Legislature(2001 - 2002)
03/22/2002 01:22 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SJR 24 - AMEND CONSTITUTIONAL BUDGET RESERVE FUND Number 0043 CHAIR ROKEBERG announced that the first 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. He noted that at a prior hearing, the administration's representative had raised four points in opposition to SJR 24. Number 0073 DEB DAVIDSON, Staff to Senator Dave Donley, Senate Finance Committee, Alaska State Legislature, on behalf of the Senate Finance Committee, sponsor, confirmed that those points had been raised at the prior hearing, and mentioned that in members' packets is a letter of response to those issues. To elaborate, on the point that SJR 24 is a policy change, she concurred that it is, and noted that this is intentional. Under SJR 24, funds could be withdrawn from the constitutional budget reserve (CBR) fund with a majority vote, provided that they are used for appropriations from the general fund (GF). Currently funds from the CBR can be used to fund any shortfall [in] any program, although there is a three-fourths vote requirement. With SJR 24 in effect, for example, a majority vote could withdraw CBR funds in order to pay for a shortfall in education funding, which is a GF program; however, in order pay to for a shortfall in a program that is funded entirely by program receipts, for example, CBR funds could only be withdrawn with a three-fourths vote. MS. DAVIDSON, on the point regarding the use of the term "unrestricted general funds", said that staff had checked with the Legal and Research Services Division, Legislative Affairs Agency, and had been told that there would not be a problem with using that term and that its use was merely a policy choice. On the point regarding the possibility that deleting the "sweep provision" without first eliminating the liability to the CBR would cause a problem with the bond market, she noted that there is no straight answer to this complex issue. Basically, she explained, the debt owed to the CBR is a debt that "we owe ourselves"; therefore, legally, getting rid of the sweep provision automatically gets rid of the liability. So while it appears from an accounting viewpoint, on paper, as though there is a liability, it is merely money that the state owes itself. She opined that getting rid of the sweep provision should not cause any problem because it would also get rid of the liability. She noted that if, in the future, any questions were raised by the bond market or "Wall Street," the legislature would have several options with which to address those questions. MS. DAVIDSON, on the point of whether SJR 24 would have any effect should the CBR become empty in two years, said that the sponsor contends that getting rid of the sweep provision is still an important and necessary change because, otherwise, that provision would still apply regardless of whether there was any money in the CBR. In response to questions, she pointed out that under [subsection] (b), page 1, lines 13-16, "amounts available for appropriation or appropriated from federal funds, income of the permanent fund, or this budget reserve fund may not be considered". She said that the main intent of this language is to ensure that "these same funds are either included or excluded from the amount available for appropriation, and appropriated, to make sure that the comparison was based on this same..." Number 0583 REPRESENTATIVE JAMES interjected that she was a member of the legislature during the implementation of the constitutional budget reserve [fund] and, according to her recollection of the debate at that time, the court decision regarding implementation was different than how the CBR was intended to work and different than what she had in mind when she voted for it. She opined that there has been a problem ever since that court decision was made. One of the issues that the court had to decide was, at what level of appeal does resulting money go into the CBR; she noted that she did not have any problems with the [decision] on that issue. Another issue, she explained, that the court had to decide revolved around "what was available for appropriations, based on what last year's budget was, so that if your current year's budget was more than your last year's budget, if you didn't have enough money to cover it, you could take the money out with a majority vote." She said that the court determined that when "you're measuring in the first place, if you have enough money to cover the budget, they did not include the permanent fund; and yet they did include the permanent fund, so you never would ever get there as long as you had any money in the permanent fund." However, she added, at the end, because that money had to be paid back and everything was "swept," then the earnings of the permanent fund were not included. REPRESENTATIVE JAMES opined that that was a gross [misinterpretation] of the language in the original ballot measure. "It either should be counted at one end and the other, or at neither end," she added. She said that another problem is "the payback," which is the sweep provision. "As we go forward we do need a budget control or ... slush fund ...; we need to be able to build up a budget surplus because we never know what the conditions are going to be," she said. But the rules of the CBR are so restrictive, that it is not going to be the best vehicle for surpluses unless some changes are made. She remarked, however, that she is not convinced that [SJR 24] is going to "solve the problem; it seems to me like if we wish to take the money from the CBR rather than the earnings reserve of the permanent fund, then, as far as I'm concerned, we'll always have a [three-fourths] vote." She opined that there are only two solutions: "one is to fix it so we don't have to pay it back, which ... solves part of the problem, ... and this is all that you've done here." Number 0787 MS. DAVIDSON argued that in addition to repealing the sweep provision, SJR 24 changes "the phrasing in how the funds can be