House Finance, 4/28/26, 9am

[FOREIGN LANGUAGE] Okay, I'll call this meeting of the House Finance Committee to order. And let the record reflect that time is currently 9:07 AM on Tuesday, April 28th, 2026. And present today we have Representative Allard, Representative Stapp, Representative Moore, Representative Bynum, Representative Co-Chair Schraggi, Representative Co-Chair Josephson, Representative Tomaszewski, Representative Hannan, and myself, Co-Chair Foster. And reminder to mute cell phones. And we have just one item on the agenda today.

That is Senate Joint Resolution 29. That is the constitutional amendment on education funding resolution. And I'd like to invite up Senator Hoffman's staff, Mr. Tim Gruesendorf. If you could please put yourself on the record, give us a brief recap of the bill.

And the plan today is to jump back into questions. Questions, make sure we have answered everyone's questions, and then we will set an amendment deadline. And just so folks know, we do have online two people available for questions, and that is Pam Leary, Director of the Treasury Division, as well as Carol Beecher, Director of Elections. And so with that, Mr. Gruessendorf, welcome.

Good morning, Co-Chair Foster and the two other co-chairs. Senate Finance Committee. For the record, my name is Tim Gruesnor, staff to Senator Hoffman and the Senate Finance Committee.

For a quick recap, SGR 29 does two things. It creates a fund in the Constitution, a dedicated fund in the Constitution for the purposes of education. And the second part of it says that if this bill passes by two-thirds both bodies of the legislature. It will go before the voters in the next election. So that's the quick recap.

If you have any other questions, I'd—. Okay, thank you. I do want to recognize that we also have with us Representative Jimmy as well as Representative Galvin. And so we are opening it up to —questions, if folks have any questions on the bill. Representative Sharagi.

Yeah, thank you. I think I have two questions really. The first is maybe pretty straightforward. The term public education, is that defined in Alaska statute, or how would this be looked at by either the courts or future legislatures? Can you speak to how public education is defined?

Through the chair, Representative Sharagi. In talking with Ledge Legal, they said it's loosely defined and I don't believe there is like a strong definition of exactly what that entails. It could entail some pre, you know, kindergarten stuff that we're doing now and it can go all the way up to the university. I mean, education is pretty broad and I don't think it has a strict definition. And that was— through the chair, it's something that I've kind of looked at since we had our last meeting, and I think it was the intent of the Senate when it was passed is to keep it more towards instructional, not major maintenance or construction, keep it more towards the K-12.

The other programs, K-12 sort of fits more with what the BSA was originally designed for. Now we have other programs that are out there, but I figure— they figured if the funds were available, it would be best put in the instructional K-12. Fits with the constitutional responsibilities of the state. And the other programs, as money allows, it's sort of an nice to have them. It's, it's good for the kids, but when it comes right down to the bottom line of education and the kids, I think the K-12 was the original intent.

Okay, and follow up on that first question. Follow up? Yeah, thank you, Commissioner Foster. So, uh, in the intent of the, uh, sponsors is that it'd be geared towards programmatic spending and core instruction like K-12, maybe, maybe pre-K, but really with a focus on K-12. Is that right?

Mr. Chair, Representative Sharkey, correct. And as the bill reads right now, it does not say that. That's something that can be worked with in this committee to be determined. The one thing I have to— at one point when I was talking with Ledge Finance, I said, well, let's just say all this stuff should be determined by the legislature.

And how would that look. And I got a kind of a quick look at what that would look like. And I also got that all— that famous follow-up letter that says this might stretch the ability of getting something in just via a vote of the people under the Constitution. It might require a convention. So there is a fine line of how much you want to actually put into the bill and how much you want the Constitution to read as it exists now.

For instance, it's just understood that it's a majority vote to appropriate. The Constitution has a definition for appropriation and what that is and what it would take. If we try to define too many of these things just via legislation, legislative will, you start expanding and it starts running into that problem where someone could come and say, I think this is a little too big to be just a not need a constitutional convention. Okay, thank you for that. And a second question, if I may.

Representative Sharkey. Yeah, my second question is another kind of policy question for the sponsors. Is there a reason that the wording in this is that we may create an education fund instead of there will be an education fund? I went back and I believe when we created the permanent fund, for example, it was a there shall be a permanent fund. It was affirmative, we will create this fund.

Whereas this is an optional may. I may be just fine with this wording, but could you maybe give us some insight as to why this approach was taken? Through the Chair, Representative Sharagi, I would probably defer to Ledge Legal on that. I believe Mary Marks talked about why she put "may" in there. Because of the way the other bills that have been drafted, the permanent fund was a little different, but that would probably be a better question for her.

Okay, thank you. Okay, in the lineup I've got Representative Allard, Hannon, I believe Bynum.

Oh, I was just gonna— and okay, I'll put you in the queue. And Galvin. Representative Allard. Thank you. So, um, I'm going to follow up with what my colleague said from Anchorage, and it is line 12B.

It says money in the education fund may be appropriated only for public education through the co-chair. To you. Sorry about that. Mr. Gruessendorf. It does say may, so it makes me wonder how wide that window is, because it said may be appropriate only for public education, which then would lead me to believe it could be used for pre-K and other things.

