Legislature(1993 - 1994)
02/09/1994 01:30 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 9, 1994
1:30 P.M.
TAPE HFC 94 - 28, Side 1, #000 - end.
TAPE HFC 94 - 28, Side 2, #000 - end.
TAPE HFC 94 - 29, Side 1, #000 - #547.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee meeting
to order at 1:30 P.M.
PRESENT
Co-Chair Larson Representative Hoffman
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Grussendorf Representative Therriault
Representative Foster
ALSO PRESENT
Representative Jeannette James; Representative Jim Nordlund;
Representative Cynthia Toohey; Representative Bettye Davis;
Renee Chatman, Staff to Representative Bettye Davis; James
L. Baldwin, Assistant Attorney General-General Civil
Section, Department of Law; Margo Knuth, Assistant Attorney
General-Criminal Division, Department of Law; Jay Hogan,
Staff to Representative Ron Larson; Rod Mourant, Deputy
Commissioner, Department of Revenue; Diane Schenker, Special
Assistant, Department of Corrections; Tamara Brandt Cook,
Director, Division of Legal Services, Legislative Affairs
Agency; Joseph Dimantio, (teleconference), Anchorage; Sandra
Ray, (teleconference), Anchorage; Lynda Adams,
(teleconference), Ketchikan; Cheri Davis, (teleconference),
Ketchikan.
SUMMARY
HB 58 An Act relating to the budget reserve fund
established under art. IX, sec. 17, Constitution
of the State of Alaska.
CS HB 58 (FIN) was reported out of Committee with
"no recommendation" and with zero fiscal notes by
the Department of Law and the Department of
Administration.
HB 61 An Act relating to the offense of operating a
1
motor vehicle, aircraft, or watercraft while
intoxicated; and providing for an effective date.
HB 61 was held in Committee for further
discussion.
HB 128 An Act relating to early acknowledgement of
paternity for the child of an unmarried mother.
CS HB 128 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Health and Social
Services and a fiscal impact note by the
Department of Health and Social Services.
HOUSE BILL 61
"An Act relating to the offense of operating a motor
vehicle, aircraft, or watercraft while intoxicated; and
providing for an effective date."
REPRESENTATIVE JIM NORDLUND explained that HB 61 would
reduce the legal definition of intoxication for the crime of
driving while intoxicated from .10% to .08% blood alcohol
content which would mean it would be illegal for a person to
be in control of a motor vehicle, aircraft, or watercraft
with a blood alcohol level of .08% or greater.
Five states have already lowered their legal definition of
intoxication to .08%. All of Canada has a .08% blood
alcohol threshold, and all European nations prohibit driving
with a .08% or lower blood alcohol level.
Scientific evidence has established that the risk of a
driver being involved in a serious of fatal crash increased
as the alcohol concentration in the body increased. Many
studies have shown that measurable impairment to operate a
motor vehicle begins in most drivers at or below .05% blood
alcohol level, and that all drivers are impaired at a blood
alcohol level of .08%.
Representative Nordlund explained that establishing the
allowable blood alcohol level at .08% would increase the
probability of obtaining convictions for drunk driving.
Because the law will increase the certainty of conviction,
it would be more effective than current law to deter drunk
driving and to reduce the number of alcohol related crashes.
In addition to the inherent benefits of the bill, the
National Highway Traffic Safety Administration has notified
the State that Alaska currently receives $688,000 in federal
funds annually for Highway Safety Planning and may be
2
eligible for a 30% or more increase if House Bill 61 passes.
If similar legislation had passed last year, Alaska would
have already received the benefits of the increase.
Representative Nordlund provided the Committee with a copy
of two amendments. (Copies on file).
JOSEPH DIMANTIO, DIRECTOR, ALASKA COUNCIL FOR THE PREVENTION
OF DRUG AND ALCOHOL ABUSE, (TESTIFIED VIA TELECONFERENCE),
ANCHORAGE, spoke in support of the proposed legislation.
SANDRA RAY, EXECUTIVE DIRECTOR OF MOTHERS AGAINST DRUNK
DRIVING, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, spoke in
support of HB 61.
LYNDA ADAMS, ALASKANS FOR DRUG FREE USE, (TESTIFIED VIA
TELECONFERENCE), KETCHIKAN, spoke in support of the proposed
legislation.
CHERI DAVIS, ALASKANS FOR DRUG FREE USE, (TESTIFIED VIA
TELECONFERENCE), KETCHIKAN, spoke in support of HB 61.
DIANE SCHENKER, SPECIAL ASSISTANT, DEPARTMENT OF
CORRECTIONS, explained that the Department of Corrections
will revise last year's fiscal note to reflect the expense
incurred.
MARGO KNUTH, ASSISTANT ATTORNEY GENERAL-CRIMINAL DIVISION,
DEPARTMENT OF LAW, noted that the Department of Law strongly
supports the proposed legislation. She emphasized that
alcohol is Alaska's number one crime problem and the
legislation would help to address that concern.
Discussion followed regarding the accuracy of the
Intoximeter 3000 reading. The intoximeter is calibrated at
least every sixty days and has been proven to have a one
percent margin of error.
HB 61 was HELD in Committee for further discussion.
HOUSE BILL 128
"An Act relating to early acknowledgement of paternity
for the child of an unmarried mother."
RENEE CHATMAN, STAFF TO REPRESENTATIVE BETTYE DAVIS,
explained that the non-support of children has become a
national epidemic with one-fourth of children in the United
States now living with a single parent and an estimated 60
percent spending at least part of their childhood in a
single-parent home. In also most half of these cases, the
absent parent does not pay child support. Many of these
3
children are born out-of-wedlock and paternity is
established in only 30 percent of such cases. That
interprets into 70 percent of out-of-wedlock births where
there is no proof of paternity and no means to collect child
support.
She added, the proposed legislation would add language to
A.S. 18.50 and would require the State registrar to prepare
a paternity acknowledgment form to be used at the time of
birth. The form, signed by both parents, will list the
father's full name and social security number and would
require the signature of a notary public. The bill also
would lay out specific responsibilities of hospitals or
midwives to get the proper information on the form and to
distribute appropriate paternity materials from the
Department of Health and Social Services.
The legislation is an attempt to get acknowledgment at the
time when a father is particularly willing to develop a
relationship with the child, which would benefit both
parties. The child would have the security of knowing who
his/her father is and could gain access to support from
Social Security, survivor and veteran benefits and worker's
compensation. The child would also be entitled to the
father's inheritance, health insurance and would have access
to the family medical history.
Ms. Chatman provided the Committee with Amendment #1 & #2.
(Copies on file). The amendments were submitted at the
request of the Alaska Child Support Enforcement Division
(CSED) and would be necessary to bring CSED into compliance
with the recent paternity changes resulting from the changes
of the Reconciliation Act of 1993. If the amendments are
not added to the legislation, CSED could jeopardize losing
funds.
ROD MOURANT, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
noted that the Department strongly endorses the proposed
legislation. The establishment of paternity is the most
time consuming and expensive work done by the Department of
Revenue's Child Support Enforcement Division.
REPRESENTATIVE CYNTHIA TOOHEY spoke in support of the
proposed legislation.
Representative Parnell MOVED to adopt Amendment #1. There
being NO OBJECTION, it was adopted.
Co-Chair MacLean MOVED to adopt Amendment #2. There being
NO OBJECTIONS, it was adopted.
Representative Martin MOVED to report CS SS HB 128 (FIN) out
4
of Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CC SS HB 128 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Health and Social Services and a fiscal impact
note by the Department of Health and Social Services.
(Tape Change HFC 94-28, Side 2).
