Legislature(2001 - 2002)
10/19/2001 11:11 AM House JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SJR 24 - AMEND CONSTITUTIONAL BUDGET RESERVE FUND Number 0151 CHAIR ROKEBERG announced that the last order of business would be CS FOR SENATE JOINT RESOLUTION NO. 24(RLS), Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. Number 0153 SENATOR DAVE DONLEY, Alaska State Legislature, testified on behalf of the Senate Finance Committee, sponsor of SJR 24. This resolution would amend the current constitutional budget reserve (CBR) amendment. Although the CBR is functioning well as a fiscal shock absorber, it isn't functioning well in regard to helping control spending and enforcing fiscal discipline. Under the current situation, small groups of legislators can force increased spending by withholding CBR votes. If one were to count all the proposed floor amendments that were made, rejected, and eventually included in the budget in order to obtain the three-quarters vote, it would sum $150 million this year. Senator Donley agreed to provide the delineation of the $150 million. SENATOR DONLEY informed the committee that the packet should include the language that the voters saw when the CBR was adopted in 1990. The lieutenant governor's description of the CBR said that the fund could be used when money available for appropriation in the year is less than the year before, but only if the shortfall is made up. However, the legislative affairs' summary specified that appropriations may be made from the CBR only if the money available for the fiscal year is less than the amount appropriated for the prior year. The proponents' statement says that the CBR is an effective first step to controlling state spending and that is party due to the ability to use CBR funds when revenues are less than the amount appropriated in the previous year, in which case the amount appropriated from the CBR couldn't exceed the shortfall. Even the opponents' explanation said that a simple majority of the legislature could borrow funds from the CBR to make up any shortfalls in revenues up to the amount appropriated in the previous year. Everyone agreed that money [from the CBR] could be accessed with a simple majority vote in order to make up for the shortfall, up to the amount that was appropriated in the previous year. SENATOR DONLEY said that didn't happen, however. Once the amendment was adopted, the legislature adopted the statutory explanation of the language, which the court subsequently overruled as being in conflict with the court's meaning of "being available for appropriation". Whether the court was correct or not, that wasn't what the people voted on. Therefore, this resolution is an attempt to restore what was meant by Ballot Measure No. 1 with regard to accessing the CBR. Thus, SJR 24 proposes to correct the problem identified in the court case and clarify that in a year in which revenues are less than the previous year, the legislature may access the CBR by a simple majority vote for funding up to the previous year's appropriation. This resolution also deletes the so-called "sweep provision," which requires a three-quarters vote to repay the money taken from the CBR in the previous year. Number 0217 REPRESENTATIVE DAVIES noted that [SJR 24] has been characterized as fixing a budget, a "blackmail" situation. Although that argument can be made, the other side is that in other areas of the budget the Majority short funds the budget, relying on the Minority to force limits that the Majority wants, but for which they don't want to take credit or blame. CHAIR ROKEBERG said that there is some truth to that statement. REPRESENTATIVE BERKOWITZ commented that he noticed that Senator Donley's budget report to the public took credit for funding that "we" [the Minority] insisted on as part of the CBR vote. He cited the funding for education and the troopers as examples. Number 0248 MR. TEAL, in response to Chair Rokeberg, explained that typically each year the appropriation's bill contains what is called "the reverse sweep" section. That section is included because the constitution specifies that if there are any outstanding borrowings from the CBR, then every June 30th all the subaccounts of the general fund (GF) are swept into the CBR in order to repay it. He estimated that there is about $3 billion in debt. SENATOR DONLEY pointed out that it is a year-to-year forgiveness, and therefore there is no outstanding debt that has to be handled by a three-quarters vote on the $3 billion. He clarified that the debt is only for the debt of the prior year. MR. TEAL estimated that approximately $100 million a year from the GF subaccounts is swept into the CBR. The language in the appropriation's bill says that the money taken from the GF subaccounts is replaced by withdrawing from the CBR. Therefore, that is a withdrawal from the CBR and would require a three- quarter vote. In essence, [the language] says that in order to make the [GF] subaccounts