So it's funny because the scariest to me bills are the ones that are just one page. So I'm just curious So you don't have a legal memo at this time in regards to this bill at all? Okay, I'll get one. Okay. And I'll share with the committee.

All right. Thank you. Okay. Next up, I'll get Representative Hannan. Thank you, Co-Chair Foster.

Mr. Gruessendorf, in researching the background for this bill, I'm sure that there was time to reflect on back in the day when there was an education— I guess I'm going to call it a head tax— back when we were first working, and I think it went away in '80 or '81. Do you know, was that money allocated into a separate fund or was that just deposited into the general fund at the time of collection? Mr. Gruzenberg. Through the Chair, Representative Hannon, I believe it went right to the general fund, but I would have— I have to go research that.

I don't— I am not sure, but I think the Senate when they were dealing with this bill. In this bill that talks about funds that can be appropriated into this, I— after conversations with, uh, in our last meeting with Representative Galvin talking about other places and other funds that could go into this, it probably should be a little broader on areas that— of areas of funds that could be put into this. Okay. That was my only question this morning. Thank you.

Representative— I've got Representative Bynum, Galvin, and Stepp. Representative Bynum. Thank you, Co-Chair Foster. Through the Chair, Representative Schrag kind of hit on this a little bit talking about the definition of public education. I know that our Constitution currently already defines the state maintaining a system of education.

And I believe that when we look— when that's been looked at, that it says public education system is the way that it's been kind of defined. And then it goes into what that is, and basically meaning that it's public. And then we talk about not being directly benefited for religious or private educational institutions. I guess the question I have is, has it been explored on whether or not when the legislature creates the education fund, we actually create the fund that we are able to in the law when we create that to define specifically what we mean. So if it is pre-K, that we could include that, or if it's something after-school education programs or whatever it is that we want it to be, that we would be able to establish that through the law when we create that, or would that venture outside of the requirement that's being established in this constitutional amendment?

Mr. Kruzendorf. Chair, Representative Bynum. It definitely could be a little better defined in this bill without— I did, like I said earlier, I did talk to the ledge finance— or not ledge finance, ledge legal. About— I did a couple amendments just to see what it took to trigger that extra letter that says, oh, now you're getting a little close to this. And it could be defined as K-12 in this bill.

I think the other body is open to that if this body chooses to go that route. It could be just defined and decided by law, the legislature, to do a lot of these things, but when you do that, once again, at some point you run into that letter from legal that says you might be treading on grounds that could bring a lawsuit or bring something back at you. But defining it in the bill as K-12, that did not trigger that. Or, I mean, you could still do it by law, and I don't think that— that alone didn't trigger the lawsuit. Their letter response either.

Follow-up? Thank you, Co-Chair Foster. Through the Chair, yeah, I'm more— I'm comfortable with this being general in nature when we talk about education or public education and then the legislature when we go to create the fund to define that. My only concern would be is that if we did that, that whatever we define might run afoul to what this is requiring. And that's, that's basically what I was trying to ask is, has LegiLegal or any other governmental lawmaking or the Attorney General or anyone kind of looked at this to say that there would be guardrails on what the legislature could do after the fact?

And that was just my biggest concern. So I like the idea of the flexibility for the legislature later to decide what that fund would look like, but I also wouldn't want it to go out of the bounds of what the intention is. So I think putting it on legislative record now is an important part of that. Through the Chair, Representative Bynum. There are a lot of things.

If you just leave it up to the legislature to get decided by law, just put that word those words in there, that can open up a bunch of things. It could trigger where the legislature gets to decide what it— how many votes it takes to override a veto. I mean, the list of things was pretty expansive and I think then you're definitely treading on something that's bigger and more unusual than your average constitutional amendment going in there without a convention. So I think you'd have to kind of try to tighten that up, make sure when you what language you put in there, but— and it would be up to the legislature if you do just go that route. I'm sure our legal department would let you guys— would let the legislators know that you're starting to get into those grounds where you're really defining things that maybe should be left to the— how the Constitution is written and to decide.

[Speaker:BRAD] Yeah. Co-chair Foster, I just want to clarify for the record, my comment is specifically about the definition of public education and not veering into creating new constitutional law or circumventing the Constitution through making the language here less prescriptive. But thank you. Okay, Representative Gelvin.

Thank you, Co-Chair Foster. Through the Chair, I— in the language within the bill, What I'm seeing is Section 18 reads education fund. My question is, was there thought as to including the word public before education fund?

Through the Chair, Representative Galvin. That was not something we contemplated at the time. We did leave— I mean, there's a lot of room for interpretation, not only by the constitution itself, but for this body. We, you know, because time is always an issue when you go through the legislative process, there is in this bill as it's currently written for the House to— this body to decide, put some more side rails on it or put your fingerprints on the bill so you have some input to it also. And that's how we envisioned it going through the system.

Follow-up? Follow-up? Thank you. It seems that in the last 20 or so years, actually since— 12 years, we have seen public education funds move to other institutions, including tuition for private education. So if I want to make sure that the maker of this bill would be comfortable including the words public just to be very clear about where these funds would be going.