HOUSE BILL 58
"An Act relating to the budget reserve fund established
under art. IX, sec. 17, Constitution of the State of
Alaska."
Representative Brown provided the Committee with Amendment
Representative Hanley OBJECTED.
Representative Brown explained that Amendment #1 stated that
all money that may be withdrawn by the Legislature "shall"
be included, unless it has already been appropriated, and
can be withdrawn without further appropriation.
Representative Brown pointed out the problem of having
"quasi" dedicated funds or attempts to hoard off money from
the General Fund. She stated it would not be appropriate to
be excluding those funds. There is no legal basis for it.
Representative Brown stated that Ms. Cook with the
Legislative Affairs Agency, Legal Services, felt that the
proposed legislation was not in agreement with the
Constitution and would be an overreaching attempt.
Representative Brown stated that Amendment #1 addresses the
legal opinion and advice of that Agency.
Representative Brown thought Amendment #1 would be
consistent and would make sense for Alaska over the long
term and suggested that both the Majority and the Minority
partake in decisions made regarding the Budget Reserve.
Representative Hanley recommended clarifying the record to
describe the terms "or the money in funds or accounts
designated by laws as outside of the general fund" and what
they included.
Co-Chair Larson provided the Committee with copies of Alaska
Statutes Section 37.05.146 which defines program receipts
and non-general fund program receipts. [Attachment #1].
Representative Grussendorf referenced A.S. 37.05.146 and
pointed out that (J) lists the permanent fund. He added
5
that the Constitution and the articles dealing with the
Permanent Fund does implicate the interest earned could be
used for the operation and capital budget. He stressed that
language was in the Constitution and those funds were
available as a pool of money to be considered before
touching the Constitutional Budget Reserve.
Constitutionally, the Permanent Fund earnings are available
to the legislative body. He emphasized the corpus of that
account would not be available.
Co-Chair MacLean asked if the income of the Permanent Fund
could be used. Representative Grussendorf replied it could
be used. He pointed out that the Earnings Reserve Account
had been used to pay off "hold harmless" items in the
General Fund.
Representative Martin asked for the legal opinion of the
Legislative Affairs Agency. Representative Martin
understood that the Permanent Fund earnings were considered
part of the Permanent Fund Corporation and would be separate
from General Funds. He suggested that this information be
made clear to the people of the State.
Representative Brown disagreed with Representative Martin.
It was her understanding that in the lower Court decision,
the judge totally objected at looking at legislative intent
as having anything to do with the interpretation of
"administrative proceedings". He stated that "what the
legislative body thought was relevant was not". She
requested that Tam Cook testify regarding what is meant by
"money in funds or accounts designated by law as outside of
the general fund".
TAMARA BRANDT COOK, DIRECTOR, DIVISION OF LEGAL SERVICES,
LEGISLATIVE AFFAIRS, responded to Representative Hanley's
question regarding " money in funds or accounts designated
by law as outside of the General Fund". She pointed out
that the categories established in separate paragraphs (1),
(2), and (3) of the amendment apply to the repayment section
of the Constitutional provision, Subsection (D). That
section differs as it specifically provides that the
repayment is going to:
1. Come out of general fund money, and;
2. Will give the Legislature the power to implement
that section.
To that extent, it is different from the others, as the
Constitution states that the repayment money will come from
general fund revenues only. The Constitution does not
define that word.
6
The first category is an attempt to define it. It states
that money in funds or accounts which are designated by law
as outside the general fund are not used for repayment. Ms.
Cook said there is at least one significant account which is
currently outside the General Fund as a matter of law - the
Earnings Reserve Account which is in the Permanent Fund.
Essentially, what this says is, "When the Legislature
establishes an account, the Legislature can designate, for
purposes of this provision, whether it is inside or outside
the Permanent Fund", for purposes of the repayment.
Representative Hanley asked if that was the repayment
provision and not what is available for appropriation. Ms.
Cook pointed out that the language earlier in the bill
points out two important differences when looking at
appropriations from the Budget Reserve Fund. Ms. Cook noted
that the committee substitute does not include the language
that refers to the General Fund in applying the formula of
funds available for appropriation. It does exist in Section
(D) but does not exist in Section (B). In addition, she
added, there is not language which would allow the
Legislature to implement the section which would clearly
give the Legislature some discretion for interpreting the
language.
She felt that a court would be "literal minded" when it
attempts to ascertain which funds are available for
appropriation for purposes of applying the formula that lets
the Legislature appropriate from the Budget Reserve Fund to
meet shortfalls.
Ms. Cook stated that the test she used in drafting the
amendment is that one could argue to a court forcefully that
surely the amount available for appropriation was not
intended to include amounts already appropriated.
Logically, that must be so, because if not so, then the
entire structure of the Budget Reserve Fund unravels.
Section (B) then could not be applied.
If reappropriation would have to be considered, Ms. Cook
asked herself how many years back would it be necessary to
check for unaccounted balances. She said this would be "a
nightmare" and felt that even the most determined court
would be willing to agree that if the funds had already been
appropriated, they would not be available for appropriation
within the terms of this language. That is essentially the
test which Ms. Cook said she tried to establish at the first
part of Amendment #1.
Representative Hanley asked, for example, if the Railbelt
Energy Fund money had been appropriated by the Legislature
as specifically, not to be withdrawn from the State Treasury
7
without further appropriation, would it be available. Ms.
Cook explained the reason she used that formula. She said
the Legislature can appropriate funds to AHFC for grants,
however, only if appropriations are made for the grants each
year. She added, it would be difficult to stand in front of
the courts each year and state that the money would not be
available for appropriation. She said within the structure
of the fund which has been established, it is a requirement
that no expenditures can be made without an act of
appropriation as a legal matter. There are quite a few
funds like that. Most of AHFC funds do not have that type
of language.
Ms. Cook continued, stating that in fact the Railbelt Energy
Fund, is now depleted and it is no longer an issue.
However, when it was a large fund, it was established and
the Legislature stated specifically that money could not be
used from that fund without an act of appropriation. The
Legislature also stated as a result of the manner in which
it was established, that money within the fund would be used
for certain limited purposes. The Legislature kept control
over the fund by requiring additional appropriations.
She added that it will be difficult to convince a court of
law that such money is not available for appropriation when
the statute itself clearly states that it must be
appropriated "again" before it can be expended.
Representative Martin pointed out that he had introduced HB
35. He did not know that Representative Barnes had asked
Ms. Cook for an opinion pertaining to repayment.
Representative Martin understood that the earnings reserve
account was under the Permanent Fund Corporation and would
not normally be considered as part of the General Funds. He
asked if this was correct.
Ms. Cook stated that the Earnings Reserve Account money
could not be used for repayment, because the statute states
that the account is established in the Permanent Fund. The
Permanent Fund is established as a matter of constitutional
law and therefore a court would recognize that the Permanent
Fund is outside of the General Fund. Because the statutes
says the Earnings Reserve Account is in the Permanent Fund,
under the constitutional provision establishing the
Permanent Fund, there is a provision which states that the
income can go to the General Fund or as is designated by the
Legislature.
Ms. Cook said this is a situation where the Constitution has
given the Legislature the authority to identify where this
money will go. The Legislature has chosen to keep the money
within the Permanent Fund itself, separated for accounting
8
purposes. For this reason, Ms. Cook did not feel that the
money could be placed under the repayment requirement. She
believed that the funds would be subject to appropriation.
Representative Martin stated that the court can not tell the
government to reappropriate the money. He thought that only
the Legislature has the responsibility to make whole the
constitutional budget account. He asked if the Governor
could take the earnings reserve or any money that is
available and put it into the Constitutional Budget Reserve
Account. Ms. Cook thought that the Governor could not take
the Earnings Reserve Account, however, she believed that
the Governor could "correct an accounting error".