whole, a three-quarter vote is required. That is part of SJR 24 because if the super majority vote is trying to be avoided in order to just have a budget that is the same as last year, then the $100 million sweep super majority requirement must be eliminated. CHAIR ROKEBERG related his understanding, then, that this resolution maintains the CBR while modifying how it functions. SENATOR DONLEY explained that the resolution modifies how the CBR is accessed and eliminates the sweep provision. The original intent of the amendment is restored, in that a three- quarter vote is only required for those funds that are over and above what was appropriated for the previous year. Therefore, a three-quarter vote would be required if the desire is to increase spending and obtain the [increase] from the CBR. Only a simple majority vote is required to access money that is equal to what was appropriated in the previous year. Number 0292 REPRESENTATIVE DAVIES asked if that would have any cash flow implications. MR. TEAL noted that the opinion on that differs. Currently, the Department of Revenue doesn't believe the cash flow issue to be a large problem. In fact, borrowing $50-$100 million isn't really an appropriation from the CBR because it is being repaid before the end of the year. In other words, in FY01 the CBR draw wasn't necessary at all because $300-$400 million was taken from the CBR, but repaid before the end of the year. In response to Chair Rokeberg, Mr. Teal said that no interest is paid on the draw. CHAIR ROKEBERG expressed his concern with the lack of interest payments. MR. TEAL turned to FY01, when the legislature did take money from the CBR. Of course, the interest earnings that the GF recovered stays in the GF, and thus the year ends and there is a GF surplus of $80 million. The sweep provision says that the $80 million goes into the CBR, which happened. However, the reverse sweep only applies to the subaccounts of the GF, not the GF itself. Therefore, the interest was returned. CHAIR ROKEBERG characterized [a draw from the CBR] as a single appropriation rather than an installment. SENATOR DONLEY explained that if this resolution was placed on the ballot and approved by the voters, the situation would change such that the legislature could access the CBR with a simple majority for an amount up to the prior year's expenditures. However, there is much pressure to do more than that. Senator Donley felt that the three-quarters vote is appropriate since that was the original intent. Number 0352 REPRESENTATIVE BERKOWITZ pointed out that [Article IX] Section 17 says, "(c) An appropriation from the budget reserve fund may be made for any public purpose upon affirmative vote of three- fourths of the members of each house of the legislature." He understood that language to refer to any appropriation. MR. TEAL informed the committee that there are two sections that refer to removing money. One section requires a three-quarters vote for any purpose. The other section requires a simple majority vote, as long as the withdrawal is no more than was spent in the prior year. REPRESENTATIVE BERKOWITZ said that under law that is in conflict, the default is to the [language] that is more restrictive. SENATOR DONLEY disagreed and explained that the default is to try to read the [sections in conflict] jointly in an attempt to make sense. MR. TEAL clarified that the three-quarters vote [is required] when the prior year's budget has been exceeded. Number 0373 SENATOR DONLEY posed the possibility that the court is correct. Even if that were the case, the court's ruling isn't what the voters thought they were voting for nor was it the intent of the sponsors or the opponents. Therefore, he felt that the voters should have the opportunity to restore what they thought they were voting for. Senator Donley went on to point out that the court case centered around the language "available for appropriation". As a lawyer, he felt that the court had a defensible conclusion. However, it doesn't make it the best public policy or what the public thought it was getting. CHAIR ROKEBERG recalled that there have been resolutions to repeal the entire section regarding the CBR. He inquired as to why Senator Donley chose to take the tact he did versus repealing the entire section. SENATOR DONLEY answered with his belief that the CBR is working well and was a wise step as a fiscal shock absorber. Therefore, he felt that the well-functioning parts should be kept. CHAIR ROKEBERG asked whether Legislative Legal Services had provided an opinion that [Article IX, Section 17] subsection (c) doesn't need to be modified to be crystal clear in regard to the intent. SENATOR DONLEY informed the committee that the version adopted by the Senate Rules Committee accomplishes that goal. CHAIR ROKEBERG asked whether anyone else wished to testify. [There being no one, the hearing on SJR 24 was recessed.] [SJR 24 was held over.]
| Document Name | Date/Time | Subjects |
|---|