Mr. Gruzenorf. Through the chair, Representative Galvin. I believe the intent of the Senate when we put it in there was for public school education and I said, like I mentioned earlier, you could put K-12 in there, which may include other schools, but that part of the definition might want to be left to the legislature to decide by law. I would say that— I mean, you could— I think it would be safe to put in K-12 as in the bill, but it— —would probably be more appropriate to put—have that other stuff decided by law, by the legislature after the fact, if the fund is brought to the Constitution by the vote of the people.

I'm going to ask maybe in a different way, if I may. Representative Goldman. Thank you. Would the sponsor of the bill be comfortable inserting the word public before education fund. Mr. Gruzenhof.

Through the Chair, Representative Gelman, I cannot speak for the Senate Finance Committee because it is a Senate Finance bill. My boss would probably be comfortable with that because I had a conversation with him, but he is one of 7 members of the Finance Committee, so I respectfully— —no worries. Thank you very much. Okay, Representative Stapp. Yeah, thank you, Co-Chair Foster, through the chair, Mr. Gustafson.

Thank you for being here. So I kind of went and looked back. You know, the question that I had was, we had a constitutional convention in Alaska in 1955-56. I would say the framers of the Constitution were very pro-education advocates. And the real question is, why did they decide not to include a dedicated fund for education when they drafted the state's constitution when we had one basically in territorial times.

And they're pretty explicit about how they wanted to put an obligation for education in the constitution, but they did not want to put a dedicated funding source because they did not want to trample on legislative appropriation, have issues with separations of powers, and they were concerned about governance structure in the event that you did that. The arguments they make were to preserve legislative flexibility. So I'm curious if the Senate Finance Committee has a thought on that, on those positions when they drafted this constitutional amendment. Because like I said, the framers of the Constitution were pretty clear that they did not want dedicated funds in the Constitution. Through the Chair.

Mr. Gruessendorf. Through the Chair, Representative Stapp. The Senate did contemplate that. Listening to the senators speak on the floor, they talked about how legislators go to their constituents, support education, talk about education. It always seems to be an issue that we deal with at the end of sessions these days.

There's two things, there's two things that we end up with, and it's been pretty consistent the last 10 years. We have the dividend and how much we're going to fund education for for the dividends in the Constitution.

But, well, the dividend is not the amount of the dividend, but it is something that we discuss an awful lot in the session, as is education. And we would like to see, you know, if the people of the state of Alaska will vote on it and let them tell the legislature if they I believe that education is indeed something that should rise to the top and be— have a dedicated fund for the funding of education. And if the people may choose not to, and then the legislature will know that maybe it's not— it doesn't rise to that level, but the thought was let the people decide. And then we know when people talk about education as our number one priority, well, of my constituents, we will know. The answer will be there on an election, and that will tell every— the whole state will let everyone know where we put education in the line of things that the state is responsible for.

Follow-up, Mr. Co-Chair? Follow-up, Representative Stepp? Yeah, thank you, Co-Chair Foster, through the Chair, Mr. Gussendorf. Yeah, so you kind of hit on my next issue. You talked about one of the things that always gets to the end of session, it's covered in this bill, but the other thing is not.

I don't know if the Senate Finance Committee has any plans to ask the voters if they want to put the PFD in the Constitution. Because I think that if the voters had that option, they probably would. Which leads me to kind of the underlying point, which is why the framers of the Constitution were pretty wary about putting dedicated funds into constitutional obligation. Because if you read the minutes of the convention, they anticipated that once you started putting in funds in the Constitution, there would be no limit on things that you would want to put obligations for constitutional limits. But I'm curious about If you were to do this, what is the governance structure that would regulate this endowment— or excuse me, this education fund?

As I assume if we're going to treat it as an investment fund, it would have some sort of governance structure. It's not defined in the bill. Is that something that you're looking to define into statute later, or is that something that the Senate Finance Committee has some sort of thought process on governance structure of the fund through the chair? Mr. Gruzenorf. Chair, Representative Stepp.

I believe it through law. It would be future legislatures to decide on how they would want that structure to, you know, how they would want the funds to be, not exactly how they'd be invested, but through revenue. Of course you would want it to be used, be able to be liquidated be able to take, draw funds from it fairly quickly. Don't want to invest it in long-term investments that you cannot, if the legislature chose to spend the money on something, you need it to be able to be liquid so you can get at it for the fiscal year. But that would probably be something that will be decided, established by law by the future legislature.

One more follow-up, Mr. Kocher. Hello. Yeah, thank you, Chair Foster, the Chair, and Mr. Gussendorf. What is the thought as far as— you kind of brought this up last hearing— as far as where the money that's deposited is going to come from? So I would imagine if the voters were to approve this, could the state levy direct taxation on individuals or things for this purpose of depositing money in this fund, if it would be constitutionalized?

Would that effectively circumvent that as well through the Chair? Mr. Gruzenhof. Chair, Representative Stepp. I think I would leave that question for Marie Marks. But, you know, I did have her, like I said, draft a few ideas for— just because I wanted to see what they'd look like for amendments and different type of fund.