Ms. Cook stated that the court has said, "The Legislature
has placed money into the wrong account in the General Fund
and it should have gone somewhere else". As a matter of
correcting an accounting error, the Governor can order the
Department of Revenue to return money from the General Fund
to the Budget Reserve Fund.
Ms. Cook stated that under the terms of the Superior Court
order, which has not currently modified it on the Supreme
Court level, essentially, the Governor has been directed by
the end of the legislative session, to replace the money "as
an accounting matter". The obvious result is that the
Legislature ends up with a depleted General Fund. Ms. Cook
said the fact that the General Fund is substantially
decreased is a matter for the Legislature to deal with
through the appropriation process.
Representative Martin asked Ms. Cook what she believed was
meant by the people voting on the amendment of what was
available for use. He asked if the public was aware that
the earnings reserve must be used first, before touching the
Constitutional Budget Reserve.
Ms. Cook replied that she could not speculate on what the
public thought when they were in the position of voting on
this issue. She does believe that there is wide spread
misconception about the legal status of the Earnings Reserve
Fund. Very often in the press, it is referred to as
Permanent Fund money and seems to be "somewhat lumped in the
mind of the public as part of the constitutionally mandated
Permanent Fund". Ms. Cook believes that as a result of the
"popular press" some people do not make a distinction
between income of the Permanent Fund and principle of the
Permanent Fund. She is not sure that all members of the
public do not actually understand there is an Earnings
Reserve Account which is made up entirely of income. She
has seen in the press a great many allegations that the
State is "robbing" the Permanent Fund when there is an
9
appropriation from the Earnings Reserve Account. From a
legal point of view, that is not accurate because the State
can not rob the Permanent Fund principle and the earnings as
income has always been able to be appropriated.
Representative Martin asked if the earnings reserve would
need to be used before the Constitutional Budget Reserve is
touched. Ms. Cook believed that it would have to be used
because the Budget Reserve Fund as a created
constitutionally created entity clearly prevails over any
politically established fund that identifies money that does
not have constitutional protection. That money is more
vulnerable than the Budget Reserve Fund under the form which
requires the majority vote.
With regard to the requirement of a three quarter vote, Ms.
Cook stated, this vote is not based on the formula of funds
available for appropriation. To the extent that the
Legislature is trying to access to the Budget Reserve Fund
under Section 17(B), the issue is essentially, "What is the
court going to do with applying the formula and ascertaining
what funds are available for appropriation for the given
fiscal year". If there is a large pot of money in the
Earnings Reserve Account, Ms. Cook believes a court will
find that money is available for appropriation for purposes
of applying the formula.
Ms. Cook proceeded, that should the State have a billion
dollars and no money in the General Fund, there is no
requirement to use the Earnings Reserve Account per se.
Although, if it is unused, it may be part of the formula
which is used to ascertain whether the Legislature can
access money in the Budget Reserve Fund.
Representative Martin asked if the money is being divided
into two sections, funds that are left over and funds which
are going to be appropriated (re: dividends and inflation
proofing).
Ms. Cook responded that if money is appropriated from the
Earnings Reserve Account for the purposes of dividends, then
that accounts for a portion as it has been appropriated and
will no longer be in that account. If it is appropriated
for the current fiscal year, it surely was available for
appropriation during that fiscal year. According to Ms.
Cook, the formula requires the Legislature to look at what
was actually appropriated in the prior fiscal year to
ascertain the level that it may reach during the current
fiscal year. In the recent history of our State, there has
always been during a prior fiscal year, a substantial
appropriation for the Permanent Fund dividends. From that
point of view, since the prior fiscal year already had an
appropriation for permanent fund dividends then that should
10
increase the amount available for appropriation.
Representative Grussendorf commented on the Undistributed
Income Account and his original desire to call that account
the Budget Reserve Account. He eventually supported
earmarking the funds as the Earnings Reserve Account. He
supported Ms. Cook's argument. The Permanent Fund requires
that all the earnings from the corpus would be available to
the General Fund unless provided for by law. He emphasized
that has occurred particularly in three categories. He
believed the money would be available for appropriation and
questioned whether the earnings reserve funds would be
considered funds designated by law as outside the General
Fund. Representative Grussendorf stated that the Earnings
Reserve Account was available to go into the General Fund.
He asked Ms. Cook if it would be required to be used.
Ms. Cook stated it would, although it would not be required
to be used for repayment and should the situation at the end
of a fiscal year present the State with a repayment
requirement for a prior appropriation from the Budget
Reserve Account. The Earnings Reserve Account is an example
of a fund which would not need to be given up in repayment.
She added, that it would be counted and available for
appropriation but under Section (D) if there were a balance,
it would not be required to be transferred for repayment.
Co-Chair Larson asked if a deficit balance could be carried
into FY95. Ms. Cook questioned the provision on
"indebtedness". She stated that she was not certain whether
the Alaska Constitution requires a balanced budget. She
thought that a deficit could be carried forward although
eventually there could be a cash flow situation which would
preclude expenditures or delay them.
Co-Chair Larson asked for examples in each of the three
provisions specified in Amendment #1. Ms. Cook referenced
(1) and stated that a "fund which is designated by law as
outside of the General Fund" would be the Earnings Reserve
Account of the Permanent Fund. A fund which is designated
by the law as inside would be the Statutory Budget Reserve
Fund. With regard to most funds, the statute is either
silent on where it is located from an accounting point of
view or it specifically states that the fund is within the
General Fund.
Ms. Cook referenced (2), "money that by law, may be used
only for a specific purpose that precludes placing it in the
budget reserve fund" is an attempt by Counsel to address
true trust funds. The three groups apply only to the
repayment requirement. The requirement applies only to
11
General Fund money and also states that the Legislature has
the power to implement the requirement. She added that
there is a need to make as provision for trust funds. She
cited the example an individual who leaves money to the
State of Alaska to be used for a scholarship fund.
Scholarships would be the only thing the funds could be used
for. The terms of the trust would be violated if used to
repay the Budget Reserve Fund.
Ms. Cook referenced stating that if the Legislature had in
fact appropriated money in a position where it could be
expended, that money could be taken and used for repayment
even though the money is in the General Fund and is
obligated at a specific point in time. An example would be
the entire operating budget or the money which goes to
Alaska Housing Finance Corporation (AHFC).
Ms. Cook used the reference of AHFC because there has been a
lot of talk of use of AHFC funds. AHFC has nearly twenty
different established funds and accounts. Virtually all of
them, the language which establishes the accounts says,
"this money can be used by AHFC for mortgage loans as
security for bonds, for insurance reserves". There is also
language establishing the funds which allows AHFC to use the
money without the Legislature having to be involved. There
are a couple of accounts in AHFC, Senior Housing for example
where language says AHFC can not expend funds unless the
Legislature appropriates it on a project specific basis.
Representative Therriault asked where the Science and
Technology Fund would be located. Ms. Cook believed the
fund to be outside the general fund as far as the repayment
portion is concerned.
Representative Therriault asked if the Railbelt Energy Fund
money would have been available for appropriation. Ms. Cook
noted that she feared that a court could reach that result,
however, said that opinion is extremely speculative as a
court has not looked at this concern. She thought that the
Railbelt Fund would be more vulnerable than the Science and
Technology Fund which is an endowment with the intent that
it will generate income, the income will be used and the
money has been appropriated. Ms. Cook advised that the
Railbelt Energy Fund was essentially a "savings account"
created by statute which could not be "touched by anyone
without specific appropriation by the Legislature.
(Tape Change HFC 94-29, Side 1).
