STATE OF                                                                    
     ALASKA:                                                                                                                    
       * Section  1.  Article  IX, sec. 15,  Constitution of                                                                    
     the State of Alaska is amended to read:                                                                                    
       Section  15. (a)  At  least twenty  per  cent of  all                                                                  
     mineral   lease   rentals,  royalties,   royalty   sale                                                                  
     proceeds, federal mineral  revenue sharing payments and                                                                  
     bonuses  received by  the State  shall be  placed in  a                                                                  
     permanent fund,  the principal of  which shall  be used                                                                  
     only    for    those    income-producing    investments                                                                  
     specifically   designated  by   law  as   eligible  for                                                                  
     permanent  fund  investments.  Up to  five  percent  of                                                                  
     market value of the permanent  fund may be deposited in                                                                  
     the  general  fund  and  may be  used  for  any  public                                                                  
     purpose excepting  any program that  provides dividends                                                                  
     or other payments to all State residents.                                                                                
                                                                                                                                
         (b)   At least five  per cent of all  mineral lease                                                                  
     rentals,  royalties,  royalty  sale  proceeds,  federal                                                                  
     mineral revenue  sharing payments and  bonuses received                                                                  
     by the State shall be  placed in an education fund, the                                                                  
     principal  of  which  shall  be  used  only  for  those                                                                  
     income-producing  investments  specifically  designated                                                                  
     by law as eligible  for permanent fund investments. The                                                                  
     fund shall  be managed  by the by  the managers  of the                                                                  
     permanent fund as provided by  law.  Up to five percent                                                                  
     of  market value  of  the education  fund  may only  be                                                                  
     expended  as follows:  one third  to the  University of                                                                  
     Alaska  for instruction  and  or  scholarships and  two                                                                  
     thirds to  the Department of Education  for primary and                                                                  
     secondary education.                                                                                                     
                                                                                                                                
       01 * Sec.  2.  Article XV, Constitution  of the State                                                                  
     of Alaska, is amended by adding a new                                                                                    
       14 02 section to read:    .                                                                                            
     [UNLESS OTHERWISE PROVIDED BY LAW].                                                                                        
                                                                                                                                
       01 * Sec.  2.  Article XV, Constitution  of the State                                                                    
     of Alaska, is amended by adding a new                                                                                      
       02 section to read:                                                                                                      
       03 Section  30.  Payments  From the  Alaska Permanent                                                                    
     Fund and Effective                                                                                                         
       04 Date.  (a)   Notwithstanding Section 15 of Article                                                                    
     IX, each individual                                                                                                        
       who is eligible                                                                                                          
       05 under  State statute to  receive a  permanent fund                                                                    
     dividend for the year 2004 shall                                                                                           
       06 receive  from the State  a payment in  addition to                                                                    
     that dividend.  All provisions of statute                                                                                  
       07  and  regulation  that   are  both  applicable  to                                                                    
     permanent fund dividends for 2004 and in                                                                                   
       08  effect  on January  1,  2004,  apply to  payments                                                                    
     under this subsection except provisions                                                                                    
       09 that relate to the  amount of the dividend and the                                                                    
     date the dividend is paid.  The                                                                                            
       10 balance  of the principal of  the Alaska permanent                                                                    
     fund on the effective date of this                                                                                         
       11   section,   less  twenty   one[fifteen]   billion                                                                  
     dollars,  shall   be  used  for  payments   under  this                                                                    
     section.  The                                                                                                              
       12 balance,  after the  twenty one  [fifteen] billion                                                                  
     dollar deduction is made, shall be divided equally                                                                         
       13  among  all  eligible  individuals  so  that  each                                                                    
     eligible individual receives an equal                                                                                      
       14 payment, rounded to the nearest cent.                                                                                 
                                                                                                                                
       15  (b)   Notwithstanding Section  15 of  Article IX,                                                                  
     upon effect of Section 30 (a) of                                                                                         
       16  this  amendment,  six billion  dollars  shall  be                                                                  
     transferred from the permanent                                                                                           
       17 fund  (Section 15(a)  of Article IX) and deposited                                                                  
     in the education fund                                                                                                    
       18 Section 15(b) of Article IX.                                                                                        
                                                                                                                                