withdrawn with a majority vote, to clarify when that may happen." She offered that the phrasing in Section 1 specifies that the federal funds, the permanent fund, or the budget reserve fund cannot be considered when calculating amounts available for appropriation or the amounts appropriated, the comparison has been made level on both sides. She surmised that part of the problem, initially, was that amounts available for appropriation and amounts actually appropriated were defined in statute, and the court found that this was inconsistent with the [Alaska State] Constitution. By placing "this" in the constitution, she opined, it would squarely set out what the comparison is. REPRESENTATIVE JAMES asked whether SJR 24 would be removing the stipulations pertaining to the prior year's budget and, if so, whether that meant that the budget could be raised and just a majority vote would be needed to access the CBR. MS. DAVIDSON said not entirely, no. She elaborated: What this says is, ... if the amount that you were appropriating this year is more than you have available to appropriate, you may withdraw funds from the CBR up to the total that was appropriated the year before with a majority vote - anything more than that will require the [three-fourths] vote - and the difference in that amount may only be used for appropriations from the unrestricted general fund. As I said, for funding education, if you needed to make up that difference, you would be able to do it up to the last year's level with the general fund. If you were funding a shortfall from another funding source - something funded by [Alaska Housing Finance Corporation] AHFC receipts, something like that - that would require a [three-fourths] vote. So it restricts more than the current does [with regard to] what may be withdrawn.... REPRESENTATIVE JAMES remarked that although she understands the sponsor's intent, if the public were to be asked "this question, they'd say no." She acknowledged that there are some problems with "the CBR," but opined that [SJR 24] is not going to resolve them. Number 0982 REPRESENTATIVE BERKOWITZ asked whether the "exceptions to the amount of appropriations made in the current year apply to those made in previous years?" That is, if the permanent fund or federal funds had been used - appropriated - in prior years, does that impact how this mechanism would work? MS. DAVIDSON said that she didn't believe so because of the addition of the phrase, "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 opined that if the funds were appropriated in the prior year, they would not be considered in what was calculated for the current year or for the current year's appropriations. REPRESENTATIVE BERKOWITZ asked: "If you had appropriations of federal funds in a prior year, and you needed to reach that aggregate funding level, ... what would the mechanism be to get into the CBR in the current year?" MS. DAVIDSON replied that that would be the [three-fourths] vote. The section in the [Alaska State] Constitution that allows appropriations from the CBR to be made for any public purpose with a [three-fourths] vote remains there; that has not changed at all. "So, if you wanted to use funds from the CBR to make up a loss of federal funds or to get to a total, you could do that; it would, however, require a [three-fourths] vote rather than a majority vote," she said. REPRESENTATIVE BERKOWITZ referred to the phrase, "For purposes of this subsection, 'unrestricted general fund' shall be defined by law". He asked whether the sponsor had any ideas regarding how "unrestricted general fund" might be defined. MS. DAVIDSON said that she did not know whether the sponsor had any specific definition in mind regarding "unrestricted general fund". She mentioned that although currently there is not a specific definition of what constitutes "unrestricted general funds", that phrase is used in several statutes. Referring to members' packets, she pointed out an example of a statute - AS 37.05.146 - which specifies items that "are not made from the unrestricted general fund". She said that it is her belief that "when the definition came through, there would be consideration of that, as well as other things." REPRESENTATIVE JAMES opined that the [lack of a current definition] seems to "give us a little trap here as to what that's going to be." She mentioned that she considers dividends from Alaska Industrial Development and Export Authority (AIDEA), for example, to be general funds "when they come over," but acknowledged that they are not counted as such. Number 1227 MS. DAVIDSON remarked that if funding is needed for any of the program receipts listed in AS 37.05.146(b), a [three-fourths] vote would be required to access the CBR because the statute specifically says that appropriations for those items are not made from the unrestricted general fund. She said that the best example of what unrestricted general funds are currently used for is "partially doing the education funding," adding her belief that revenue sharing also comes from the unrestricted general fund. Thus, although there is no definition of what unrestricted general funds are, there is a definition of what they are not. REPRESENTATIVE JAMES indicated that she thought that funds which are appropriated would still be general funds until spent, although they would be considered restricted [funds] because they'd already been appropriated. CHAIR ROKEBERG, mentioning that he had concerns about drafting, referred to the phrase on lines 13-15: "For purposes of applying this subsection, amounts available for appropriation or appropriated from federal funds". He asked, "Why is that disjunctive there?" MS. DAVIDSON offered that it is because of how lines 5-6 are drafted: "If the amount available for appropriation for a fiscal year is not sufficient to fully fund the amount appropriated". CHAIR ROKEBERG mentioned that he does not understand lines 13-15 the way they are drafted; they appear to essentially say, "amounts available for appropriation may not be