Legislature(2015 - 2016)SENATE FINANCE 532

04/11/2016 09:00 AM Senate FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 101(FIN) Out of Committee
Scheduled but Not Heard
Moved SB 201 Out of Committee
Moved SJR 12 Out of Committee
Moved CSSB 196(FIN) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 196                                                                                                           
     "An  Act  relating to  the  use  of certain  unexpended                                                                    
     earnings  from the  power  cost equalization  endowment                                                                    
9:53:34 AM                                                                                                                    
Co-Chair  MacKinnon discussed  SB  196. She  noted that  the                                                                    
public  hearing had  been  opened and  closed  on March  16,                                                                    
Vice-Chair   Micciche  discussed   the   fiscal  note   (OMB                                                                    
component 2602)  from the Department of  Commerce, Community                                                                    
and Economic  Development (DCCED). He  stated that it  was a                                                                    
zero fiscal note with no added capital or added employees.                                                                      
Vice-Chair   Micciche  discussed   the   fiscal  note   (OMB                                                                    
component  0)  for  various   departments  from  the  Senate                                                                    
Finance  Committee.  He  informed  that  the  note  was  for                                                                    
informational  purposes  only,  and   had  to  do  with  the                                                                    
dividend funds  from the  PCE Endowment  Fund. He  read from                                                                    
the bottom of the fiscal note:                                                                                                  
    Why this fiscal note differs from previous version:                                                                         
     Initial  version.  This  fiscal  note  for  information                                                                    
     purposes  only. Beginning  in FY16,  it  assumes a  six                                                                    
     percent earnings  rate and  two percent  program growth                                                                    
     rate for each fiscal year.  In FY18 through FY22, Power                                                                    
     Cost  Equalization  Endowment   funds  (DGF)  would  be                                                                    
     available to   replace   Unrestricted   General   Funds                                                                    
     (UGF)   expenditures  for   Community  Assistance   and                                                                    
     Rural   Energy  Programs. Depending  on actual earnings                                                                    
     in a  fiscal year the  amount available to  replace UGF                                                                    
     will vary from zero to $55 million.                                                                                        
Vice-Chair Micciche specified that  the fiscal note showed a                                                                    
$17 million displacement in FY 18,  with no impact in FY 17.                                                                    
He continued that there was  a $17.2 million displacement in                                                                    
FY 19, a $17.5 million displacement  in FY 20, a $17 million                                                                    
displacement in FY  21, and a $16.6  million displacement in                                                                    
FY 22.                                                                                                                          
Co-Chair  MacKinnon asked  if Vice-Chair  Micciche had  been                                                                    
referring  to the  dividend coming  from  the PCE  Endowment                                                                    
Vice-Chair Micciche answered in the affirmative.                                                                                
Senator   Hoffman  stated   that  he   had  introduced   the                                                                    
legislation  primarily to  reflect  the  original intent  of                                                                    
funding  the PCE  program. He  clarified that  the endowment                                                                    
was  never meant  to  have additional  funds  for any  other                                                                    
purpose.  He explained  that the  bill would  stipulate that                                                                    
any  additional  earnings  would  be used  for  other  state                                                                    
Senator  Dunleavy   commented  on  the  $4   billion  budget                                                                    
deficit, and wondered  why the state would not  use the fund                                                                    
to  backfill some  of the  deficit. He  understood that  the                                                                    
fund gave assistance to some  Alaskan communities, and asked                                                                    
if anyone wanted to comment on the matter.                                                                                      
9:57:15 AM                                                                                                                    
Senator  Hoffman  thought  that   the  purpose  of  the  PCE                                                                    
Endowment  Fund  was discussed  and  brokered  prior to  his                                                                    
tenure in  the legislature. He  recounted that the  fund had                                                                    
been in existence for well  over 30 years. He mentioned that                                                                    
the  funds  were   split  when  the  Four   Dam  Pool  [four                                                                    
hydroelectric facilities (dams and  lake tap projects) built                                                                    
by the State of Alaska in  the early 1980s] was being built.                                                                    
The fund was intended to  address the high electricity costs                                                                    
(for  heating)  in  rural  Alaska, and  was  an  attempt  to                                                                    
equalize  the  power  throughout  the state  of  Alaska.  He                                                                    
thought by keeping  the funds in the endowment it  was not a                                                                    
drain on the GF, but  rather a long-term solution to address                                                                    
higher costs throughout the state.  Conversely, if the funds                                                                    
were taken it  would be a one-time use, and  people in rural                                                                    
Alaska would end up paying  substantially more in electrical                                                                    
costs. He  noted that the  PCE program only gave  credit for                                                                    
the first 500  kilowatt hours (kWhs) of  electricity use per                                                                    
month.  He  discussed electricity  use  in  rural and  urban                                                                    
areas  of the  state. He  saw the  bill as  a commitment  to                                                                    
lower costs  and make the  state a more affordable  place to                                                                    
Senator  Dunleavy  acknowledged  the   history  of  the  PCE                                                                    
program  and  supported the  concept  of  helping people  in                                                                    
rural  Alaska with  energy costs.  He hoped  that the  state                                                                    
would  be able  to  drive  down the  overall  cost of  state                                                                    
government so that  it could continue to have  funds such as                                                                    
the PCE endowment  fund. He referred to proposed  use of the                                                                    
permanent fund and potential new  taxes, and thought that it                                                                    
was  important  to  have  discussions  about  all  potential                                                                    