       19 (c)  [(b)] The 2004 amendment  that amends Section                                                                  
     15 of Article IX and adds this                                                                                             
       20 section  to this article  takes effect on  the day                                                                    
     after certification of the election                                                                                        
       21 returns for the 2004 general election.                                                                                
       22  *  Sec.  3.   The  amendments  proposed  by  this                                                                    
     resolution shall be placed before the                                                                                      
       23 voters of  the state at the  next general election                                                                    
     in conformity with art. XIII, sec. 1,                                                                                      
       24  Constitution  of the  State  of  Alaska, and  the                                                                    
     election laws of the state.                                                                                                
                                                                                                                                
Number 0720                                                                                                                     
                                                                                                                                
CHAIR HAWKER objected for discussion purposes.                                                                                  
                                                                                                                                
REPRESENTATIVE  OGG  explained  that [Amendment  2]  creates  two                                                               
sections in  Section 15; a  permanent fund, with changes  from 25                                                               
percent  to 20  percent in  the amount  of money  going into  the                                                               
permanent fund, and  a new section, (b),  an education endowment,                                                               
which  would collect  5  percent  of the  lease  royalties on  an                                                               
annual  basis.   He added  that [Amendment  2] would  transfer $6                                                               
billion from the  permanent fund to the  education endowment, and                                                               
would also  leave $21 billion in  the fund.  The  payout would be                                                               
$10,000 rather than $20,000, he said.                                                                                           
                                                                                                                                
Number 0828                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM  responded  that   he  did  not  agree  with                                                               
Representative Ogg's amendment  for several reasons.   One of the                                                               
issues  is   the  problem  of  "dedication   of  funds"  creating                                                               
difficulties  for state  governments.   Another issue  is whether                                                               
$10,000 rather  than $20,000 is  enough to entice people  to give                                                               
up the dividend.   He said [$10,000] would be  equal to a 10-year                                                               
buyout, rather  than a  20-year buyout.   Another reason  for the                                                               
$20,000 is  to allow enough  capital to  come back to  Alaska and                                                               
make  life-altering changes  for people,  he added.   For  those,                                                               
reasons,  he opined,  HJR 31  would  work better  in its  present                                                               
form.   He said  he appreciated  Representative Ogg's  ideas, but                                                               
didn't think they would work, and  he was fearful of setting up a                                                               
program which the government couldn't fund in the future.                                                                       
                                                                                                                                
REPRESENTATIVE WILSON  asked Representative  Ogg to  explain page                                                               
2, lines 15-18.                                                                                                                 
                                                                                                                                
REPRESENTATIVE OGG responded,  "What that says is  when this bill                                                               
is  enacted, if  it  is enacted  as  a constitutional  amendment,                                                               
you're not able  to take monies out of the  permanent fund except                                                               
by particular formula under 15(a) -  the POMV formula - and those                                                               
lines there  say, notwithstanding that."   He said it  creates an                                                               
enactment to remove $6 million for an education fund.                                                                           
                                                                                                                                
Number 1107                                                                                                                     
                                                                                                                                
REPRESENTATIVE   OGG,  in   response  to   Representative  Holm's                                                               
comments, said he  didn't know what the proper amount  was to buy                                                               
people  out, but  that  he  was very  interested  in creating  an                                                               
educational  endowment.   He reflected  that Representative  Holm                                                               
did   raise  an   interesting  point   on  the   unconstitutional                                                               
designation of  funds.   He referred to  a legal  analysis [Legal                                                               
Services Memorandum, from Tamara  Brandt Cook, February 11, 2004]                                                               
requested by Representative Con  Bunde, and questioned what would                                                               
entail  a dramatic  change that  would  require a  constitutional                                                               
convention,  as  opposed  to  just  making  a  revision  [to  the                                                               
constitution].  He quoted from page 3 of the Memorandum:                                                                        
                                                                                                                                
     The complication  factor here,  of course, is  that the                                                                    
     original  amendment  to  the state  constitution  under                                                                    
     which the  permanent fund was established  was, itself,                                                                    
     a significant  restriction on the legislative  power of                                                                    
     appropriation.                                                                                                             
                                                                                                                                
