Representative Matt Claman's Alaska Matters
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Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain
March 31, 2017
In this issue:
• Comparing Permanent Fund Proposals
• HB 86: Repealing the State’s Authority
to Block Renewal of Occupational Licenses
Because of Student Loan Defaults
• Constituent Hours: Saturday 2:00-3:30
• Community Events

Dear Friends and Neighbors,

The budget continues to our top priority and we’re committed to hearing your thoughts on a responsible action plan for Alaska. As a friendly reminder, don’t forget that today is also the last day to file for your PFD.

 

Comparing Permanent Fund Proposals: House Bill 115 & Senate Bill 26

There are currently two different approaches to addressing Alaska’s financial challenges in the Senate and the House. The Senate has passed Senate Bill 26 to restructure the Permanent Fund and add a spending cap to the budget. Meanwhile, the House is working on a proposal, HB 115, which would also restructure the Permanent Fund and establish an income tax.

SB 26 restructures the Permanent Fund by removing the requirement to pay out a dividend. This legislation provides that the legislature may appropriate funds to pay a dividend, but is not required to do so. The change in state laws allows the legislature to use a portion of the Permanent Fund Earnings Reserve to pay for government services. This bill provides for the withdrawal from the Permanent Fund to the general fund. Specifically, the withdrawal is set at 5.25% of the market value of the Permanent Fund. The market value of the fund is the average value of the first five of the last six years – excluding the most recent year from the average. The concept referred to in the bill is a “POMV” - or Percent of Market Value- approach to helping solve Alaska’s financial challenges. The current average for the POMV calculation, which combines the Principal and the Earnings Reserve of the Permanent Fund, is $57 billion. SB 26 further specifies that 20% of the POMV withdrawal will be used to pay the Dividend and 80% of the withdrawal will go to the general fund to pay the costs of government and reduce the deficit. The actual withdrawal comes from the Permanent Fund Earnings Reserve- not from the Permanent Fund Principal. The Alaska Constitution, in Article IX, Section 15, does not allow withdrawals from the Permanent Fund Principal. After 3 years, the POMV draw decreases to 5.00%.

The following calculations reflect the current Permanent Fund average value of $57 billion
5.25% POMV Draw: $57,000,000,000 X 5.25% = $2,992,500,000
20% to pay Dividends: $2,992,500,000 X 20% = $598,500,000
80% to the general fund: $2,992,500,000 X 80% = $2,394,000,000

SB 26 also sets the amount of the Dividend at $1000 for the next three years.

A key feature of SB 26 is a cap on state undesignated general fund spending at $4.1 billion with provisions that exempt capital projects and debt service (paying loans and other indebted obligations) from the cap. This cap is on par with the current undesignated general fund budget of approximately $4.3 billion. Interestingly, the current budget is less than the $4.5 billion sustainable budget that UAA Institute for Social and Economic Research Professor Scott Goldsmith recommended in 2015. This $4.1 billion cap is a statutory cap, which means future legislatures are not obligated to maintain the cap because each year’s budget is technically its own law and a legislature may not set guidelines for a future legislature.

Representative Seaton’s Permanent Fund restructuring proposal in House Bill 115 also establishes a 5.25% POMV draw from the average market value of the Permanent Fund for the first five of the last six fiscal years. From the 5.25% draw, 33% would be used to pay Dividends and 67% will go to the general fund to pay the costs of government. Financial analysts estimated that the Dividend for the next three years will be $1,250 and it will increase to $1,400 by FY26.

HB 115 also includes an income tax to help close the budget deficit. The proposed tax would generate approximately $660M by taxing adjusted gross income for both residents and non-residents who earn income in Alaska. The state income tax would be deductible on federal tax returns for those who itemize their tax returns. The bill includes a per-person exemption of $4,000 and exempts the PFD from the state tax. The federal government will continue to tax the permanent fund. To have a better idea of your proposed tax liability, please see the charts, here.