Representative Navarre referenced Representative Larson's
question regarding carrying a deficit forward. He stated
12
that as a matter of public policy, this would not be a good
idea. He noted his concern that then the budget would be
based on projections which would create an intentional or
unintentional deficit.
Co-Chair MacLean asked if funds established by statute would
be available for repayment with the proposed amendment. Ms.
Cook replied that the Legislature would need to designate
that the fund is outside the General Fund or outside of the
General Fund for purposes of this constitutional provisions.
She believed that the Legislature could do this, because
under Subsection (D) of the Constitutional provision it is
stated that the Legislature shall implement that section.
At this point, money has not been appropriated from the
Budget Reserve Fund. There is no Subsection (D) budget
repayment requirement. The repayment requirement will only
occur if there is money available at the end of the year in
the General Fund and has not been expended.
Co-Chair MacLean asked if there were funds which would be
scrutinized. Ms. Cook stated that it would be helpful if it
were clear in the statute that funds would not be used for
repayment. Otherwise, if the account is an account created
where the money can be used without a further act by the
Legislature, that money would not be deemed to be used for
repayment. Most of the accounts are of that nature such as
an account which is established for the use of grants.
Co-Chair Larson noted concern with the rights of the
citizen. He thought that the amendment would create more
problems than those being settled.
Representative Brown asked if Ms. Cook had checked CS HB 58
(FIN). She asked how the approach to repayment in the
legislation would differ from that recommended in Amendment
Ms. Cook referenced Subsection (b), Page 2, which would
specifically identify a portion of the General Fund, the
unreserved and undesignated General Fund balance. She
presumed that evidence could be presented to a court to
identify that money. She thought that approach could work.
She cautioned the inclusion of a certain date and time. Ms.
Cook explained the courts reaction to "legislative intent"
regarding constitutional amendments. She disagreed stating
that the court for years have expounded on what the founding
fathers did when interpreting constitutional provisions.
JAMES L. BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, made general comments upon the testimony of Ms. Cook.
He stated that it is hard to believe that one could have a
definite opinion as to what Amendment #1 would mean. He
13
said that is why the Department of Law supports legislation
which will provide definition for the Constitution.
He explained that the Department can not suggest the way in
which the Constitution could be interpreted. He offered to
suggest reasonable interpretations and then leave it up to
the Legislature to provide the best policy call for how it
should be interpreted.
Mr. Baldwin stated that Subsection (d) of the Constitutional
amendment, states that the Legislature "shall" implement it
by law. Generally, those types of provisions are
interpreted as mandatory directive to the Legislature, by
law, for some way to implement it. It does not preclude
the Legislature, or establish a presumption that it can not
be done, as to the other provisions. He added, it would be
very difficult to determine the real meaning and there is
some degree of latitude to arrive at a rational definition
of the terms used.
Mr. Baldwin stated that there is a high probably of
litigation concerning the meaning of the provision. It will
definitely concern the enactments passed through the House
Finance Committee. He stated that the Department is looking
for tools to help in defending the State and defending the
ultimate interpretation which is applied when enacting a
budget for next year.
Mr. Baldwin advised members that legislation which provides
a set definition, and enactment by the Legislature of a
budget which is consistent, there will be something
substantial to work with which will the odds increase
considerably in being able to prevail in supporting the
interpretation adopted to address the budget bills and major
appropriation bills.
Comparing Amendment #1 to the House Judiciary version
language, Mr. Baldwin said there is merely a refinement on
the words which are used to describe the amounts available
for appropriation for figuring out the central method for
calculating what is available for appropriation. The
Department could live with the Judiciary language, although
it did state what "isn't" included rather that stating what
"is". The approach being proposed is identify what is
available for appropriation so the State would not be
involved in accounting terms.
Mr. Baldwin stated that should the Committee elect, it would
be acceptable to place Amendment #1 into Section (d)
although he did not believe it would be as good as the
language proposed by the Department. Mr. Baldwin addressed
federal funds. He believed Amendment #1 would address money
14
used only for a specific purpose and noted that federal
funds cover a wide range of types of funds and usage. He
felt that the proposed House Finance Committee version would
be a good approach.
Mr. Baldwin said the language drafted by Law was prepared by
budget writers to be a budget writing tool. The State
"looks" into the future one year when formulating that
budget and looks back to see what is carried forward from
the previous year. He emphasized that the committee
substitute work draft would assist in that endeavor.
He stated that the argument questioning what would be
accomplished with all other reserve funds is irrelevant.
Each fund was created by the Legislature with good
intentions. He said those funds were established by law and
"deserve respect".
Representative Navarre asked if the safest position for the
Legislature would be to appropriate out of the
Constitutional Budget Reserve by a three quarter vote, and
that anything else to define available for appropriation
would likely lead to litigation.
Mr. Baldwin thought in order to comply with the court's
order for FY94, it would be the recommendation of the
Department to do it by three quarters vote simply because
there are appropriations on the books and expenditures made
by third parties in connections with those appropriations,
amounts advanced by the State Treasury, and the State should
not do anything to throw into question the validity of those
actions.
Representative Martin asked with that opinion why would
there be a separation between Section (b) and Section (c).
He thought that Section (c) would make it clear, with the
understanding with Legislative shortfalls are coming from
the prior years. Mr. Baldwin agreed with Representative
Martin. He added, that there would be a great potential for
litigation. He reiterated his legal advise would be to
solicit and receive a three quarter vote for FY94.
Representative Martin replied, if the shortfall from this
year is to be made up, a simple majority should be able to
make that decision. Mr. Baldwin stated that the risks would
be increased by taking a simple majority vote.
Representative Martin summed up that Section (B) would allow
a simple majority and Section (C) would mean a three
quarters vote.
Representative Brown referenced Section 2, the retroactive
clause to July 1, 1993. She asked the purpose in making the
proposal retroactive. Mr. Baldwin stated that this would be
applied to FY94, in order for any decisions to be made for
15
restoration of the funding in compliance with the court
order, this interpretation would have to be in effect at the
time of the appropriations which are in dispute.
Representative Brown asked the effect of not including that
provision in the bill. Mr. Baldwin thought it may have the
same effect. The retroactive provision would make it
absolutely clear, stating this is how it should have been
for FY94. He was not sure that the provision was absolutely
necessary although it would provide clarity.
Representative Hoffman questioned the amount available for
appropriation. He noted the discrepancy between Mr. Baldwin
and Ms. Cook on the Permanent Fund earnings. Representative
Hoffman questioned if the Legislature had the authority to
make the appropriation.
Mr. Baldwin replied that the Legislature does have the power
to appropriate the money. He thought there could be a
problem in how that power could be exercised. The
justification for not considering it to be available for
appropriation in the context of which that term is used in
the amendment is because it is a separate provision
established by statute. Representative Hoffman disagreed
with Mr. Baldwin.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Grussendorf, Hoffman, Navarre, Brown.
OPPOSED: Hanley, Martin, Parnell, Therriault,
Larson, MacLean.
Representative Foster was not present for the vote.
The MOTION FAILED (4-6).
Representative Martin MOVED that CS HB 58 (FIN) be reported
out of Committee with individual recommendations.
Representative Navarre OBJECTED.
A roll call vote was taken on the MOTION.
IN FAVOR: Hanley, Martin, Parnell, Therriault,
MacLean, Larson.
OPPOSED: Hoffman, Navarre, Brown, Grussendorf.
Representative Foster was not present for the vote.
The MOTION PASSED (6-4).
CS HB 58 (FIN) was reported out of Committee with "no
recommendations" and with zero fiscal notes by the
16
Department of Law and the Department of Administration.
ADJOURNMENT
The meeting adjourned at 4:00 P.M.