Number 1220                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG  added that this  issue certainly  hasn't been                                                               
challenged,   but  legal   analysis  believes   that  there   are                                                               
persuasive arguments that creating the  fund, in the first place,                                                               
was a  restriction on the power  of appropriation, and it  may be                                                               
of such a magnitude that  it would have required a constitutional                                                               
convention  instead  of   just  a  revision.    He   said  he  is                                                               
reconsidering his amendment because  of the "dedication of funds"                                                               
point made  by the sponsor of  the bill.  He  queried the sponsor                                                               
about the  legal analysis of putting  to the voters the  power of                                                               
appropriation by  the adoption  of the  constitutional amendment.                                                               
Is  that, in  itself, an  unconstitutional designation  of funds,                                                               
and a restriction on the power  of the legislature, he asked.  He                                                               
said he didn't  have an answer to that question  and, having read                                                               
the legal  opinion, concluded  it may be  problematic for  HJR 31                                                               
and put  into question the  whole permanent fund itself.   Having                                                               
said that, Representative Ogg withdrew  [Amendment 2].                                                                          
                                                                                                                                
Number 1430                                                                                                                     
                                                                                                                                
CHAIR  HAWKER thanked  Representative  Ogg for  his comments  and                                                               
stated that he has a  great interest in the larger constitutional                                                               
issue.  He  commented on the process of dealing  with HJR 31, the                                                               
fact that  [House Judiciary Standing  Committee] would  deal with                                                               
the  legal  ramifications  of  the bill,  and  the  adequate  due                                                               
diligence process as the bill moves forward.                                                                                    
                                                                                                                                
Number 1538                                                                                                                     
                                                                                                                                
REPRESENTATIVE   WEYHRAUCH  added   his   appreciation  for   the                                                               
discussion of Amendment  2.  He mentioned that he  is viewing HJR                                                               
31 from a  [House Special Committee on Ways  and Means] viewpoint                                                               
to  analyze  how to  provide  fiscal  revenues  to the  state  of                                                               
Alaska.   He said that it  appears, with a $27  billion permanent                                                               
fund, [the legislature] has become  frozen in the ability to deal                                                               
with the fiscal problem.  He  said, "What we've done is we've set                                                               
in our constitution  a permanent fund, and  we've given ourselves                                                               
a permanent  headache on how  to deal with money  distribution to                                                               
the public and for money distribution to the state."                                                                            
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  stated that  education is  a preeminent                                                               
concern  of his.    Balanced  against that  is  the concern  that                                                               
putting an  education endowment into the  constitution would lead                                                               
to  a  future  debate  similar  to  the  one  now  regarding  the                                                               
permanent fund.   He noted that, in the future,  there could be a                                                               
top-heavy amount of  money in education, but  all other functions                                                               
of  government could  be suffering:   the  court system,  the law                                                               
enforcement   branch,   environmental  protection,   et   cetera.                                                               
"Therefore,  it becomes  incumbent upon  the legislature  to have                                                               
the ability to  look at the corporation resources,  as it stands,                                                               
and  make those  both substantive  and political  decisions at  a                                                               
time and  in the context ...."   He concluded by  saying he hopes                                                               
Representative Ogg  will bring the  same debate back at  a future                                                               
date.                                                                                                                           
                                                                                                                                
Number 1758                                                                                                                     
                                                                                                                                
REPRESENTATIVE   OGG   replied  he   appreciates   Representative                                                               
Weyhrauch's  comments,  and  he explained  the  reasoning  behind                                                               
withdrawing his  amendment.  He  added that his intention  was to                                                               
provide a fiscal solution.                                                                                                      
                                                                                                                                
REPRESENTATIVE   HOLM   also    stated   his   appreciation   for                                                               
Representative Ogg's  amendment and added his  support to finding                                                               
a solution to education's dilemma soon.   He added that this bill                                                               
is not the  vehicle to fix the problem of  funding education, but                                                               
it  could free  up the  dollars so  that the  state could  do its                                                               
appropriate business.                                                                                                           
                                                                                                                                
Number 1932                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON added  that she  hopes Representative  Ogg                                                               
continues "in  that vein"  in order to  get answers  to questions                                                               
about [education  funding].  She  said that throughout  the state                                                               
there is concern  about two things, the  permanent fund dividend,                                                               
and education.   She emphasized  that the majority of  the people                                                               
feel  that [the  legislature]  is  not doing  a  good enough  job                                                               
[funding education] and  it needs to be pursued.   She encouraged                                                               
Representative   Ogg  to   continue  [his   pursuit  of   funding                                                               
education.]                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG thanked  the committee and joked  that he felt                                                               
much better for having withdrawn [his amendment].                                                                               
                                                                                                                                
