Legislature(1993 - 1994)
02/23/1994 01:15 PM House JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
TAPE 94-28, SIDE A
Number 000
The House Judiciary Standing Committee was called to order
at 1:25 p.m. on February 23, 1994. A quorum was present.
CHAIRMAN PORTER announced that the committee would take up
HB 505 first. CHAIRMAN PORTER welcomed SHELBY STASNEY to
begin discussion of the bill.
HB 505 - APPROP: BUDGET RESERVE FUND TO GEN.FUND
CSHB 505(JUD): "An Act making appropriations to the
constitutional budget reserve fund established under art.
IX, sec. 17, Constitution of the State of Alaska; and
providing for an effective date."
Number 022
SHELBY STASNEY, Director, Office of Management & Budget
(OMB), Office of the Governor, thanked CHAIRMAN PORTER for
placing the bill on the committee's agenda so quickly and
expressed appreciation for the opportunity to explain the
bill and its reason for introduction. He stated:
"House Bill 505 was introduced by the Governor as a result
of the Superior Court decision and later the Supreme Court
decision that concluded that certain monies that were
received from informal conferences were deposited into the
General Fund erroneously and should have been deposited into
the Constitutional Budget Reserve Fund. The deposits, as
all of you know, were made under an Attorney General's
opinion, an opinion that was asked for in good faith and for
good reason. An Attorney General's opinion that concluded
to deposit the informal conference money into the
Constitutional Budget Reserve Fund would be beyond what was
envisioned by that constitutional amendment when it was
passed by the voters of the state. And, as I'm sure you
know, the Administration is bound by the Attorney General's
opinion as long as there is an Attorney General's opinion in
place. And so, pursuant to that opinion, we did deposit the
money into the General Fund. Later, the Superior Court, and
then later still, the Supreme Court, decided that the
Attorney General's opinion was incorrect and that the money
should have been deposited into the Constitutional Budget
Reserve Fund. The Superior Court directed that defendants,
who were the Administration, the Governor and the
Commissioner of Revenue, should deposit that money before
the end of this legislative session. And this bill is a
bill that attempts to do that.
"In connection with that lawsuit, there was also a request
for -- I'm not a lawyer, so I might use the wrong words --
an injunction that, in effect, demanded immediate repayment
of that money. There was a supplemental opinion issued by
the same Judge Reese [phon.] in answering that demand. In
that demand, and in the supplemental opinion, the judge said
a couple of things. One, that because this money, when it
was put into the Constitutional Budget Reserve Fund, it was
apparent and with full knowledge of the legislature, and
that the legislature also appropriated some of the funds
during their regular session, that it was clear that the
solution to this, the repayment of the money, was [inaudible
due to background noise - going?] to be a joint effort
between the Administration and the legislature. Also, he
said, in that same supplemental opinion, that it wasn't
clear to him that the Administration could unilaterally
transfer the money in, because of this same interface with
the legislature, knowledge of the legislature, and the
legislature having appropriated some of those funds. And
so, it's really out of those statements by the judge that we
felt it was necessary that we submit a bill, to make it
abundantly clear that the legislature was part of this
process along with the Administration. And part of the
reason for this -- we wrestled long and hard with this, and
many of the members of this committee know that we had
discussions with you and with your groups about what the
right solution to this problem was -- and the Governor
finally came to the conclusion that he wanted this problem
taken care of. He wanted the money redeposited in a manner
that would bring finality during this legislative session to
the fiscal -- not only the budget that we're going to work
on and pass in fiscal year l995, but also the fiscal year
1994 budget. And his Attorney General and others who work
with him have given him the opinion that the only way you
can have finality to this is by a 3/4 vote to, in effect,
approve the actions of the last legislature in utilizing
monies, some of which came out of the Constitutional Budget
Reserve.
"As a result of all these -- of the court decision, and of
these discussions -- the Administration introduced a bill
which is now HB 505. Fundamentally, what that bill does is
-the legislature appropriates money out of the General Fund
into the Constitutional Budget Reserve Fund. The amount of
money that's appropriated is $945 million plus interest.
$945 million plus interest is appropriated into the
Constitutional Budget Reserve Fund out of the General Fund.
This is generally the amount of money that had been
deposited in the wrong account through the end of last
calendar year, through December 31. In addition to that,
there will be interest which will have to be calculated.
Our latest calculation shows that brings the total amount
that's going to have to be paid in to about $978 million,
when the interest is added. That gets the money back into
the Constitutional Budget Reserve Fund. The difficulty is,
the amount of money that was appropriated by the last
legislature, plus the decline in our resources available
because of the decline in the price of oil between the time
of the last legislative session and now, it requires that
have all of that money left in the General Fund in order to
meet the expenditures that were appropriated in the last
legislative session, plus there would be a couple of hundred
million dollars more in addition to this that would be
required to just balance the l994 budget.
