Legislature(2001 - 2002)
04/23/2001 09:12 AM Senate FIN
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* first hearing in first committee of referral
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SENATE JOINT RESOLUTION NO. 24
Proposing amendments to the Constitution of the State of
Alaska relating to the budget reserve fund.
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Donley testified this resolution would reform the language
governing the Constitutional Budget Reserve fund (CBR) in the
Alaska Constitution (Article IX, Section 17). He stated that when
the constitutional amendment creating this section was initially
proposed, the intent was that the CBR could be accessed by a simple
majority vote of the legislature in years where the amount of
general fund spending was not higher then the previous year's
spending. However, in a series of rulings, he pointed out the court
"misinterpreted the meaning of the language of 'all funds
available' or 'unrestricted funds'". The resulting definition, he
said, requires a three-quarters vote every time the CBR is
accessed.
Co-Chair Donley opined, "This turned the intent of the amendment
effectively on its head" and transformed it from a vehicle to
restrain state spending into "a vehicle that actually promotes
increased state spending." He explained any group of legislators
constituting at least one-forth of either the House of
Representatives or the Senate could "force additional spending to
occur" by refusing to vote for the CBR draw until their budget
requests are included. He stated this reverses the original intent
of the constitutional amendment approved by the voters.
Co-Chair Donley informed this resolution clarifies the language in
the constitution to allow the provision to function as originally
intended. He detailed that in years of spending higher than in the
previous year, the three-quarters vote would be necessary to access
the CBR.
Co-Chair Donley noted the "sweep provision" is removed from the
constitution by this resolution. He defined the provision, saying
that without a specific three-quarters vote, non-general funds,
such as from the Marine Highway System and Aerospace development,
are used to repay the CBR for previous withdrawals. He stated that
this provision is "unpalatable" to those working in the state
government as well as most Alaskans, who would be "injured" from
reductions to the affected programs.
Co-Chair Donley summarized that the resolution corrects an
"erroneous court interpretation of amounts available for
appropriation language." He remarked this would help restrain the
current practice of a small group of legislators forcing increased
spending, resulting in a "more fiscally responsible system that
reasonably allows access" to the CBR in those years the legislature
"exercises fiscal discipline" and does not spend more than in the
previous year.
Co-Chair Kelly asked for clarification of how this resolution
addresses the sweep provision.
Co-Chair Donley answered the provision is removed from the
constitution thereby eliminating the necessity of a three-quarter
vote to prevent "the sweep."
Senator Austerman understood the current system requires a three-
quarter vote to draw from the CBR. He cited language deleted from
the constitution shown on page 2, lines 5 and 6 of the committee
substitute, "less than the amount appropriated for the previous
fiscal year, an appropriation may be made". He asked if the amount
were higher than the previous year, would the three-quarter vote
still be necessary.
Co-Chair Donley responded if the legislature adopts a budget that
spends more than the amount of general funds available for that
fiscal year, a three-quarters vote would be required in order to
withdraw the remaining amount from the CBR.
Senator Austerman asked for the section in the resolution that
addresses the three-quarter vote.
Co-Chair Donley referred to the existing language in the
constitution.
AT EASE 9:20 AM / 9:25 AM
Co-Chair Kelly understood the resolution allows the legislature to
draw from the CBR without a three-quarter vote if the general fund
spending is no more than that of the previous year. He continued
that if the spending were higher, a three-quarter vote would be
necessary. He explained funds could be withdrawn from the CBR,
without a three-quarter vote, to pay the difference between the
amount of general funds available and the total spending from the
previous year. He commented that this would eliminate "the dance
that we go through down here" to secure necessary votes for the CBR
draw.
Co-Chair Kelly opined the sweep provision is "probably the most
threatening" aspect of the CBR language currently in the
constitution.
Senator Olson spoke to concerns that in a few years, the CBR would
be exhausted. He asked how this resolution guarantees cost savings
or increases the longevity of the fund.
Co-Chair Donley noted the CBR had been expected to decline in the
past few years, but that it actually has grown to a projected $3
billion at the end of the current fiscal year. He agreed the fund
is still projected to decrease in the upcoming several years and
remarked this resolution would protect the CBR in multiple ways and
would "reverse the whole presumption of access to the CBR." He
reiterated the current system "forces more spending" and larger
withdrawals from the CBR because "certain elements in the
legislature" "blackmail" the majority until their spending items
are included in the budget. Under the proposed constitutional
amendment, he continued, this practice could only occur during
years of increased general fund spending. He read language from
page 2, lines 7 through 12 of the committee substitute to
demonstrate: "However, the amount transferred from the fund under
this subsection may not exceed the amount necessary, when added to
other funds available for appropriation, to provide for total
funding equal to the amount of appropriations made for the previous
fiscal year." He stated spending could "fill in the gap" from the
previous year but that a three-quarters vote would be required for
any additional spending. This, he stressed, would "hold down"
withdrawals from the CBR thus making the fund last longer.
Senator Wilken asked for clarification that the withdrawal from the
CBR would be automatic, provided the amount of spending was no
greater then in the previous year.
Co-Chair Donley specified a majority vote is required to pass the
budget and would serve as approval to withdraw funds from the CBR.
Senator Green expressed that she hoped this resolution would
provide an incentive to spend less.
Co-Chair Donley affirmed it would by preventing "a very small
number of legislators to force higher spending" than in the
previous year by "utilizing the courts' misinterpretation of the
original intent of the CBR language."
Co-Chair Kelly emphasized, "the beauty of it is that we are able to
fight over just the increases," which he said was the original
intent of the constitutional amendment.
Senator Green referred to page 2, lines 12 through 14 of the
committee substitute, "For purposes of applying this subsection,
amounts available for appropriation or appropriated from federal
funds, income of the permanent fund, or this budget reserve fund
may not be considered." She asked if this should include retained
earnings, such as from the Alaska Housing Finance Corporation or
the Alaska Development and Export Authority as exclusions. She
noted the court excluded these earnings in Hickle vs. Halford and
was concerned whether the court would reverse itself if the items
were left out of the resolution if it was adopted.
Co-Chair Kelly recalled that the matter of corporate receipts was
discussed in relationship to the spending limit during a previous
meeting. Because of this, he wanted to merge this resolution with
SJR 23, Constitutional Amendment: Appropriation Limit, but that
there were title restraints preventing this.
Co-Chair Donley responded the issue is addressed in language on
page 2 lines 14 and 15 of the committee substitute, "For the
purposes of this subsection, 'unrestricted general fund' shall be
defined by law." This he explained, "leaves it to the legislature
to, by statute, have the flexibility to define that question." He
reminded that the legislature had passed a law providing this
definition after the constitutional amendment was first adopted in
1990. He stated this law was consistent with the original intent of
the amendment however the court overturned it and "adopted their
own interpretation of the definition" of unrestricted general
funds.
Senator Hoffman posed a scenario of an initial appropriation that
is no greater than that of the previous year's spending until
supplemental funds are appropriated thus raising the total amount
above the limit. He asked if the supplemental budget would require
a three-quarter vote in this situation.
Co-Chair Donley surmised a three-quarter vote would be required to
access those CBR funds because the spending occurs within the same
fiscal year and exceeds that of the previous year. He noted if the
original budget were low enough to allow for a supplemental
appropriation, the three-quarter vote would not be required.
Co-Chair Kelly shared that he wished the resolution to continue.
Co-Chair Donley offered a motion to move SJR 24 from Committee with
a zero fiscal note from the Office of the Governor, Division of
Elections.
There was no objection and the bill MOVED from Committee.
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