sources of funding.  He thought the issues  were complex and                                                                    
was not sure  the legislature would be able to  come up with                                                                    
a complete financial  package to address the  deficit by the                                                                    
end  of session.  He wanted  to  use care  in examining  all                                                                    
funds  to  see how  each  might  help  with the  $4  billion                                                                    
deficit. He  had lived in  rural Alaska and  experienced the                                                                    
cost differential.  He thought the legislature  needed to be                                                                    
prepared to answer  questions about the PCE Fund  as well as                                                                    
the Higher Education Fund.                                                                                                      
10:01:02 AM                                                                                                                   
Senator Olson stated  that the PCE Fund was  put together at                                                                    
a time when natural gas  and hydro-electric power were being                                                                    
developed in  the state. In  order for rural Alaska  to reap                                                                    
benefits  of the  natural gas  investments  and pricing,  as                                                                    
well as the  Four Dam Pool; the compromise  was the creation                                                                    
of the PCE  Endowment Fund. He discussed the  idea of adding                                                                    
a surcharge on  natural gas coming out of  Cook Inlet, which                                                                    
was  semi-subsidized  by the  state,  to  help pay  for  the                                                                    
budget deficit.  He discussed the  difference in  power cost                                                                    
between his residences in Anchorage and Golovin.                                                                                
Senator  Dunleavy did  not disagree.  He thought  there were                                                                    
people in the state who did  not benefit from Cook Inlet gas                                                                    
subsidization (through tax credits)  by the state; and there                                                                    
were people  in the state who  did not benefit from  PCE. He                                                                    
believed  the  points  being  addressed  were  important  to                                                                    
feature in ongoing conversations.                                                                                               
Vice-Chair Micciche pointed  out that it was  the first time                                                                    
the state  had asked the  PCE Fund  to help offset  costs in                                                                    
other areas.  For the purposes  of the legislation,  the aid                                                                    
would  be   for  community   assistance  and   rural  energy                                                                    
programs.  He noted  that there  were discussions  about the                                                                    
level  of   subsidy  in  Cook   Inlet.  He   was  relatively                                                                    
supportive of the bill.                                                                                                         
10:05:10 AM                                                                                                                   
Senator  Bishop stated  that if  there was  a PCE  Endowment                                                                    
Fund dividend,  the excess earnings  would be  split between                                                                    
the   community  assistance   program   (50  percent),   the                                                                    
renewable  energy  grant  fund  (30 percent),  and  the  PCE                                                                    
Endowment Fund  (20 percent). He recalled  that the previous                                                                    
year the  committee had strengthened  the PCE Fund  by using                                                                    
the  prudent investor  rule. He  thought  the committee  was                                                                    
doing its  job working  towards maximizing state  assets. He                                                                    
agreed with  Senator Dunleavy that  it would  take continued                                                                    
work to solve the budget problem.                                                                                               
Co-Chair  MacKinnon recalled  a PCE  bill from  the previous                                                                    
year, in which more  prudent investment was implemented. She                                                                    
thought the  bill went  an additional  step in  reducing the                                                                    
draw from 7  percent to 5 percent, in aid  of trying to keep                                                                    
the corpus of  the fund whole. She  recalled priorities that                                                                    
were articulated in a Senate  Majority press conference that                                                                    
included how  to positively  impact the  bottom line  of the                                                                    
state budget,  which she thought the  bill accomplished. She                                                                    
pointed  out  that  the  bill  left  all  of  the  PCE  Fund                                                                    
available for  appropriation in a future  year. She asserted                                                                    
that  the House  had  proposed accessing  the  fund for  the                                                                    
University,  and  she did  not  concur  with the  idea.  She                                                                    
explained that there were excess  earnings above the funding                                                                    
to the PCE program, after which  the funds would roll off to                                                                    
different areas and  reduce the call on cash to  the GF. The                                                                    
bill would reduce GF spending,  and she thought it was worth                                                                    
consideration by  both bodies. She  thought if the  bill was                                                                    
not passed, the  PCE Fund would be at risk.  She discussed a                                                                    
reduction in  tax credits that  would result in  an increase                                                                    
in gas bills.                                                                                                                   
10:09:26 AM                                                                                                                   
AT EASE                                                                                                                         
10:16:34 AM                                                                                                                   
Vice-Chair  Micciche MOVED  to report  CSSB 196(FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
CSSB  196(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  with one  new fiscal impact  note from                                                                    
the Senate Finance  Committee, and one new  zero fiscal note                                                                    
from   Department  of   Commerce,  Community   and  Economic                                                                    
10:17:15 AM                                                                                                                   
AT EASE                                                                                                                         
10:21:30 AM                                                                                                                   

Document Name Date/Time Subjects
SB 200 Public Testimony Nees.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 200 NEA Alaska Letter.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 210 Community Revenue Sharing Estimates.pdf SFIN 4/11/2016 9:00:00 AM
SB 210
SB 201 Responses to questions during SB 201 hearing SFIN 4.pdf SFIN 4/11/2016 9:00:00 AM
SB 201
SB 210 with $38.2 million vs Status Quo with $60 million.pdf SFIN 4/11/2016 9:00:00 AM
SB 210