"So, while it has been suggested that the Administration
could just put that money into the Constitutional Budget
Reserve Fund and wait for a legislative appropriation
appropriating it back out, our concern is that it would not
be possible for state government to continue to operate if
the condition existed very long. So we wanted the
appropriate -- the transfer into the Fund and the transfer
out of the Fund -- to be in the same bill, so that, the term
I use is, there'll be no more than a `nanosecond' without
having that money in the General Fund, where it's really
needed to meet our obligations. Once the money, then, is
appropriated by the legislature into the Constitutional
Budget Reserve Fund, the next couple of sections appropriate
the money back out of the Constitutional Budget Reserve Fund
and into the General Fund.
"That's done in two sections. There are two parts of
section four. The first part appropriates the $416,600,000
out of the Constitutional Budget Reserve Fund and into the
General Fund. That's the amount of the misdeposited money
that was actually appropriated during the last legislative
session. The way that number was arrived at was merely a
calculation of how much money we have received through the
end of last legislative session on these kinds of
settlements, which was about $825 million. From that we
subtracted the amount of reserves we had in our spending
plan at the end of the last legislative session, the
difference then being the amount of the Constitutional
Budget Reserve Money that no longer existed because it had
been appropriated by the legislature. That's how the
$416,600,000... You can't point at any project and say,
`This is what we spent that money on.' It's just a
mathematical calculation. And the reason for this was to
make it clear to the legislature and to the public, frankly,
that this is the amount of the Constitutional Budget Reserve
Fund money that really was appropriated by the legislature
during the last session.
"Now, the next section, or subsection, transfers the rest of
the money, which is about $529 million, into the General
Fund. And that money needs to be transferred because of the
decline in oil prices. If it weren't for the decline in oil
prices, we would have been able to make it through the rest
of the year with just the $416 million which had actually
been appropriated by the last legislative session. But, the
decline in oil prices calculates out to about $600 million
less than we have available when you look at the price of
oil at the time the last legislative session ended and now.
"Now, when you go to section five, section five is the
section that tells us which subparagraph of the
Constitutional Budget Reserve Fund we'll use to transfer --
we're suggesting in this bill be used to transfer the money
out of the Constitutional Budget Reserve Fund back to the
General Fund. As you remember, when money is in the
Constitutional Budget Reserve Fund, there are two ways to
get it out. One way, subsection (c) of the Constitutional
Budget Reserve, or the constitutional amendment, says that
upon a 3/4 vote of both houses of the legislature, the money
can be utilized for any public purpose. Subsection (b) was
the subsection that talks about money being transferred out
of the Constitutional Budget Review Fund with a simple
majority if the amount available for appropriation in the
current year is less than the amount that was actually spent
in the prior year. That's, as you know, some terms that
need some defining. Anyway, subsection (b) is the
subsection that would say, `you can take it out with a 50%
majority.' Subsection (c) is the subsection that says, `you
need a 3/4 majority.' As we suggest in this bill, out of an
abundance of caution because of the Governor's desire to
have this thing done and behind us at the end of this
session, [inaudible due to background noise - we have used?]
subsection (c), which requires a 3/4 vote.
"We're very confident that if the money is taken out under
subsection (b) because of the disagreement over the term,
`available for appropriation,' that there would certainly be
a lawsuit, and we think the people of Alaska need to know
that the money that's been appropriated for capital
projects, and for other projects, for a lot of different
reasons, in the 1994 session and the 1995 session, the 1994
budget and the 1994 budget -- the people of Alaska need to
have some certainty that those funds are really going to be
forthcoming and it could have a significant impact on the
economy if there was still some question as to whether or
not those appropriations were valid. So, for that reason,
we think that we need to step out to the plate and take a
3/4 vote, and that's what this bill suggests."
Number 314
REP. JAMES asked, "This is presuming that our choice of
spending is the Constitutional Budget Reserve?"
MR. STASNEY replied that this was true.
REP. JAMES then inquired, "What happens if you don't get 3/4
vote? What's the alternative?"
Number 324
MR. STASNEY replied, "I'm sure that's something that the
legislature is going to have to determine and something that
we're going to have work [on] with you. The only other
alternative, in my opinion, is to transfer money -- I guess
we could break the law in order to do it, but I guess the
other alternative is to transfer money from the Earning's
Reserve of the Permanent Fund into the Constitutional Budget
Reserve Fund. If that were done, then this transfer in and
transfer out wouldn't be necessary. It's possible --
because all the money that's currently in the General Fund
is needed in the General Fund to meet the appropriations
that we made last year. So, that's the other option."
Number 332
REP. JAMES added, "I just have one follow-up, and that has
to do with HB 58 and the definition that we tried to give on
money available for appropriation. Are you saying that you
don't want a court decision as to what `available for
appropriation' means? Or don't -- do you think we should be
trying get a court determination of that, or are we willing
to just kind of go by the seat of our pants?"
Number 341
MR. STASNEY replied, "Well, in my opinion, we're going to
need a court determination. I think our solution is that we
don't want a court determination to be standing over, if you
will, this fix to what the court has asked us to do. I
don't think there's any question that HB 58 is going to
require a court determination. We believe that we'd like to
get l994 taken care of. We've already had one lawsuit over
1994, and we'd like to have the people of Alaska have some
finality and certainty, and we're concerned it may take some
time before we have this other court suit out of the way."
Number 353
CHAIRMAN PORTER said, "I have one or two, Shelby. As
addresses HB 58, is it a fair statement that the
Administration believes that that's a fair interpretation of
the constitutional amendment?"
Number 356
MR. STASNEY replied that this was so, but he wished for MR.
BALDWIN to address that question for the Administration
"because he's been following it and doing the testimony for
the Administration."
Number 360
JAMES BALDWIN of the Attorney General's Office introduced
himself to the committee. He stated, "We believe that the
interpretation set out in HB 58 is a fair interpretation and
in fact is consistent with how the voters were advised at
the time that they voted on the resolution that ultimately
became the constitutional amendment. I think, as MR.
STASNEY has testified, this is an area where we anticipate
will be challenged in court. It's an interpretation that,
just because of the high visibility of the subject matter,
will more than likely be litigated.
"Our intention of assisting the legislature in its efforts
to enact HB 58 has been to encourage the legislature to come
up with a good, common sense interpretation from the statute
that can be used as a tool to defend the appropriations that
are ultimately enacted for fiscal year 1994, 1995 and
thereafter. With that statute being enacted we have a
better chance of defending what the legislature does than if
it is not enacted, and I have so testified in the House
Finance Committee. There is a range of possible
interpretations that can be applied to the words of the
amendment. That's why people have referred to it as being
ambiguous, which means it is subject to more than one
interpretation. It's been our testimony that we believe a
court will give great weight to an interpretation embodied
in the statute that is proved by the legislature, since it
is the legislature that possesses the appropriation power.
I'm not sure if there's any one right answer, but I think
that a good, common sense answer, which I think is embodied
in HB 58, has a good chance of being upheld by a court of
law."
Number 405
REP. JAMES said, "I have a question that either one of you
could answer about some of the concerns that I have. We
have passed HB 58 out of the House, and it appears to me
that this flies in the face of HB 58 because this just
assumes that just to be safe we're going to get a 3/4 vote.
It seems to me likely that if we were going to implement HB
58, we ought to do everything else as it goes along with HB
58. And of course, we don't know exactly what those
decisions are. I believe the state -- the court order --
says that we need to have this done before the end of the
legislative session. So mightn't it not be prudent to get a
little further down the process to see whether there are
funds we might be able to make available or reductions that
we might be able to make that might alter these numbers and
make it fall right into the line of HB 58."
Number 423
MR. STASNEY stated, "We were concerned about that same
thing, too, REP. JAMES, and that's why in the findings we
made it clear that this wasn't an attempt to say that we
believe that that's the only way it could be done. To use
my own words, but it's in the findings, out of an abundance
of caution, we chose this route fully understanding that an
assembled majority may be the right way to go, in keeping
with the Governor's directive -- and I think rightfully so -
- that he wants to bring finality to this; this is the way
that our attorneys advised us we can have finality in the
l994 budget. Get it done, get it out of the way. We
certainly are willing to work with you and others, REP.
JAMES, regarding any potential reductions to the budget --
in addition, as I said before, to this amount out of the
Constitutional Budget Reserve Fund, is going to take another
couple of hundred million dollars to balance the 1994
budget. This certainly isn't the end of the equation, it's
just the beginning, to meet the court order."
Number 444
CHAIRMAN PORTER commented, "An observation: to get it on
the table, this lawsuit that is undoubtedly going to come,
is undoubtedly going to come from the minority members of
the House or the Senate, or both. I don't know if there's
any correlation between that and the fact that the minority
members of this committee are not here, but to that end, and
recognizing that finality certainly is the goal, I guess,
not rhetorically, is it appropriate to take this course
when, to me at least, there is a greater likelihood of a
failure to get a 3/4 vote for a whole myriad of reasons than
there is to prevail in the lawsuit that says HB 58 is an
appropriate interpretation. With that in mind, I would not
count on delaying the inevitable by taking this route."
Number 462
MR. STASNEY responded, "Obviously, there is that chance. We
kind of believed, as you stated earlier, that this is
getting it on the table. We've got a vehicle to talk about.
As I mentioned earlier, the judge indicated that it ought to
be a joint solution between the legislative and the
administrative branches, and we certainly expect to do that.
Whether or not this would delay or add fuel to the fire, I
guess is a judgment call. But in our judgment, we felt like
this got it on the table. We tried to put language in the
findings that would make it clear that we didn't believe
that this was the only solution."
Number 475
REP. JAMES said, "I think that the general public and a lot
of people that I've talked to think that when you've got a
3/4 vote for something, that you've really got something
everybody supports. And that probably is true. But how it
got there from here was the problem. I don't see a 3/4 vote
as a real panacea in this situation because it causes you
lots and lots of problems in other ways to be able to get
the 3/4 vote. From my perspective, I'd like to do this as
deliberately as possible and go through all of the
processes, if possible, of seeing what can be reduced, what
other monies might be available. And the general public is
also saying that (1) they don't want a paper transfer in and
out and (2) they don't want us to spend that money any more
than we have to. So I think that as a legislature we have a
responsibility to the people to at least review all of our
options and determine at least findings as to why the option
that we choose is the very best option that meets the needs
of the people."
Number 494
MR. STASNEY responded, "And we commit to work with you
toward that end, because we don't disagree with that."
REP. PHILLIPS called for the committee to move the bill and
then vote on the amendments.
CHAIRMAN PORTER noted a motion to move HB 505 had been
entertained and it was so moved by REP. GREEN.
REP. PHILLIPS proposed to move Amendment 1.
CHAIRMAN PORTER noted that Amendment 1 was being passed out
of committee and requested that REP. PHILLIPS discuss
Amendment 1.
REP. PHILLIPS said, "Amendment 1 does something very, very
simple. It meets all of the requirements established by the
court ruling. It is very clear. It clarifies the court
ruling. It meets the public demand that we aren't going to
do a paper shuffle. It satisfies the basic requirements
that are needed. It appropriates the money into the Budget
Reserve Fund from the General Fund and leaves it at that.
We will work through the rest of the issue as we can, and to
that point I will say that there will be an announcement
made tomorrow on the floor, under special orders, on the
budget plan for this coming year. The budget plan that
we're going to announce tomorrow will address the entire
issues of the sections that we are deleting. I would move
Amendment 1."
CHAIRMAN PORTER stated that Amendment 1 had been moved and
asked if there was any discussion.
Number 525
REP. JAMES commented that the Judiciary Committee generally
reviewed "the legalities of everything, and I think that the
proper place for that portion of this to be done would be in
the Finance Committee, which is the next committee of
referral."
Number 528
CHAIRMAN PORTER agreed that the review of the Judiciary
Committee is towards the issue of legality and
constitutionality. He said, "I know Daniella and I have
reviewed the bill from that aspect, and really find no
constitutional problems with the bill or for that matter
with the amendment, which would basically take half of the
action of the bill and leave the option of the other half to
the Finance Committee where it's going next in any event, so
as to coincide with the plan."
Number 539
REP. KOTT affirmed that "what we have got here is probably a
good tool that we can use a little bit later down the road.
I would just call your attention to page 4. I'm not so sure
that this shouldn't also be eliminated. Line 19 -- this
also appropriates the same amount of money from the
Constitutional Budget Fund [as it does] to the General Fund.
Do we want to leave that in? Or, I think, perhaps, to
confirm with this particular amendment, that should also be
included as a friendly amendment."
Number 555
CHAIRMAN PORTER clarified, "We would then be adding to
Amendment 1 on page 4, line 19, delete `this...' through 21,
ending with `General Fund.' The last word of line 19, all
of line 20 and all of line 21 on page 4 would be deleted.
Friendly amendment?"
Number 565
REP. JAMES said, "I would consider that a friendly
amendment... I find more language on Amendment 4 that I
think probably needs to go." She cited line 31 on page 4
for reference. Further discussion of the language of the
amendment followed.
REP. PHILLIPS specified, "In the amendment, we're not
dealing with the issue of the appropriation or the 3/4 vote
or anything. What the amendment gets to is just taking the
money out of the General Fund and putting it into the Budget
Reserve Fund. Period. [This] does two things. It
satisfies the will of the court and satisfies the will of
the public."
REP. JAMES responded, "The problem that I have with this is
that it does go on to discuss how this act, how this is
going to take the money back out again, the procedure, how
it is going to be done."
REP. PHILLIPS expressed optimism that the Finance Committee
would resolve procedural questions for the reinstatement of
funds, saying, "When Finance gets to it, and deals with how
they are going to put the funds back, they will amend the
findings."
Number 595
CHAIRMAN PORTER said, "With that understanding, is there
further discussion of Amendment 1? Is there objection to
Amendment 1?" There being no objection, Amendment 1 was
adopted. The committee then considered a motion to pass HB
505 as amended out of the Judiciary Committee to the Finance
Committee with individual recommendations. There being no
further discussion or objection, HB 505 was moved out of
committee.
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