Number 2100                                                                                                                     
                                                                                                                                
ROGER GAY, spoke  about the $20,000 payout.  He  said that amount                                                               
was supposed to equal permanent  fund dividends for 20 years, but                                                               
argued that there is a need to look  at what the next 20 years of                                                               
future checks  would be,  not the  last 20 years.   He  stated he                                                               
believes the  permanent fund checks  have a beneficial  effect on                                                               
the economy of  Alaska.  He questioned how to  offset the loss of                                                               
the boost to the economy if the program is discontinued.                                                                        
                                                                                                                                
MR. GAY  opined that with  the fund at  $28 billion, the  fund no                                                               
longer needs  to be  increased by the  25 percent  yearly mineral                                                               
lease contribution.   He  said the  25 percent  could be  used to                                                               
start a new  fund to support state government -  a long-term fix.                                                               
In 20 years the  state of Alaska could have a  second fund of its                                                               
own to be  used for whatever purposes it chooses.   He emphasized                                                               
he does not  think the permanent fund, as it  is today, should be                                                               
abandoned.   He suggested the  permanent fund be changed  to "The                                                               
People's  Fund, and  that  a  new fund  be  established called  a                                                               
"Trust Fund," because, "We should  not trust the government."  He                                                               
concluded by  saying the money  the people  spend is none  of the                                                               
legislature's  business and  the  current  permanent fund  should                                                               
remain.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  HAWKER  thanked Mr.  Gay  for  his testimony  and                                                               
summed  up   the  discussion  thus   far.    He   mentioned  that                                                               
Representative  Holm has  provided  a stack  of  e-mails for  the                                                               
committee's information.                                                                                                        
                                                                                                                                
Number 2532                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  said he would  appreciate it if  the e-mails                                                               
were included in the members' packets.   He said he hoped, in the                                                               
process, the  committee would come  up with a solution  the state                                                               
could live with.   He applauded the debate process  as being good                                                               
for  the  state  of  Alaska.    He  pointed  out,  "We  have  the                                                               
opportunity to make this state,  on a solid financial basis, work                                                               
properly."                                                                                                                      
                                                                                                                                
CHAIR HAWKER announced  that public testimony was  concluded.  He                                                               
stated  that  the  following  fiscal  notes  had  been  received:                                                               
Department  of Education,  Department of  Revenue, Department  of                                                               
Labor and  Workforce Development, and  Alaska Court System.   The                                                               
committee is  waiting for  a fiscal note  from the  Department of                                                               
Corrections, he added.                                                                                                          
                                                                                                                                
Number 2737                                                                                                                     
                                                                                                                                
STEVE PORTER,  Deputy Commissioner,  Office of  the Commissioner,                                                               
Department  of Revenue,  explained  the  department's two  fiscal                                                               
notes.   The  first one  is  from the  Child Support  Enforcement                                                               
Division  (CSED) which  would receive  a substantial  impact from                                                               
this bill, he said.  In the  CSED there are about $500 million of                                                               
arrearages in child support payments,  and a single event such as                                                               
a $20,000  payout, with the  garnishments from PFD's,  would wipe                                                               
out  about  half  [of  the  arrearages], or  $240  million.    He                                                               
explained there  would also  be a  short-term benefit  to federal                                                               
incentives  the first  year,  followed by  a  negative impact  of                                                               
about $1.7 million the following  years because of no opportunity                                                               
to garnish the PFD's.                                                                                                           
                                                                                                                                
CHAIR HAWKER asked about the  outyears of decline and wondered if                                                               
this calculation took into account  the front-end loading of over                                                               
$240 million in payments to recipients of child support.                                                                        
                                                                                                                                
MR. PORTER replied that it would  depend on the age of the child.                                                               
If a  child has  reached the  age of majority  and the  amount of                                                               
money is  just owed to the  state, then the case  would be closed                                                               
out.   If there is  on-going child  support, it would  bring that                                                               
case current.   [The department]  can't garnish into  the future,                                                               
he added.   He said  that the  problem is that  federal incentive                                                               
programs are based  on "annual basis" and the gains  in '05 can't                                                               
be carried forward into '06, '07, and '08.                                                                                      
                                                                                                                                
Number 3030                                                                                                                     
                                                                                                                                
JOHN  MALLONEE,   Acting  Director,  Child   Support  Enforcement                                                               
Division,  Department  of Revenue,  stated  that  Mr. Porter  was                                                               
correct in  that a  lot of  the cases  would be  paid off  at one                                                               
settlement because  there are no on-going  child support payments                                                               
to be charged.   He said it was hard to  determine how many cases                                                               
would fall into each category.   He guessed that about 60 percent                                                               
of the  cases would probably  be on-going  and 40 percent  of the                                                               
cases  would close  out.   He said  that even  $20,000 would  not                                                               
close out  some cases which are  as large as $60,000  to $200,000                                                               
in  arrears.   He  explained  that the  larger  cases would  have                                                               
continued  to collect  money if  there  was a  yearly PFD,  which                                                               
would have helped incentives.   The incentive measure for arrears                                                               
happens to be the  number of cases in which there  was at least a                                                               
collection, he added.                                                                                                           
                                                                                                                                
CHAIR  HAWKER   said  it  sounds  like   beneficiaries  would  be                                                               
receiving a great up-front benefit,  but, if this resolution were                                                               
to pass, it would not put the CSED out of business.                                                                             
                                                                                                                                
MR. MALLONEE answered that it wouldn't.                                                                                         
                                                                                                                                
CHAIR  HAWKER  suggested  CSED would  receive  support  from  the                                                               
legislature to pursue those difficult cases.                                                                                    
                                                                                                                                
Number 3229                                                                                                                     
                                                                                                                                
MR. PORTER  spoke about the  fiscal note from the  Permanent Fund                                                               
Dividend Division  (PFDD).  He  said there  would no longer  be a                                                               
PFDD  if this  bill passed.   The  initial gain  in '05  would be                                                               
close to  $1 million; followed  by '06, '07, and  '08 recapturing                                                               
the  $5.2 spent  managing  the permanent  fund  dividend.   There                                                               
would be  a number of unresolved  issues, which would have  to be                                                               
transferred to  another organization within the  department or to                                                               
another department.   For example,  individuals, when  they reach                                                               
the  age of  18, can  apply for  missed dividends.   Appeals  and                                                               
collections is  an example of an  area which will be  hanging on,                                                               
he added.                                                                                                                       
                                                                                                                                
Number 3414                                                                                                                     
                                                                                                                                
SHARON  BARTON,  Director,   Permanent  Fund  Dividend  Division,                                                               
Department of  Revenue, added that  the fiscal note  projects how                                                               
the PFDD would be phased out.  She offered to answer questions.                                                                 
                                                                                                                                
CHAIR  HAWKER noted  the presence  of  other fiscal  notes.   The                                                               
Department  of  Education  and Early  Development,  Student  Loan                                                               
Program  Collection  fiscal note  indicates  up  front some  very                                                               
significant loan  collections and  then reduced  collections into                                                               
the future,  he explained.   The Alaska Court System  fiscal note                                                               
indicates  some affect  on fines  and forfeitures,  but the  most                                                               
significant item is  having to find a new database  from which to                                                               
pick jurors.  The Department of  Labor has a zero fiscal note, he                                                               
reported,  and  Division of  Elections  fiscal  note indicates  a                                                               
small cost to put the resolution on the election ballot.                                                                        
                                                                                                                                
Number 3637                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG asked  if the Department of  Health and Social                                                               
Services (HESS) has a fiscal note.                                                                                              
                                                                                                                                
CHAIR  HAWKER answered  that  [the committee]  is  waiting for  a                                                               
fiscal note from HESS and from the Department of Corrections.                                                                   
                                                                                                                                
REPRESENTATIVE  OGG asked  if there  was a  fiscal note  from the                                                               
Department of Public Safety.                                                                                                    
                                                                                                                                
CHAIR HAWKER  answered that [the  committee] is waiting  for that                                                               
fiscal note, also.                                                                                                              
                                                                                                                                
REPRESENTATIVE  HOLM   asked  when   [the  committee]   would  be                                                               
receiving those  fiscal notes and if  it could wait for  the bill                                                               
to go  the House  State Affairs Standing  Committee to  deal with                                                               
them.                                                                                                                           
                                                                                                                                
Number 3732                                                                                                                     
                                                                                                                                
CHAIR HAWKER  stated that the  fiscal notes were, at  best, large                                                               
estimates and he was willing to allow  the bill to move on to the                                                               
House State Affairs Standing Committee.                                                                                         
                                                                                                                                
Number 3830                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG responded  to the flavor of  testimony in some                                                               
of the  e-mails regarding this  bill.  He  said there is  a sense                                                               
that people do  better with their money than the  state does, and                                                               
he said  he would like  to speak, from a  historical perspective,                                                               
to that  issue.  "Since the  development of oil in  the state, he                                                               
said,  there  has  been  $52  billion in  revenue  to  the  state                                                               
government.   We now  have a  permanent fund  of $28  billion the                                                               
legislature managed to save.   If you throw in the constitutional                                                               
budget reserve,  that's almost 60  percent of the money  from the                                                               
oil revenue, still in hand."   He called that, "astounding fiscal                                                               
management by the state of Alaska  and the people of Alaska."  He                                                               
added  that it  was interesting  to note  in the  excess earnings                                                               
[reserve]  account,  the legislature  had  the  ability to  spend                                                               
about $14  billion, but put  it into  that [account] and  was not                                                               
mandated by the constitution to do  so.  He stated, that not only                                                               
has  [the legislature]  set aside  a savings  account, they  also                                                               
have  acted in  a responsible  manner.   He concluded  by saying,                                                               
over the  period of time  of the permanent fund,  the legislature                                                               
has handed  out about $12 billion  to the citizens of  the state.                                                               
He emphasized that the legislature  has been very responsible and                                                               
has done very well.                                                                                                             
                                                                                                                                
Number 4053                                                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON  added her  comments about  the perceptions                                                               
of people  regarding the money  in the earnings  reserve account.                                                               
She said [the  legislature], at any time, could have  by a simple                                                               
majority vote,  taken money  out of the  account.   Instead, they                                                               
acted responsibly and  used the money only to  pay permanent fund                                                               
dividends or  to increase the value  of the account.   She stated                                                               
her concern about the perception  of irresponsibility on the part                                                               
of the legislature, but added that that was not at all true.                                                                    
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH mentioned  the  Conference of  Alaskans                                                               
where people  clamored for money for  state services, broad-based                                                               
revenue  sources, constitutionalization  of  the permanent  fund,                                                               
and payout of  the permanent fund.  He noted  that [Alaska] is at                                                               
a critical time in the state's  fiscal history.  He suggested the                                                               
committee move the bill forward and  let the people analyze it in                                                               
the public forum of debate.                                                                                                     
                                                                                                                                
Number 4304                                                                                                                     
                                                                                                                                
CHAIR HAWKER reminded listeners that  the committee process is an                                                               
on-going process, and the movement of  a bill from a committee is                                                               
part of  a process.   It  does not  indicate that  the individual                                                               
committee members  will endorse or support  the bill, ultimately,                                                               
when it  gets to the  floor of the  body.   He said there  may be                                                               
individual recommendations on the bill,  but that he concurs with                                                               
Representative  Weyhrauch that  this bill  merits further  debate                                                               
that addresses the question, "What  role shall the permanent fund                                                               
play in  the future fiscal  policy of the  state of Alaska?"   He                                                               
suggested moving [HJR 31] on  to the House State Affairs Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  SAMUELS asked  Representative  Holm  if the  bill                                                               
mentions anything about putting the  payout for children under 18                                                               
in an  escrow account so  it would be  theirs when they  turn 18.                                                               
He noted  several e-mails  in the packet  that advocate  for that                                                               
idea.                                                                                                                           
                                                                                                                                
Number 4444                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM replied  that  the idea  was discussed,  but                                                               
there  was never  an agreement  on the  method for  the state  to                                                               
reserve  the  payouts for  minors.    He  stated, "It's  not  our                                                               
business  how people  spend  their  money."   Then  he posed  the                                                               
question,  "How beneficial  would it  be to  a family  to have  a                                                               
life-altering situation, financially, so  they could buy a home?"                                                               
Whether  or not  the monies  are transferred  to the  children in                                                               
value as a capital  asset or given to them in  cash when they are                                                               
18, he said he didn't know which  way was the best.  He concluded                                                               
it was a good issue for debate.                                                                                                 
                                                                                                                                
Number 4655                                                                                                                     
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  moved to  report CSHJR 31,  Version 23-                                                               
LS1282\U  out of  committee with  individual recommendations  and                                                               
the accompanying fiscal  notes.  There being  no objection, CSHJR                                                               
31(W&M) was reported  out of House Special Committee  on Ways and                                                               
Means.                                                                                                                          
                                                                                                                                
TAPE 04-6, SIDE B                                                                                                             
Number 4700                                                                                                                     
                                                                                                                                
CHAIR HAWKER thanked Representative Holm  and his staff for their                                                               
work on  the bill.   He concluded the meeting  with announcements                                                               
for next week.                                                                                                                

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