HOUSE FINANCE COMMITTEE
February 9, 1994
1:30 P.M.
TAPE HFC 94 - 28, Side 1, #000 - end.
TAPE HFC 94 - 28, Side 2, #000 - end.
TAPE HFC 94 - 29, Side 1, #000 - #547.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee meeting
to order at 1:30 P.M.
PRESENT
Co-Chair Larson Representative Hoffman
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Grussendorf Representative Therriault
Representative Foster
ALSO PRESENT
Representative Jeannette James; Representative Jim Nordlund;
Representative Cynthia Toohey; Representative Bettye Davis;
Renee Chatman, Staff to Representative Bettye Davis; James
L. Baldwin, Assistant Attorney General-General Civil
Section, Department of Law; Margo Knuth, Assistant Attorney
General-Criminal Division, Department of Law; Jay Hogan,
Staff to Representative Ron Larson; Rod Mourant, Deputy
Commissioner, Department of Revenue; Diane Schenker, Special
Assistant, Department of Corrections; Tamara Brandt Cook,
Director, Division of Legal Services, Legislative Affairs
Agency; Joseph Dimantio, (teleconference), Anchorage; Sandra
Ray, (teleconference), Anchorage; Lynda Adams,
(teleconference), Ketchikan; Cheri Davis, (teleconference),
Ketchikan.
SUMMARY
HB 58 An Act relating to the budget reserve fund
established under art. IX, sec. 17, Constitution
of the State of Alaska.
17
CS HB 58 (FIN) was reported out of Committee with
"no recommendation" and with zero fiscal notes by
the Department of Law and the Department of
Administration.
HB 61 An Act relating to the offense of operating a
motor vehicle, aircraft, or watercraft while
intoxicated; and providing for an effective date.
HB 61 was held in Committee for further
discussion.
HB 128 An Act relating to early acknowledgement of
paternity for the child of an unmarried mother.
CS HB 128 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Health and Social
Services and a fiscal impact note by the
Department of Health and Social Services.
HOUSE BILL 61
"An Act relating to the offense of operating a motor
vehicle, aircraft, or watercraft while intoxicated; and
providing for an effective date."
REPRESENTATIVE JIM NORDLUND explained that HB 61 would
reduce the legal definition of intoxication for the crime of
driving while intoxicated from .10% to .08% blood alcohol
content which would mean it would be illegal for a person to
be in control of a motor vehicle, aircraft, or watercraft
with a blood alcohol level of .08% or greater.
Five states have already lowered their legal definition of
intoxication to .08%. All of Canada has a .08% blood
alcohol threshold, and all European nations prohibit driving
with a .08% or lower blood alcohol level.
Scientific evidence has established that the risk of a
driver being involved in a serious of fatal crash increased
as the alcohol concentration in the body increased. Many
studies have shown that measurable impairment to operate a
motor vehicle begins in most drivers at or below .05% blood
alcohol level, and that all drivers are impaired at a blood
alcohol level of .08%.
Representative Nordlund explained that establishing the
allowable blood alcohol level at .08% would increase the
probability of obtaining convictions for drunk driving.
Because the law will increase the certainty of conviction,
18
it would be more effective than current law to deter drunk
driving and to reduce the number of alcohol related crashes.
In addition to the inherent benefits of the bill, the
National Highway Traffic Safety Administration has notified
the State that Alaska currently receives $688,000 in federal
funds annually for Highway Safety Planning and may be
eligible for a 30% or more increase if House Bill 61 passes.
If similar legislation had passed last year, Alaska would
have already received the benefits of the increase.
Representative Nordlund provided the Committee with a copy
of two amendments. (Copies on file).
JOSEPH DIMANTIO, DIRECTOR, ALASKA COUNCIL FOR THE PREVENTION
OF DRUG AND ALCOHOL ABUSE, (TESTIFIED VIA TELECONFERENCE),
ANCHORAGE, spoke in support of the proposed legislation.
SANDRA RAY, EXECUTIVE DIRECTOR OF MOTHERS AGAINST DRUNK
DRIVING, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, spoke in
support of HB 61.
LYNDA ADAMS, ALASKANS FOR DRUG FREE USE, (TESTIFIED VIA
TELECONFERENCE), KETCHIKAN, spoke in support of the proposed
legislation.
CHERI DAVIS, ALASKANS FOR DRUG FREE USE, (TESTIFIED VIA
TELECONFERENCE), KETCHIKAN, spoke in support of HB 61.
DIANE SCHENKER, SPECIAL ASSISTANT, DEPARTMENT OF
CORRECTIONS, explained that the Department of Corrections
will revise last year's fiscal note to reflect the expense
incurred.
MARGO KNUTH, ASSISTANT ATTORNEY GENERAL-CRIMINAL DIVISION,
DEPARTMENT OF LAW, noted that the Department of Law strongly
supports the proposed legislation. She emphasized that
alcohol is Alaska's number one crime problem and the
legislation would help to address that concern.
Discussion followed regarding the accuracy of the
Intoximeter 3000 reading. The intoximeter is calibrated at
least every sixty days and has been proven to have a one
percent margin of error.
HB 61 was HELD in Committee for further discussion.
HOUSE BILL 128
"An Act relating to early acknowledgement of paternity
for the child of an unmarried mother."
19
RENEE CHATMAN, STAFF TO REPRESENTATIVE BETTYE DAVIS,
explained that the non-support of children has become a
national epidemic with one-fourth of children in the United
States now living with a single parent and an estimated 60
percent spending at least part of their childhood in a
single-parent home. In also most half of these cases, the
absent parent does not pay child support. Many of these
children are born out-of-wedlock and paternity is
established in only 30 percent of such cases. That
interprets into 70 percent of out-of-wedlock births where
there is no proof of paternity and no means to collect child
support.
She added, the proposed legislation would add language to
A.S. 18.50 and would require the State registrar to prepare
a paternity acknowledgment form to be used at the time of
birth. The form, signed by both parents, will list the
father's full name and social security number and would
require the signature of a notary public. The bill also
would lay out specific responsibilities of hospitals or
midwives to get the proper information on the form and to
distribute appropriate paternity materials from the
Department of Health and Social Services.
The legislation is an attempt to get acknowledgment at the
time when a father is particularly willing to develop a
relationship with the child, which would benefit both
parties. The child would have the security of knowing who
his/her father is and could gain access to support from
Social Security, survivor and veteran benefits and worker's
compensation. The child would also be entitled to the
father's inheritance, health insurance and would have access
to the family medical history.
Ms. Chatman provided the Committee with Amendment #1 & #2.
(Copies on file). The amendments were submitted at the
request of the Alaska Child Support Enforcement Division
(CSED) and would be necessary to bring CSED into compliance
with the recent paternity changes resulting from the changes
of the Reconciliation Act of 1993. If the amendments are
not added to the legislation, CSED could jeopardize losing
funds.
ROD MOURANT, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
noted that the Department strongly endorses the proposed
legislation. The establishment of paternity is the most
time consuming and expensive work done by the Department of
Revenue's Child Support Enforcement Division.
REPRESENTATIVE CYNTHIA TOOHEY spoke in support of the
proposed legislation.
20
Representative Parnell MOVED to adopt Amendment #1. There
being NO OBJECTION, it was adopted.
Co-Chair MacLean MOVED to adopt Amendment #2. There being
NO OBJECTIONS, it was adopted.
Representative Martin MOVED to report CS SS HB 128 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CC SS HB 128 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Health and Social Services and a fiscal impact
note by the Department of Health and Social Services.
(Tape Change HFC 94-28, Side 2).
HOUSE BILL 58
"An Act relating to the budget reserve fund established
under art. IX, sec. 17, Constitution of the State of
Alaska."
Representative Brown provided the Committee with Amendment
Representative Hanley OBJECTED.
Representative Brown explained that Amendment #1 stated that
all money that may be withdrawn by the Legislature "shall"
be included, unless it has already been appropriated, and
can be withdrawn without further appropriation.
Representative Brown pointed out the problem of having
"quasi" dedicated funds or attempts to hoard off money from
the General Fund. She stated it would not be appropriate to
be excluding those funds. There is no legal basis for it.
Representative Brown stated that Ms. Cook with the
Legislative Affairs Agency, Legal Services, felt that the
proposed legislation was not in agreement with the
Constitution and would be an overreaching attempt.
Representative Brown stated that Amendment #1 addresses the
legal opinion and advice of that Agency.
Representative Brown thought Amendment #1 would be
consistent and would make sense for Alaska over the long
term and suggested that both the Majority and the Minority
partake in decisions made regarding the Budget Reserve.
Representative Hanley recommended clarifying the record to
describe the terms "or the money in funds or accounts
designated by laws as outside of the general fund" and what
they included.
21
Co-Chair Larson provided the Committee with copies of Alaska
Statutes Section 37.05.146 which defines program receipts
and non-general fund program receipts. [Attachment #1].
Representative Grussendorf referenced A.S. 37.05.146 and
pointed out that (J) lists the permanent fund. He added
that the Constitution and the articles dealing with the
Permanent Fund does implicate the interest earned could be
used for the operation and capital budget. He stressed that
language was in the Constitution and those funds were
available as a pool of money to be considered before
touching the Constitutional Budget Reserve.
Constitutionally, the Permanent Fund earnings are available
to the legislative body. He emphasized the corpus of that
account would not be available.
Co-Chair MacLean asked if the income of the Permanent Fund
could be used. Representative Grussendorf replied it could
be used. He pointed out that the Earnings Reserve Account
had been used to pay off "hold harmless" items in the
General Fund.
Representative Martin asked for the legal opinion of the
Legislative Affairs Agency. Representative Martin
understood that the Permanent Fund earnings were considered
part of the Permanent Fund Corporation and would be separate
from General Funds. He suggested that this information be
made clear to the people of the State.
Representative Brown disagreed with Representative Martin.
It was her understanding that in the lower Court decision,
the judge totally objected at looking at legislative intent
as having anything to do with the interpretation of
"administrative proceedings". He stated that "what the
legislative body thought was relevant was not". She
requested that Tam Cook testify regarding what is meant by
"money in funds or accounts designated by law as outside of
the general fund".
TAMARA BRANDT COOK, DIRECTOR, DIVISION OF LEGAL SERVICES,
LEGISLATIVE AFFAIRS, responded to Representative Hanley's
question regarding " money in funds or accounts designated
by law as outside of the General Fund". She pointed out
that the categories established in separate paragraphs (1),
(2), and (3) of the amendment apply to the repayment section
of the Constitutional provision, Subsection (D). That
section differs as it specifically provides that the
repayment is going to:
1. Come out of general fund money, and;
2. Will give the Legislature the power to implement
22
that section.
To that extent, it is different from the others, as the
Constitution states that the repayment money will come from
general fund revenues only. The Constitution does not
define that word.
The first category is an attempt to define it. It states
that money in funds or accounts which are designated by law
as outside the general fund are not used for repayment. Ms.
Cook said there is at least one significant account which is
currently outside the General Fund as a matter of law - the
Earnings Reserve Account which is in the Permanent Fund.
Essentially, what this says is, "When the Legislature
establishes an account, the Legislature can designate, for
purposes of this provision, whether it is inside or outside
the Permanent Fund", for purposes of the repayment.
Representative Hanley asked if that was the repayment
provision and not what is available for appropriation. Ms.
Cook pointed out that the language earlier in the bill
points out two important differences when looking at
appropriations from the Budget Reserve Fund. Ms. Cook noted
that the committee substitute does not include the language
that refers to the General Fund in applying the formula of
funds available for appropriation. It does exist in Section
(D) but does not exist in Section (B). In addition, she
added, there is not language which would allow the
Legislature to implement the section which would clearly
give the Legislature some discretion for interpreting the
language.
She felt that a court would be "literal minded" when it
attempts to ascertain which funds are available for
appropriation for purposes of applying the formula that lets
the Legislature appropriate from the Budget Reserve Fund to
meet shortfalls.
Ms. Cook stated that the test she used in drafting the
amendment is that one could argue to a court forcefully that
surely the amount available for appropriation was not
intended to include amounts already appropriated.
Logically, that must be so, because if not so, then the
entire structure of the Budget Reserve Fund unravels.
Section (B) then could not be applied.
If reappropriation would have to be considered, Ms. Cook
asked herself how many years back would it be necessary to
check for unaccounted balances. She said this would be "a
nightmare" and felt that even the most determined court
would be willing to agree that if the funds had already been
appropriated, they would not be available for appropriation
23
within the terms of this language. That is essentially the
test which Ms. Cook said she tried to establish at the first
part of Amendment #1.
Representative Hanley asked, for example, if the Railbelt
Energy Fund money had been appropriated by the Legislature
as specifically, not to be withdrawn from the State Treasury
without further appropriation, would it be available. Ms.
Cook explained the reason she used that formula. She said
the Legislature can appropriate funds to AHFC for grants,
however, only if appropriations are made for the grants each
year. She added, it would be difficult to stand in front of
the courts each year and state that the money would not be
available for appropriation. She said within the structure
of the fund which has been established, it is a requirement
that no expenditures can be made without an act of
appropriation as a legal matter. There are quite a few
funds like that. Most of AHFC funds do not have that type
of language.
Ms. Cook continued, stating that in fact the Railbelt Energy
Fund, is now depleted and it is no longer an issue.
However, when it was a large fund, it was established and
the Legislature stated specifically that money could not be
used from that fund without an act of appropriation. The
Legislature also stated as a result of the manner in which
it was established, that money within the fund would be used
for certain limited purposes. The Legislature kept control
over the fund by requiring additional appropriations.
She added that it will be difficult to convince a court of
law that such money is not available for appropriation when
the statute itself clearly states that it must be
appropriated "again" before it can be expended.
Representative Martin pointed out that he had introduced HB
35. He did not know that Representative Barnes had asked
Ms. Cook for an opinion pertaining to repayment.
Representative Martin understood that the earnings reserve
account was under the Permanent Fund Corporation and would
not normally be considered as part of the General Funds. He
asked if this was correct.
Ms. Cook stated that the Earnings Reserve Account money
could not be used for repayment, because the statute states
that the account is established in the Permanent Fund. The
Permanent Fund is established as a matter of constitutional
law and therefore a court would recognize that the Permanent
Fund is outside of the General Fund. Because the statutes
says the Earnings Reserve Account is in the Permanent Fund,
under the constitutional provision establishing the
Permanent Fund, there is a provision which states that the
24
income can go to the General Fund or as is designated by the
Legislature.
Ms. Cook said this is a situation where the Constitution has
given the Legislature the authority to identify where this
money will go. The Legislature has chosen to keep the money
within the Permanent Fund itself, separated for accounting
purposes. For this reason, Ms. Cook did not feel that the
money could be placed under the repayment requirement. She
believed that the funds would be subject to appropriation.
Representative Martin stated that the court can not tell the
government to reappropriate the money. He thought that only
the Legislature has the responsibility to make whole the
constitutional budget account. He asked if the Governor
could take the earnings reserve or any money that is
available and put it into the Constitutional Budget Reserve
Account. Ms. Cook thought that the Governor could not take
the Earnings Reserve Account, however, she believed that
the Governor could "correct an accounting error".
Ms. Cook stated that the court has said, "The Legislature
has placed money into the wrong account in the General Fund
and it should have gone somewhere else". As a matter of
correcting an accounting error, the Governor can order the
Department of Revenue to return money from the General Fund
to the Budget Reserve Fund.
Ms. Cook stated that under the terms of the Superior Court
order, which has not currently modified it on the Supreme
Court level, essentially, the Governor has been directed by
the end of the legislative session, to replace the money "as
an accounting matter". The obvious result is that the
Legislature ends up with a depleted General Fund. Ms. Cook
said the fact that the General Fund is substantially
decreased is a matter for the Legislature to deal with
through the appropriation process.
Representative Martin asked Ms. Cook what she believed was
meant by the people voting on the amendment of what was
available for use. He asked if the public was aware that
the earnings reserve must be used first, before touching the
Constitutional Budget Reserve.
Ms. Cook replied that she could not speculate on what the
public thought when they were in the position of voting on
this issue. She does believe that there is wide spread
misconception about the legal status of the Earnings Reserve
Fund. Very often in the press, it is referred to as
Permanent Fund money and seems to be "somewhat lumped in the
mind of the public as part of the constitutionally mandated
Permanent Fund". Ms. Cook believes that as a result of the
25
"popular press" some people do not make a distinction
between income of the Permanent Fund and principle of the
Permanent Fund. She is not sure that all members of the
public do not actually understand there is an Earnings
Reserve Account which is made up entirely of income. She
has seen in the press a great many allegations that the
State is "robbing" the Permanent Fund when there is an
appropriation from the Earnings Reserve Account. From a
legal point of view, that is not accurate because the State
can not rob the Permanent Fund principle and the earnings as
income has always been able to be appropriated.
Representative Martin asked if the earnings reserve would
need to be used before the Constitutional Budget Reserve is
touched. Ms. Cook believed that it would have to be used
because the Budget Reserve Fund as a created
constitutionally created entity clearly prevails over any
politically established fund that identifies money that does
not have constitutional protection. That money is more
vulnerable than the Budget Reserve Fund under the form which
requires the majority vote.
With regard to the requirement of a three quarter vote, Ms.
Cook stated, this vote is not based on the formula of funds
available for appropriation. To the extent that the
Legislature is trying to access to the Budget Reserve Fund
under Section 17(B), the issue is essentially, "What is the
court going to do with applying the formula and ascertaining
what funds are available for appropriation for the given
fiscal year". If there is a large pot of money in the
Earnings Reserve Account, Ms. Cook believes a court will
find that money is available for appropriation for purposes
of applying the formula.
Ms. Cook proceeded, that should the State have a billion
dollars and no money in the General Fund, there is no
requirement to use the Earnings Reserve Account per se.
Although, if it is unused, it may be part of the formula
which is used to ascertain whether the Legislature can
access money in the Budget Reserve Fund.
Representative Martin asked if the money is being divided
into two sections, funds that are left over and funds which
are going to be appropriated (re: dividends and inflation
proofing).
Ms. Cook responded that if money is appropriated from the
Earnings Reserve Account for the purposes of dividends, then
that accounts for a portion as it has been appropriated and
will no longer be in that account. If it is appropriated
for the current fiscal year, it surely was available for
appropriation during that fiscal year. According to Ms.
Cook, the formula requires the Legislature to look at what
26
was actually appropriated in the prior fiscal year to
ascertain the level that it may reach during the current
fiscal year. In the recent history of our State, there has
always been during a prior fiscal year, a substantial
appropriation for the Permanent Fund dividends. From that
point of view, since the prior fiscal year already had an
appropriation for permanent fund dividends then that should
increase the amount available for appropriation.
Representative Grussendorf commented on the Undistributed
Income Account and his original desire to call that account
the Budget Reserve Account. He eventually supported
earmarking the funds as the Earnings Reserve Account. He
supported Ms. Cook's argument. The Permanent Fund requires
that all the earnings from the corpus would be available to
the General Fund unless provided for by law. He emphasized
that has occurred particularly in three categories. He
believed the money would be available for appropriation and
questioned whether the earnings reserve funds would be
considered funds designated by law as outside the General
Fund. Representative Grussendorf stated that the Earnings
Reserve Account was available to go into the General Fund.
He asked Ms. Cook if it would be required to be used.
Ms. Cook stated it would, although it would not be required
to be used for repayment and should the situation at the end
of a fiscal year present the State with a repayment
requirement for a prior appropriation from the Budget
Reserve Account. The Earnings Reserve Account is an example
of a fund which would not need to be given up in repayment.
She added, that it would be counted and available for
appropriation but under Section (D) if there were a balance,
it would not be required to be transferred for repayment.
Co-Chair Larson asked if a deficit balance could be carried
into FY95. Ms. Cook questioned the provision on
"indebtedness". She stated that she was not certain whether
the Alaska Constitution requires a balanced budget. She
thought that a deficit could be carried forward although
eventually there could be a cash flow situation which would
preclude expenditures or delay them.
Co-Chair Larson asked for examples in each of the three
provisions specified in Amendment #1. Ms. Cook referenced
(1) and stated that a "fund which is designated by law as
outside of the General Fund" would be the Earnings Reserve
Account of the Permanent Fund. A fund which is designated
by the law as inside would be the Statutory Budget Reserve
Fund. With regard to most funds, the statute is either
silent on where it is located from an accounting point of
view or it specifically states that the fund is within the
27
General Fund.
Ms. Cook referenced (2), "money that by law, may be used
only for a specific purpose that precludes placing it in the
budget reserve fund" is an attempt by Counsel to address
true trust funds. The three groups apply only to the
repayment requirement. The requirement applies only to
General Fund money and also states that the Legislature has
the power to implement the requirement. She added that
there is a need to make as provision for trust funds. She
cited the example an individual who leaves money to the
State of Alaska to be used for a scholarship fund.
Scholarships would be the only thing the funds could be used
for. The terms of the trust would be violated if used to
repay the Budget Reserve Fund.
Ms. Cook referenced stating that if the Legislature had in
fact appropriated money in a position where it could be
expended, that money could be taken and used for repayment
even though the money is in the General Fund and is
obligated at a specific point in time. An example would be
the entire operating budget or the money which goes to
Alaska Housing Finance Corporation (AHFC).
Ms. Cook used the reference of AHFC because there has been a
lot of talk of use of AHFC funds. AHFC has nearly twenty
different established funds and accounts. Virtually all of
them, the language which establishes the accounts says,
"this money can be used by AHFC for mortgage loans as
security for bonds, for insurance reserves". There is also
language establishing the funds which allows AHFC to use the
money without the Legislature having to be involved. There
are a couple of accounts in AHFC, Senior Housing for example
where language says AHFC can not expend funds unless the
Legislature appropriates it on a project specific basis.
Representative Therriault asked where the Science and
Technology Fund would be located. Ms. Cook believed the
fund to be outside the general fund as far as the repayment
portion is concerned.
Representative Therriault asked if the Railbelt Energy Fund
money would have been available for appropriation. Ms. Cook
noted that she feared that a court could reach that result,
however, said that opinion is extremely speculative as a
court has not looked at this concern. She thought that the
Railbelt Fund would be more vulnerable than the Science and
Technology Fund which is an endowment with the intent that
it will generate income, the income will be used and the
money has been appropriated. Ms. Cook advised that the
Railbelt Energy Fund was essentially a "savings account"
28
created by statute which could not be "touched by anyone
without specific appropriation by the Legislature.
(Tape Change HFC 94-29, Side 1).
Representative Navarre referenced Representative Larson's
question regarding carrying a deficit forward. He stated
that as a matter of public policy, this would not be a good
idea. He noted his concern that then the budget would be
based on projections which would create an intentional or
unintentional deficit.
Co-Chair MacLean asked if funds established by statute would
be available for repayment with the proposed amendment. Ms.
Cook replied that the Legislature would need to designate
that the fund is outside the General Fund or outside of the
General Fund for purposes of this constitutional provisions.
She believed that the Legislature could do this, because
under Subsection (D) of the Constitutional provision it is
stated that the Legislature shall implement that section.
At this point, money has not been appropriated from the
Budget Reserve Fund. There is no Subsection (D) budget
repayment requirement. The repayment requirement will only
occur if there is money available at the end of the year in
the General Fund and has not been expended.
Co-Chair MacLean asked if there were funds which would be
scrutinized. Ms. Cook stated that it would be helpful if it
were clear in the statute that funds would not be used for
repayment. Otherwise, if the account is an account created
where the money can be used without a further act by the
Legislature, that money would not be deemed to be used for
repayment. Most of the accounts are of that nature such as
an account which is established for the use of grants.
Co-Chair Larson noted concern with the rights of the
citizen. He thought that the amendment would create more
problems than those being settled.
Representative Brown asked if Ms. Cook had checked CS HB 58
(FIN). She asked how the approach to repayment in the
legislation would differ from that recommended in Amendment
Ms. Cook referenced Subsection (b), Page 2, which would
specifically identify a portion of the General Fund, the
unreserved and undesignated General Fund balance. She
presumed that evidence could be presented to a court to
identify that money. She thought that approach could work.
She cautioned the inclusion of a certain date and time. Ms.
Cook explained the courts reaction to "legislative intent"
regarding constitutional amendments. She disagreed stating
29
that the court for years have expounded on what the founding
fathers did when interpreting constitutional provisions.
JAMES L. BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, made general comments upon the testimony of Ms. Cook.
He stated that it is hard to believe that one could have a
definite opinion as to what Amendment #1 would mean. He
said that is why the Department of Law supports legislation
which will provide definition for the Constitution.
He explained that the Department can not suggest the way in
which the Constitution could be interpreted. He offered to
suggest reasonable interpretations and then leave it up to
the Legislature to provide the best policy call for how it
should be interpreted.
Mr. Baldwin stated that Subsection (d) of the Constitutional
amendment, states that the Legislature "shall" implement it
by law. Generally, those types of provisions are
interpreted as mandatory directive to the Legislature, by
law, for some way to implement it. It does not preclude
the Legislature, or establish a presumption that it can not
be done, as to the other provisions. He added, it would be
very difficult to determine the real meaning and there is
some degree of latitude to arrive at a rational definition
of the terms used.
Mr. Baldwin stated that there is a high probably of
litigation concerning the meaning of the provision. It will
definitely concern the enactments passed through the House
Finance Committee. He stated that the Department is looking
for tools to help in defending the State and defending the
ultimate interpretation which is applied when enacting a
budget for next year.
Mr. Baldwin advised members that legislation which provides
a set definition, and enactment by the Legislature of a
budget which is consistent, there will be something
substantial to work with which will the odds increase
considerably in being able to prevail in supporting the
interpretation adopted to address the budget bills and major
appropriation bills.
Comparing Amendment #1 to the House Judiciary version
language, Mr. Baldwin said there is merely a refinement on
the words which are used to describe the amounts available
for appropriation for figuring out the central method for
calculating what is available for appropriation. The
Department could live with the Judiciary language, although
it did state what "isn't" included rather that stating what
"is". The approach being proposed is identify what is
available for appropriation so the State would not be
30
involved in accounting terms.
Mr. Baldwin stated that should the Committee elect, it would
be acceptable to place Amendment #1 into Section (d)
although he did not believe it would be as good as the
language proposed by the Department. Mr. Baldwin addressed
federal funds. He believed Amendment #1 would address money
used only for a specific purpose and noted that federal
funds cover a wide range of types of funds and usage. He
felt that the proposed House Finance Committee version would
be a good approach.
Mr. Baldwin said the language drafted by Law was prepared by
budget writers to be a budget writing tool. The State
"looks" into the future one year when formulating that
budget and looks back to see what is carried forward from
the previous year. He emphasized that the committee
substitute work draft would assist in that endeavor.
He stated that the argument questioning what would be
accomplished with all other reserve funds is irrelevant.
Each fund was created by the Legislature with good
intentions. He said those funds were established by law and
"deserve respect".
Representative Navarre asked if the safest position for the
Legislature would be to appropriate out of the
Constitutional Budget Reserve by a three quarter vote, and
that anything else to define available for appropriation
would likely lead to litigation.
Mr. Baldwin thought in order to comply with the court's
order for FY94, it would be the recommendation of the
Department to do it by three quarters vote simply because
there are appropriations on the books and expenditures made
by third parties in connections with those appropriations,
amounts advanced by the State Treasury, and the State should
not do anything to throw into question the validity of those
actions.
Representative Martin asked with that opinion why would
there be a separation between Section (b) and Section (c).
He thought that Section (c) would make it clear, with the
understanding with Legislative shortfalls are coming from
the prior years. Mr. Baldwin agreed with Representative
Martin. He added, that there would be a great potential for
litigation. He reiterated his legal advise would be to
solicit and receive a three quarter vote for FY94.
Representative Martin replied, if the shortfall from this
year is to be made up, a simple majority should be able to
make that decision. Mr. Baldwin stated that the risks would
be increased by taking a simple majority vote.
Representative Martin summed up that Section (B) would allow
31
a simple majority and Section (C) would mean a three
quarters vote.
Representative Brown referenced Section 2, the retroactive
clause to July 1, 1993. She asked the purpose in making the
proposal retroactive. Mr. Baldwin stated that this would be
applied to FY94, in order for any decisions to be made for
restoration of the funding in compliance with the court
order, this interpretation would have to be in effect at the
time of the appropriations which are in dispute.
Representative Brown asked the effect of not including that
provision in the bill. Mr. Baldwin thought it may have the
same effect. The retroactive provision would make it
absolutely clear, stating this is how it should have been
for FY94. He was not sure that the provision was absolutely
necessary although it would provide clarity.
Representative Hoffman questioned the amount available for
appropriation. He noted the discrepancy between Mr. Baldwin
and Ms. Cook on the Permanent Fund earnings. Representative
Hoffman questioned if the Legislature had the authority to
make the appropriation.
Mr. Baldwin replied that the Legislature does have the power
to appropriate the money. He thought there could be a
problem in how that power could be exercised. The
justification for not considering it to be available for
appropriation in the context of which that term is used in
the amendment is because it is a separate provision
established by statute. Representative Hoffman disagreed
with Mr. Baldwin.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Grussendorf, Hoffman, Navarre, Brown.
OPPOSED: Hanley, Martin, Parnell, Therriault,
Larson, MacLean.
Representative Foster was not present for the vote.
The MOTION FAILED (4-6).
Representative Martin MOVED that CS HB 58 (FIN) be reported
out of Committee with individual recommendations.
Representative Navarre OBJECTED.
A roll call vote was taken on the MOTION.
IN FAVOR: Hanley, Martin, Parnell, Therriault,
MacLean, Larson.
OPPOSED: Hoffman, Navarre, Brown, Grussendorf.
32
Representative Foster was not present for the vote.
The MOTION PASSED (6-4).
CS HB 58 (FIN) was reported out of Committee with "no
recommendations" and with zero fiscal notes by the
Department of Law and the Department of Administration.
ADJOURNMENT
The meeting adjourned at 4:00 P.M.
33
| Document Name | Date/Time | Subjects |
|---|