And I think it would be the intent that we keep the different funds and different ways to to capitalize the fund, you know, as broad as possible. I don't know what it— I don't know what that exactly would look like, but as much funding that the legislature decides it wants to direct that way, we want them to have the ability to do that. And is Maria online, Co-Chair? No, nobody from Leg Legal is online. I'll just do one last follow-up then.

Mr. Repsensdahl. Yeah, thank you, Chair Foster, through the Chair.

So I guess I would say if you can do direct taxation, is there a target fund capitalization for this before you would make appropriations? Because I'm curious what happens to the existing— there's an existing public trust fund for education. What happens to that fund? Could it be moved into this because it'd be constitutional, or is that separate still? Through the chair, Mr. Ruesendorf.

It would be separate because when we were originally working on this, I was trying to— I was like, well, we already have a fund in the Constitution, why can't we add on to that? And it was recommended to me from legal that that fund was established in pre-statehood and it already had side rails on it and it would not be advised for the legislature to come in and try to change that as it was put into the Constitution. And then we'd have to do something separate. So no, we couldn't grab that money. And it's a substantial amount in that account.

But no, it would continue to just roll out the interest or the 5% and actually actually supplant money that we put in the BSA. And I guess— sorry, last one. I'm bad at this. What stops the legislature from simply just appropriating money directly into the education endowment fund that exists already? Through the chair.

Mr. Gruessendorf.

Through the chair, Representative Stapp, when I talked to legal, it didn't sound like— it sounded like that would create a problem. You're talking about the trust fund still? Yeah. Yeah. They— the way it was set up and how it was originally capitalized, it just would create some problems.

And they didn't know if it was something that we could do, just put more money in there outside, because it was already defined when it was put in there on what money was to be in that account. Because you can see right now, In this bill, it talks about the different types of funds that can go into here. I don't think it— personally, I don't think it's broad enough as it's written right now. There should be other ways to put different types of money into this. But as far as the other one, it just doesn't allow for other types of capitalization to that fund other than what's already with other than what established it in the first place.

Okay, thanks. I've got, um, Representative Schraggy, Allard, and Bynum. Representative Schraggy. Uh, thank you, Co-Chair Foster. A couple of, uh, things.

Just returning to the public education discussion for a moment, uh, I just want to remind folks that public education is defined in the Constitution. I think where we're having discussion is whether or not we want So there was the question about can you use the money for private or religious schools, that's being litigated currently. I think there'll be some outcome on that in the near future and that'll help better define that. So I think that is already pretty well defined. I think the question is do you try to focus it on pre-K, K through 12, college, which all can be defined as public education today.

I personally am comfortable with the broad, I think, definition here, or lack thereof, and the broad possible uses of the fund.

So I think that's okay with me. I think what I am curious about is what would prevent the legislature from— during our last hearing, Mr. Grysendorf, you talked about how the Public Education Trust Fund can't really be touched. It's a pre-statehood fund. That's why it has its protected status. It kind of rolled in despite our prohibition on dedicated funds.

Would this constitutional amendment not allow us to make that a new constitutionally protected fund that doesn't rely on its pre-statehood existence for constitutional protection? And therefore we could further invest in that fund and have more control on how that fund is used? If you don't have the answer to that, maybe we'll get legal on later and can explore that further. But Could we not do that? Is that not one possible benefit of this amendment?

Through the chair, Representative Sharagi, that would probably be a question better asked of Ledge Legal. I, I can't answer that for you. Okay. And we are trying to get Ms. Marie Marks online. So.

Okay. Thank you. That's fine for now. Okay. I've got Representative Ellard.

Thank you. And through the co-chair. So I'm a little bit interested in this amendment that isn't specific to where or how the funds would come or where they would be used? Do we not have that pinpointed?

Mr. Gruessendorf. Through the chair, Representative Allen, no, we don't have that pinpointed other than for education. So you are saying put this forward to the voters through the co-chair, put this forward to the voters, and it's almost going to be used, in my opinion, as a poll to see where they stand. But there's actually no commitment to the voters saying, hey, if this passes, we have guaranteed funds through for education that's earmarked for education. So I'm just kind of— isn't that a false narrative to the voters?

Because there's no guarantee, it's just kind of a a little bit performative? Through the Chair, Representative Allard.

I don't believe that to be so. I think yes, the legislature can appropriate it, but I don't— but when we don't have funds to put into it, the funds aren't available. But as when funds become available for whatever reason, whether we have whether it's a good stock market year, whether somehow there's a windfall of money from something, oil, that that's a place that because the people of the state of Alaska and the legislature, when they go and talk to their constituents, they say education is their priority or one of their main priorities. If that's the case and there is a windfall, that's when they should be taking the money and putting into the fund so they know it's going to be used for the people's choice of making that a— choosing to vote to make it a dedicated fund. You're the co-chair.

Representative Valley. So do you believe there's a potential conflict with the existing fiscal structure in this?