considered." REPRESENTATIVE JAMES agreed that the language on lines 13-15 doesn't make sense. Number 1394 MS. DAVIDSON said that in her mind, she translated that language to: "For applying this subsection, amounts available for appropriation [pause] or amounts appropriated from [pause] then federal funds, income of the permanent fund, or the budget reserve fund may not be considered." CHAIR ROKEBERG remarked that according to the way Ms. Davidson spoke regarding her interpretation of lines 13-15, it sounded as though there was a long pause before the word "or", in which case perhaps some form of punctuation is needed in that phrase. He said: To translate what I think the meaning should be, it should be that ... when you're defining amounts available for appropriations, you may not consider federal funds, income of the permanent fund, or budget reserve funds. Is that what it means? MS. DAVIDSON replied: Not only for when considering amounts available for appropriation, but also when considering amounts appropriated, because we compare amounts available for appropriation with amounts actually appropriated, and when you're considering either one of these two items, you may not consider federal funds, income from the permanent fund, or the budget reserve fund. CHAIR ROKEBERG mentioned that "it's not real clear." REPRESENTATIVE JAMES said: I see the comparison now, when I read lines 5 and 6, because there's two things there: there's the "available for appropriation" and "the amount appropriated". So, I think that's what they meant, that for purposes of this subsection, when they're talking about - at the beginning of (b) - amounts available for appropriation or appropriated from federal funds, ... there is an "available for appropriation" and "amount appropriated". CHAIR ROKEBERG asked: Would it be fair to say that it could be redrafted to say, "For purposes of applying this subsection, amounts available for appropriation or appropriated from federal funds do not include income from the permanent fund or this budget reserve"? Number 1512 REPRESENTATIVE JAMES said she did not see any connection at all between "that and federal funds." "Federal funds are one thing and these other things are something else," she added. CHAIR ROKEBERG said, "You're right." He asked what the distinction is between "appropriated" and "appropriation". REPRESENTATIVE JAMES offered that perhaps the language is attempting to address, in one fell swoop, both of those amounts in that first sentence, and that by doing so, it is leading to confusion. She mentioned that there are two measurements: one is, "available for appropriation", and the other is, "the amount appropriated". And they're saying that from either one of those, it doesn't include income of the permanent fund or the budget reserve fund," she surmised. CHAIR ROKEBERG said he assumes that [amounts] "appropriated from federal funds" should also be excluded. REPRESENTATIVE JAMES acknowledged that it should be, and thus it is the wrong "conjunctive." She pointed out, however, that it is still necessary to say, "available for appropriation or appropriated", and stop there, and then say, "income from the permanent fund, or the budget reserve, or federal funds should not be considered." CHAIR ROKEBERG suggested that putting a colon "there" would work, although "it's not real good language." He asked Ms. Davidson whether he and Representative James were on the right track with regard to the meaning of subsection (b). MS. DAVIDSON said that they were. She suggested that it might help to say, "For the purposes of applying this subsection, amounts available for appropriation or amounts appropriated may not consider federal funds, income from the permanent fund, or the budget reserve fund". CHAIR ROKEBERG remarked that if [SJR 24] goes out to the general public, and the general public cannot understand it, they are not going to vote for it. Number 1620 REPRESENTATIVE BERKOWITZ asked: Shouldn't the "or" on line 15 be an "and"? CHAIR ROKEBERG said: "I would think so, also.... That's what I'm worried about: it's either so poorly drafted or I don't understand what they're getting at here." REPRESENTATIVE JAMES opined that that sentence [on lines 13-15] needs to be rewritten. She also opined that it might be difficult to get "it" into one sentence. MS. DAVIDSON continued with her suggested change. It would say, "amounts available for appropriation or amounts appropriated may not consider federal funds, income of the permanent fund, or this budget reserve fund." REPRESENTATIVE JAMES offered that "does not consider" would be better than "may not consider". CHAIR ROKEBERG surmised that because [the language] is in the negative, that is why "or" is used rather than "and". REPRESENTATIVE BERKOWITZ remarked that from a legal perspective, "or" usually means: any one of these and all of them. CHAIR ROKEBERG surmised, then, that using "or" would be alright. Number 1696 CHAIR ROKEBERG made a motion to adopt Conceptual Amendment 1, which would, on line 14, add the word "amounts" between "or" and "appropriated"; add the words "should not consider" after the word "appropriated"; striking "from"; and then going on to read "federal funds, income of the permanent, or this budget reserve fund." There being no objection, Conceptual Amendment 1 was adopted. Number 1786 REPRESENTATIVE MEYER moved to report CSSJR 24(RLS), as amended, out of committee with individual recommendations and the accompanying fiscal notes. Number 1790 REPRESENTATIVE BERKOWITZ objected. REPRESENTATIVE JAMES requested confirmation that repealing the "sweep provision" [of the Alaska State Constitution], as proposed by Section 2, would also "do away with the debt." MS. DAVIDSON confirmed that it would. REPRESENTATIVE BERKOWITZ, speaking to his objection, commented: The premise that the sponsor repeats over and over again is that the CBR has somehow led to leveraging of the budget, and I brought with me our budget requests that we negotiated with the majority last year. It came to a grand total of $9,571,000. