Legislature(2015 - 2016)BUTROVICH 205

02/04/2016 09:00 AM Senate STATE AFFAIRS

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Audio Topic
09:03:11 AM Start
09:08:26 AM SB128
09:20:08 AM Presentation: "accessing Permanent Fund Earnings to Reduce the Fiscal Gap."
10:12:13 AM Presentation: "a Way Forward on the Alaska Budget"
10:43:44 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
+ Presentation by Sponsor, Senator Lesil McGuire TELECONFERENCED
-- Testimony <Invitation Only> --
Heard & Held
-- Testimony <Invitation Only> --
+ Presentations: TELECONFERENCED
Professor Emeritus Scott Goldsmith, UAA
Institute of Social and Economic Research (ISER)
Brad Keithley, Alaskans for Sustainable Budgets
"A Way Forward on the Alaska Budget"
+ Bills Previously Heard/Scheduled TELECONFERENCED
        SB 128-PERM. FUND: DEPOSITS; DIVIDEND; EARNINGS                                                                     
9:08:26 AM                                                                                                                    
CHAIR STOLTZE announced the consideration of SB 128.                                                                            
9:08:54 AM                                                                                                                    
RANDALL  HOFFBECK, Commissioner,  Alaska  Department of  Revenue,                                                               
stated that he  appreciated the fact there were  many versions of                                                               
Permanent Fund legislation  as a solution for  the fiscal crisis.                                                               
He  reviewed his  presentation on  best  practices on  sovereign-                                                               
wealth funds  around the world,  ways the Permanent  Fund relates                                                               
to other wealth  funds, and ways it can be  used to stabilize and                                                               
fund  government.  He  reported  that  he  and  Attorney  General                                                               
Richards  also provided  information on  the governor's  approach                                                               
and how it fits into the governor's total fiscal plan.                                                                          
He  related that  SB 128  is one  of three  pieces that  includes                                                               
using  the state's  wealth,  a tax  component,  and a  budget-cut                                                               
piece. He said SB 128,  The Alaska Permanent Fund Protection Act,                                                               
is a way  to achieve a $3.3 billion endowment-type  draw from the                                                               
state's  earnings by  putting  100  percent of  oil  and gas  tax                                                               
revenue  and  other  mineral  revenue  into  the  Permanent  Fund                                                               
itself. He  detailed that SB  128 would allow the  Permanent Fund                                                               
account to  generate $3.3 billion  on a sustainable  basis moving                                                               
forward.  He specified  that the  dividend  would be  tied to  50                                                               
percent of  royalties received on  an annual basis.  He concluded                                                               
that SB  128 is a  plan that works and  provides a solution  to a                                                               
very difficult problem.                                                                                                         
9:11:52 AM                                                                                                                    
CHAIR STOLTZE suggested committee  members request information on                                                               
the constitutionality of SB 128.                                                                                                
SENATOR MCGUIRE stated that her  two main concerns are related to                                                               
the  structure. She  disclosed that  in SB  114 the  General Fund                                                               
(GF) is retained, but  SB 128 purports to create a  new GF in the                                                               
Earnings  Reserve   Account  (ERA).  The   Constitutional  Budget                                                               
Reserve  (CBR) remains  the same  in SB  114, but  in SB  128 the                                                               
three-quarters vote to access funds  is removed. She inquired how                                                               
certain the  administration is regarding legal  challenges to her                                                               
two concerns.                                                                                                                   
9:13:55 AM                                                                                                                    
WILLIAM MILKS,  Assistant Attorney General, Alaska  Department of                                                               
Law, asked Senator  McGuire to restate her concern  about the CBR                                                               
and the GF.                                                                                                                     
SENATOR  MCGUIRE specified  that  the GF  is statutorily  created                                                               
with a  minimum-balance threshold to  move money in and  out. She                                                               
detailed that  the ERA  is statutorily created  as an  overlay to                                                               
the constitutional creation of the  Permanent Fund and that money                                                               
can  move in  and  out only  for inflation  proofing  and to  pay                                                               
dividends.  She opined  that the  bill's proposal  to statutorily                                                               
change the  ERA is legally  sound. She questioned  how vulnerable                                                               
the  GF would  be  if the  ERA  was made  a part  of  it and  how                                                               
vulnerable it  would become because  of pulling in  royalties and                                                               
production  taxes,  etc.,  and then  paying  out  for  government                                                               
expenses.  She   noted  that  Senator  Wielechowski   shares  her                                                               
9:15:51 AM                                                                                                                    
COMMISSIONER  HOFFBECK  asked if  she  meant  "vulnerable to  the                                                               
SENATOR MCGUIRE answered yes.                                                                                                   
9:17:04 AM                                                                                                                    
CHAIR STOLTZE held SB 128 in committee.