Through the chair, Representative Ballard, I don't think I quite—. I don't understand what you're at for the— Well, I mean, we already have a method of funding our schools. Wouldn't you think this could be a conflict with the way we already fund our schools? Through the chair, Representative Ballard. No, I think it's a spot to— for the legislature to place money however they choose to.

Whenever it comes available to a place where it can only be used for one, for that purpose of education, rather than just going to general fund, because then it gets pulled, it can get pulled in a bunch of different directions then. I mean, yes, the legislature can choose to spend that, to spend that money on education, but that money will be set aside for that purpose only. Not, it won't be available for other state agencies or for whatever expansion of government or whatever you want to call that. Okay, through the co-chair, may I? So that would leave me background to maybe appropriated for funding school or for funding public education.

So this is kind of— there's no guarantee. So if we were to put this in front of the voters to vote on this, Some would say, oh good, we get guaranteed funding, but that's not really what this does. This actually would just open a constitutional door but not walk through it.

Through the chair, Representative Ballard. True. Okay. I mean, because there, there is no funding mechanism or no funds that are going to be dedicated to this right off the bat. But again, as, as legislators come in and there's windfalls that happen or just money that comes in and then at the end of the year you have money left over, you can dedicate it to education alone.

And that I think would help satisfy a lot of the education community. I mean, it gives a place to put money that can be used for one purpose only and for the purpose of education and not just be out for just not sitting in the general fund to be used for other purposes. So yes, the legislature can sit and do nothing. I mean, that, that, that's a possibility, but they can also pass legislation and for new revenues and set up a stream through that and through those new revenues that could potentially go straight into this fund. And when you talk about new revenues into the public If they knew that some of these new revenues that are being discussed go there, they would— they might be more inclined to be supportive of that, knowing that their number one priority is being, you know, is being addressed and can be addressed in the future.

Okay. Can I just do a follow-up? Representative Ellard. Last comment. Okay.

Thank you. So we have no funding mechanism that's specified, no dedicated funding precedent set up, and then we are looking at potential conflict with existing fiscal structure, and this is an avenue to open the constitutional door but not walk through it. So, so far I just see false hope, and then we could just later on decide where we want the money to come from, and everybody's supposed to be on board with it.

You don't have to answer. I'm sorry. It's a lot. Okay, thank you. Okay, uh, we do have Maureen Marks with Ledge Legal online.

I know that Representative Sharagi had a question for Ledge Legal. Was it Representative Bynum who had the other question for Ledge Legal? Okay, in, in the queue, um, oh, that was Representative Stapp, and you also. Okay, um, I think what we'll do is in the queue I had Representative Bynum, Sharagi, and Tomaszewski, and then For the folks that we had questions for, Marie Marks, it will be staff, and I think Representative Bynum and Schrag, you will probably ask your questions in the order in which I have the queue. So Representative Bynum.

Thank you, Co-Chair Foster. Yes, Ms. Marks, through the chair, there was this question that came up about public school trust fund and whether or not we could add money to that and then make that available. The trust fund is basically an endowment. It's set up as an endowment, and I'd like to get a formal response on whether or not we have the legal ability to add money to that fund and, and it's protected. That's my first question.

The second question that I'd like a response on is the idea of whether or not this current resolution would allow for the dedication of tax dollars to go into this fund. I believe that that response came from our last meeting, but I haven't— we don't have that in writing. I was hoping that we could get a formal response on that. So those are my two questions for now. And then I did look at in the bill on page 1, line 12 and 13, that they do define public education as the only expenditure authorization.

So I mean, I think that we could probably go up to line 6 and add public education fund, but I think that those express purposes within this define it as public education. So I'd also like clarification on, on those— that element as well. Ms. Marks, if you could put yourself on the record.

Yeah, for the record, this is Maureen Marks with Legislative Legal Services. Through the chair to Representative Bynum, I hear 3 questions, I think, so I'll just take them 1, 2, 3. The first is regarding, can the legislature add money to the existing public school trust fund? And the short answer to that is Likely no. It would greatly increase the risk that the legislature would lose the dedicated fund status.

Right now, that fund money in there was reconstituted money from land given to us by the federal government. It's that land that is protected, and specifically that, that amount of that money in there represents what was protected. It was not the fund itself. And so if the legislature adds additional money outside of that land value to the fund, there's a significant risk the legislature would lose the dedicated fund status of that fund in full. The second question was— or I'll pause there, I guess, Representative Bynum, and see if there's any further questions on that issue.

Senator Bynum.

The Thank you, Co-Chair Foster. Yes, as a follow-up to that first question, with this resolution passing, could we direct by law that that would then be a protected fund and then add money to it, I guess is the follow-up. But the second question that I had was whether or not this resolution, if passed into law, or I'm sorry, if passed by the voters, would create an ability for an obligation of directing tax dollars into this fund and that would be a protected tax as you would say instead of a tax that is just available for general appropriation separate from this resolution?

For the record, again, Marie Marks, Legislative Legal Services. Through the Chair, Representative Bynum, in answer to your first question, I think there is feel the risk that because it's a federal trust, really it's a federal trust, anything that we change in our Constitution risks losing either our protected status under— because of the federal trust or violating the federal trust principles. I think that I would have to do more analysis on that issue, and I'd be happy to do that and get back to you on that question. It's a really interesting question. My My first thought is that because it's a federal trust, the legislature is really limited in what it can do to change that, even through the Constitution.