Rep. Seaton, the House Finance Co-Chair, has voiced his concern that SB 26 is not a complete fiscal plan because it leaves an annual deficit of approximately $500,000,000 and lacks a means to collect new revenue. SB 26 does not require non-residents who work in Alaska to help address Alaska’s financial challenges.

Compared side by side, SB 26 establishes a $1,000 Dividend for three years, while HB 115 sets a $1,250 Dividend. SB 26 provides a spending cap, but leaves an annual budget deficit of nearly half a billion dollars and does not collect any new revenue. In contract, HB 115 collects approximately $660M in new revenue, but does not establish a spending cap.

Both Permanent Fund proposals will receive substantial analysis and review as the Legislature works for a responsible action plan for Alaska.

HB 86: Repealing the State’s Authority to Block Renewal of Occupational Licenses Because of Student Loan Defaults

On Wednesday, the Alaska House of Representatives passed legislation introduced by my office to repeal statutes that allow the State to block renewal of occupational licenses for student loan defaults.  The Alaska Commission on Postsecondary Education (ACPE) is responsible for handling cases of delinquency and default of student loans in Alaska. Under current law, a licensing agency may not renew a license issued to a borrower if the ACPE notifies the licensing agency that the borrower is in default on their student loan. The licenses include occupational licenses for nursing, teachers (K-12), correctional officers, and others. The ACPE acknowledged that blocking renewal of occupational licenses was not effective for collecting loans in default, and other methods to work out the loans are more effective.

Allowing the government to stop renewal of occupational licenses is an unfair threat to hold over the head of working Alaskans. Our office was pleased to introduce HB 86 because it supports people working in their chosen occupation and limits government overreach. The bill passed the House by a vote of 36-4 and will now go to the Alaska Senate for consideration.

Community Events

Mark your calendar for these upcoming events:

Anchorage Constituent Hours 

Saturday, April 1st, from 2:00 PM – 3:30 PM at the Jewel Lake Kaladi Brothers 
This weekend I will be in town and available to meet with constituents at the Kaladi Brothers near Jewel Lake and Raspberry: 6861 Jewel Lake Road.

Please feel free to come by to check in and share your suggestions and comments.

Community Councils

Sand Lake Community Council
When: Monday, April 3rd at 6:30
Where: Sand Lake Elementary School, School Library Room

Spenard Community Council
When: Wednesday, April 5th at 6:30pm
Where: Spenard Recreation Center

Turnagain Community Council
When: Thursday, April 6that 7:00 p.m.
Where:
 Lake Hood Elementary School

Public Health Fair

When: Wednesday, April 5th from 9:00am - noon
Where: 4th Floor of the Health department- 825 L Street
To celebrate National Public Health Week and the 80th anniversary of the Anchorage Department of Health and Human Services, DHHS will be hosting a free community public health fair. Free ervices offered include vision tests and blood pressure, cholesterol, glucose and hemoglobin screenings.

Anchorage Senior Citizens Advisory Commission Survey

The Senior Citizens Advisory Council is asking for your help to measure the issues and concerns of Anchorage seniors. Your input will help the council to focus its policy concerns for the future. Take the survey hereThe deadline for the survey is Thursday, April 21st at noon.

As always, please let us know if you have any question or concerns.

Sincerely,

signed: Matt Claman

    Rep. Matt Claman

    P.S. follow me on Facebook and Twitter

Contact Information

(907) 465-4919

Rep.Matt.Claman@akleg.gov

State Capitol Bldg. Rm 405
Juneau, Alaska 99801

www.repmattclaman.com

Contact the Governor

550 West 7th Avenue, Suite 1700
Anchorage, AK 99501
T (907) 269-7450 F (907) 269-7461
EMAIL: Governor Bill Walker

STATE of ALASKA
http://alaska.gov/

State Info (907) 269-5111

Serving the Anchorage Neighborhoods of
Sand Lake, Spenard, and Turnagain

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