CSHB 505(FIN)(BRF FLD)(EFD FLD): "An Act making appropriations to the constitutional budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska; and making an appropriation to the Department of Education for school construction debt retirement."
00CS FOR HOUSE BILL NO. 505(FIN)(brf fld)(efd fld) 01 "An Act making appropriations to the constitutional budget reserve fund 02 established under art. IX, sec. 17, Constitution of the State of Alaska; and 03 making an appropriation to the Department of Education for school construction 04 debt retirement." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. FINDINGS AND INTENT. (a) Following ratification by the voters, art. IX, 07 sec. 17, of the Constitution of the State of Alaska, took effect on January 2, 1991. This 08 amendment 09 (1) created a constitutional budget reserve fund; 10 (2) required that the proceeds of certain tax and mineral revenue disputes be 11 deposited into that fund; and 12 (3) established limitations on the legislature's ability to appropriate money 13 from that fund. 14 (b) That amendment dedicates to the constitutional budget reserve fund money from
01 mineral lease bonuses, rentals, royalties, royalty sale proceeds, federal mineral revenue sharing 02 payments or bonuses, and taxes imposed on mineral income, production, or property received 03 by the state after July 1, 1990," as a result of the termination, through settlement or otherwise, 04 of an administrative proceeding or of litigation in a State or federal court." 05 (c) Following the ratification of the budget reserve amendment, the Department of 06 Revenue requested that the attorney general determine whether the term "administrative 07 proceeding" in art. IX, sec. 17, of the Constitution of the State of Alaska, applied to informal 08 conferences and audits or only to formal hearings. On April 24, 1992, the attorney general 09 issued a formal opinion concluding that informal conferences do not constitute "administrative 10 proceedings" for the purposes of art. IX, sec. 17, of the Constitution of the State of Alaska. 11 The attorney general reasoned that sec. 17 applied to administrative actions that were similar 12 to litigation, such as the formal hearings held by the Department of Revenue. The opinion 13 concluded that informal conferences held for purposes of discussion and negotiation "fall 14 outside the ambit of the common understanding of litigation or legal contests." 15 (d) Since July 1, 1990, the state has engaged in several formal administrative hearings 16 and judicial proceedings to resolve oil and gas tax and mineral royalty disputes. Revenue 17 from the termination of these disputes has been deposited into the constitutional budget reserve 18 fund. During this period, the state also received oil and gas or mineral tax revenue from audit 19 assessments in the informal conference phase. In conformance with the April 24, 1992, 20 opinion of the attorney general, the Department of Revenue deposited in the general fund all 21 revenue resulting from settlement of informal tax conferences. 22 (e) The money in the general fund was available for appropriation by the legislature 23 and would be applied as necessary to meet any fiscal need. 24 (f) In passing the appropriation bills in 1993, the legislature authorized the expenditure 25 of anticipated revenue in the general fund, including amounts deposited in that fund as a result 26 of settlement of informal tax conferences. At the time the legislature passed those 27 appropriations for fiscal year 1994, revenue forecasts showed a surplus in the general fund. 28 However, due to the unanticipated decrease in state revenue, the state treasury has less money 29 than was anticipated at the time that the legislature made its appropriations in 1993. Because 30 of this shortfall, any anticipated surplus representing settlements of informal tax conferences, 31 and amounts received from informal tax conference settlements occurring after July 1, 1994,
01 must be expended to fully fund the capital and operation appropriations enacted in 1993. 02 (g) On July 12, 1993, the senate majority filed suit challenging the Department of 03 Revenue action of depositing into the general fund revenue resulting from informal tax 04 conferences. Halford v. Hickel, (3AN-93-6297 CI). On July 27, 1993, former Governor Steve 05 Cowper filed a similar complaint captioned Cowper v. Hickel (3AN-93-6848 CI). The cases 06 were consolidated. 07 (h) On November 19, 1993, the court issued its decision which concluded that art. IX, 08 sec. 17, of the state constitution applied to informal tax conferences. On November 29, 1993, 09 the state presented evidence that retroactive application of the court's ruling, requiring transfer 10 of over $940,000,000 from the general fund, would disrupt state finances and put at risk the 11 justifiable reliance interest of Alaskans and municipalities throughout the state. 12 (i) The superior court dismissed the state's request that the ruling be applied 13 prospectively only. The court found the evidence of hardship "very compelling," but noted 14 that the hardship could be relieved if the legislature reappropriated the money for fiscal year 15 1994. The court ordered the governor to fully restore the constitutional budget reserve fund 16 with interest and to comply with its decision by the end of the 1994 legislative session. The 17 superior court noted "it is not clear that the Governor could legally remove the improperly 18 placed funds from the general fund [to the Budget Reserve Fund] without an appropriation 19 authorizing it." 20 (j) Following appeal to the Alaska Supreme Court, the court determined that all 21 income that resulted from the settlement or other termination of informal administrative 22 proceedings involving certain taxes since July 1, 1990, should have been deposited into the 23 budget reserve fund created by art. IX, sec. 17, of the Constitution of the State of Alaska. 24 (k) The Alaska Supreme Court ordered the governor to restore the constitutional 25 budget reserve fund, with interest from the date of receipt by the state of money described in 26 (j) of this section. 27 (l) The amount required to restore the constitutional budget reserve fund consistent 28 with judicial interpretation is $945,636,778.27, plus interest that would have been earned upon 29 investment of this money, calculated from the date of receipt by the state. 30 (m) As of February 1994, there was not sufficient unappropriated or unrestricted 31 money in the general fund to allow the governor to unilaterally transfer the money needed to
01 fully restore the constitutional budget reserve fund. 02 (n) It is the intent of the legislature that the order of the Alaska Supreme Court be 03 complied with by an appropriation from the general fund to the constitutional budget reserve 04 fund, retroactive to July 1, 1993, of the principal and interest that should have been deposited 05 into that budget reserve fund. This appropriation will restore all money to the constitutional 06 budget reserve fund that should have been deposited there since July 1, 1990, under the 07 provisions of art. IX, sec. 17, of the Constitution of the State of Alaska. 08 * Sec. 2. The sum of $945,636,778.27 is appropriated from the general fund to the budget 09 reserve fund established by art. IX, sec. 17, Constitution of the State of Alaska, to comply 10 with the judgment in Hickel v. Halford (Supreme Court No. S-6124/6134) (Alaska Jan. 27, 11 1994). 12 * Sec. 3. An amount equal to the interest that would have been earned on money received 13 by the state after June 1, 1990, as a result of termination through settlement or otherwise of 14 an informal administrative proceeding involving taxes imposed on mineral income, production, 15 or property, and subsequently deposited in the general fund, is appropriated from the general 16 fund to the budget reserve fund established by art. IX, sec. 17, Constitution of the State of 17 Alaska, to comply with the judgment in Hickel v. Halford (Supreme Court No. S-6124/6134) 18 (Alaska Jan. 27, 1994). 19 * Sec. 4. The sum of $103,345,252 is appropriated from the Alaska debt retirement fund 20 (AS 37.15.011) to the Department of Education for state aid for costs of school construction 21 under AS 14.11.100. 22 * Sec. 5. Sections 1 - 3 of this Act are retroactive to July 1, 1993.