So I'll go ahead and get back to you on that analysis. Regarding the dedication of money, the legislature in— cannot dedicate a funding source to the education fund as it is written now. If the legislature would like to dedicate a funding source then the SJR 29 would need to be amended to allow for that dedication of funds and source. Ms. Marks, if you could maybe get closer to the mic. I'm not sure if you're on a speakerphone.

Unfortunately, folks weren't able to hear the last statement you made. If you could repeat that.

Sure. Regarding dedication of money into the fund. As I understood Representative Bynum's question, he was asking whether the legislature could dedicate a stream of money or a funding source into the education fund. Am I understanding that question correctly? Uh, to the chair, Representative Bynum.

Uh, thank you, Co-Chair Foster. Yes, that's the question, and it's specifically related to the way that —this resolution is currently written? So basically it's a yes or no.

Ms. Marks? Chair, Representative Bynum, as currently drafted, the answer is no. It would have to be amended to expressly allow the dedication of a specific stream of revenue into the fund. Great. Follow-up?

Representative Bynum. So if that were the case, would we run into any potential issues of if this were amended to allow that to happen, would that potentially create other issues of trying to create dedicated funding streams in general?

Yeah. [Speaker] Again, for the record, remarks. Legislative Legal Services. Through the Chair, Representative Bynum, if the change is made in the Constitution, there would be no constitutional issue because the Constitution would explicitly allow the dedication of revenue. There is an issue about whether this would be a quantitative change or qualitative change, not quantitative.

If the changes are minimal in the resolution, there's an issue about whether the type of change has become so sweeping that it would require a constitutional convention. In my opinion, just making this small change probably would not rise to the level of meeting a constitutional convention. I think just adding in that proceeds of a tax or other fee or revenue could be dedicated to the fund would probably be fine under that. Alaska Supreme Court states that under that analysis there. We have only one court case, unfortunately, addressing, you know, where is that line between needing a constitutional convention and whether the people can amend the Constitution by a vote through just a simple amendment.

I think it would probably be okay if the change would be to just explicitly allow the legislature to establish by law the stream of revenue to be dedicated into the fund.

Thank you. Okay, and oh, Representative Bynum. And then my third part of that was specifically addressing the line 6 to line 12 and 13, whether or not the Section B is sufficient to define this as public education.

As Mark's—. For the record, yeah, Mary Marks, Legislative Legal Services. Uh, through the chair, Representative Bynum, I, I think it's implied. Again, there's no harm in making it explicit and putting public before the word education in each place in the resolution, and I'm happy to make that simple fix if it's the will of the committee. Thank you.

Thank you. Okay, in line I've got Representative Sharagi, Tomaszewski, Stepp, Galvin, and Josephson. Representative Sharagi.

They want to pass for right now. Okay, Representative Tomaszewski. Thank you, co-chair. Thank you for being here. For alleged legal firm, Ms.

Marks, who wrote this resolution? Isn't there generally a name associated, alleged legal name, under the work order? I just, I don't have one on mine.

Ms. Marks. For the record, Bree Marks, Legislative Legal Services.

Through the Chair, I don't know if final versions— this is more of a procedural question. I'd probably defer to Megan Wallace in our office. My guess is final versions of bills or resolutions omit drafting names at the top. Work drafts do, is my understanding. But again, I'd probably have you follow up with Megan Wallace in our office just to confirm.

Okay, thank you. Uh, follow-up, Representative Tom Schaffer. Mr. Grisadorf, um, so when Representative's staff asked about the funding and, and you— what money would be in this fund, you kind of talked about liquid assets, something that's easily, easily liquidated and used. And yet in the resolution itself, it says the fund consists of land transferred. I would think that lands transferred into this fund would be about as non-liquid as, as we could probably think about as far as funding sources.

So I'm kind of confused on that, but my question is going to be in regards to the current BSA, would the funding used from this fund be on top of or in replace of the current BSA that we have in statute now? Mr. Gruzenorf. Through the Chair, Representative Tomaszewski. I believe, and Ms. Marks can correct me if I'm wrong on how that would flow, it could potentially be to supplant some general funds just like the trust fund does. The trust fund money shows up there first and the BSA general fund comes in afterwards.

Whereas the money that flows in from the— the bill where, you know, the Senator Bishop bill that did the raffle, that money is on top of the BSA. It doesn't supplant. So there's two different sources that actually, besides general funds, that go into that, and one supplants general funds, another one is on top of. So I would believe that this money could be either one. As decided by the legislature.

Okay, so it could be on top of it or it could be replacement. We, we don't know. It's up to the legislature to make that determination at some point. When I see resolutions like this and this is, you know, this is a big policy change. This is, this is a big, big deal right here.

Usually there's an endgame. Thought out. And right now I haven't really heard of what the endgame is or how we're gonna fund this. I know you've talked about, you know, in the future windfalls and that sort of thing, that funding this particular fund, but can you give us a little more specific as what ideas have been discussed on how to actually fund this into the future? Besides just, well, we might make a little extra money.

Are we talking about sweeping— sweeps into this fund? Are we talking about taxation into this fund? Give us a little more on that so the public can kind of delve into that. Through the Chair, Representative Tomaszewski.

I would think that that could be a discussion, I mean, for future legislature on how it gets funded, but you have to start somewhere. I mean, when I started working for Senator Hoffman, PCE only had $20 million in the fund. And over the years, they were able to put more and more money in there, and then there was a $400 million deposit. Then the stock market took off and it made another $178 million, In 2015, that PCE fund now actually funds the whole PCE program. And you just have to start somewhere.

And this is the start. I don't expect this legislature or the next one to be able to fill the fund up adequately to do— to fund all of public education, but it can slowly over time be that fund for the state. And it's not an endowment right now, but maybe someday it will. But to spin off, have a 4.5% draw fund of— what is education? $1.2 Billion or $2 billion?

That's gonna take a long time to make the fund that big, but you have to start somewhere, and this is envisioned as the start. Follow-up, Representative Tomaszewski. So with the— you just mentioned a 4.5 or 4, 4.5% draw, but there's nothing in this resolution that says we can't just spend it all. How do we— how do we stop future legislators? Or, you know, say we— say we did— say we started this 10 years ago and now there's $200 million in there, what stops the next legislature from just wiping it out completely for one special project or another?

Through the chair, Representative Tomaszewski, nothing's stopping the legislature. They have the ability to appropriate, and that is this body's job to do. And if they— if the majority determines they need they need it for educational purposes for that year, that would be— they could draw the fund all the way down to zero and start over. [Speaker:ED] Okay, and just a comment. So it sounds like the endgame is having a fund that will take care of public education, fund public education, but I don't think this does it in the fact that no matter how much we save and how much we put in there, it can just be categorically spent at the whim of any one particular legislature.

To the Chair, Representative Thomas Schaefki. That is correct. I think the hope is that we have more good times ahead of us than bad. And when during the good times you put money away and save it, and hopefully future legislatures legislatures understand what it takes to be disciplined and do that and keep putting money into it as long as they possibly can and withdraw as little as they possibly can when the general funds are there to put into the BSA.

Thank you. Okay, we're getting close to the end of our time here. I do have in line Representative Stepp. Galvin, Josephson, and Bynum. We will go a few more minutes and then if there are more questions, then we will move this— the remainder of this to this afternoon's meeting.

So with that, I have got Robson of staff. Yeah, thank you, Chair Foster. Through the Chair to Ms. Marks, I am just going to have some kind of technical questions on the language. So first one is going to be— so on line 10 of the bill, Section 7 of this article may not— does not apply to land transferred or money appropriate to the fund or earned income from the fund. I assume that is amending— that is referencing the dedicated funds clause, Article 9 of the Constitution, Section 7.

You had mentioned previously that it would probably be fine if we were to change that to allow for dedication of funds. Given that it's in the same section, how would we not be opening up the state for the ability to establish dedicated funds across the board if we were to amend that section that it references in Section 7. Through the Chair, Ms. Marks.

Yeah, for the record again, I'm Mary Marks with Legislative Legal Services. Through the Chair, Representative Stopp, it's a good question. We have precisely one Alaska Supreme Court case giving guidance on the line between where a constitutional convention is needed and when the voters can amend the Constitution through the simple amendment. There have been amendments to the Constitution through simple amendment establishing funds. For example, the people established the Constitutional Budget Reserve Fund in Article IX, Section 17 of the Alaska Constitution through an amendment.

However, that was never challenged. Um, and so I guess in answer to your question, I would say it has been done before, it hasn't been challenged. The fewer changes you make to the Constitution and the simpler the changes, the more likely, if it's challenged, a court would find that it could be correctly amended. It would be legal to amend it through the amendment process. It has been done before, but you're right, we don't know unless someone challenges the establishment of a fund and providing an exception to the dedicated clause provision with that dedication of the fund.

Yeah, follow-up, Mr. Kuchar. Uh, Representative Stout. Yeah, thank you, Chair Foster. So the, uh, through the chair, Ms. Markes. So the other kind of issue in the language here is this line.

It's actually relevant to Article IX, Section 17 as well. It says the fund— education fund shall be invested as to yield competitive market rates to the fund. So the budget reserve fund says basically the same thing, shall be invested as to yield competitive market rates to the fund. But the constitutional budget reserve fund doesn't really yield competitive market rates. So what do we actually mean?

Like, if I look at the investment returns on the CBR, they're abysmal and far below competitive market rates. So what do we— what do we mean by that when we put that in here? Through the Chair, Representative— or Ms. Marks.

Yeah, again, for the record, Bree Marks, Legislative Legal Services. Through the Chair to Representative Thopp, that would be, I guess, a question either for Legislative Finance or the sponsor of the bill. Since the way a bill is drafted, the language used is really a policy call, and I would turn to them for their intent with that. Let me ask in a different way, follow Mr. Korchier. All right, let's say I go sue Revenue because they are not getting market rates for the CBR.

I mean, is that something that I could do? Because it's— when I read that line, I mean, to me, I mean, I don't get market rates, I can tell you that, pretty simple. Now maybe you could make argument on the type of assets that invested in, but like if I establish a fund, I say in my constitution, my constitution said yield competitive market rates and it doesn't. I mean, do I have legal implications regarding that through the chair? Ms.

Marks. Again, for the record, Leigh Marks, Legislative Legal Services. Through the chair, Representative Stopp, my recommendation would be for the legislature to establish a record of the meaning of yield competitive market rates. I'm not familiar with any cases that have challenged that language or have interpreted that language. If challenged, then a court would likely, you know, interpret the legislature's intent regarding use of that yield competitive market rate.

Generally, courts interpret just the plain language. If there's no clear intent from the legislative record, they would just use the plain language and interpret it that way. And so I again would probably recommend that the legislature just put on the record its intent on how that money should be invested and what it means to say yield competitive market rates. Okay, um, follow-up, Mr. Kuchar. This is going to be Mr. Gussendorf.

So we've kind of established here that you can't— currently the bill doesn't allow us to do any type of targeted taxation for deposit funds. You said yourself that the investment here is basically similar how PCE was capitalized through kind of large windfall appropriations and building up the value of the fund over time. I guess the issue I have is the legislature already has a mechanism that kind of wasn't available to you folks at the time where it's just more efficient monetarily if we were to take windfalls and capitalize the permanent fund itself because the investment rate yields returns and then appropriate the money as you do currently. So I don't know why mechanically, and this is probably a Ledge Finance question, why would it not generate more value just to take windfalls, deposit them into the permanent fund itself, which would increase, enhance the overvalue of the fund since we're already appropriating money out of the fund anyways. I guess that's kind of my thought.

I don't see the value in setting up another fund that we have to capitalize when we already have a fund that is capitalized greatly that we already appropriate money from. So I know that in the context of the historic year, PCE was different because we weren't taking money out of the earnings— like, we didn't take a BOMV draw of the fund prior to the setting of PCE. So I'm just curious mechanically. You've been around a long time. Like, why wouldn't it be more efficient just to simply put windfalls into the permanent fund itself to take a greater appropriation out of the percent of market value?

Through the Chair. Mr. Gruzenberg. Through the Chair, Representative Stapp.

The difference I would say is that if you dumped it into— if you took the windfalls and put them into the permanent fund, yes, it may— the spinoff of that may be a little bit more. But there's nothing that said it's going to go to education. And education is probably the key thing in this whole bill is that this tells you, you know, will you yield as much? Because the permanent fund, they have it, they're very diverse and they can invest in longer-term revenues. But once the 4.5% or whatever that level is right now, draw is it goes to the general fund and not straight to the general fund, and it doesn't say that it's for educational purposes.

That's what this bill establishes. And I did talk with Marie Marks about, you know, what it would take to add a tax or something to this bill. And one of the suggestions she had on page 1, line 8, following legislature insert the proceeds of a state tax or license dedicated to the fund by law. That's the simple— that's a simple piece of language that can be put in there to allow that to happen. But I think education is the key word.

And yes, the money could be put someplace else, but then it would just— it would take every legislature every year to decide where exactly exactly that money goes where this says it will go to education. I fault Mr. Kocher. I think Kocher Foster, through the chair, to Mr. Gussendorf. So I guess if that was the intent of the Senate Finance Committee, why didn't they put in the bill, Mr. Gussendorf, to create a dedicated taxability? Um, well, through the chair, Representative Stepp, it was, it was a timing issue.

We had, we had talked a little bit about it, but we knew there was still a lot to this process to go and this committee here and they were open to having that discussion with this body. They didn't— the bill was not going to be written and finished in Senate Finance. It was a process and it wasn't specifically written in there, but I think that the— Senate Finance Committee and the Senate by voting for the bill.

It's open for this body to put in their two cents worth on how they would like to see it run, and the Senate will either concur or not, and we'll go to conference committee where we can figure it out. But it was just to leave it open so it wasn't an open and closed deal. We don't— just trying to I'll leave it open for the House to have an input on it too. Thanks. Okay, we have reached the end of our time.

In the queue when we come back this afternoon will be Representative Galvin, Josephson, Bynum. Also, Ms. Marks, are you available? We do have two bills at— during our 1:30 meeting, and it's first going to be the money transmission bill and then mail theft. We're hoping that maybe we can take this bill up again, resolution, at the end of that meeting. So I'm wondering if you're available from like, say, 3:00 to 3:30.

And if we do have time, are you available? Ms. Marks, Director of Remarks, Legislative Legal Services. Yes, I am available, Chair Foster. Great. Okay.

Thank you. Okay. So with that, our next meeting is scheduled for today at 1:30, and at that meeting we'll be hearing Senate Bill 86. That is the money transmission and online currency bill. And then after that will be House Bill 77, mail theft.

And then after that, time permitting, we'll come back to SGR 29. And so with that, if there is nothing else to come before the committee, we'll be adjourned at 10:09 a.m. Thank you.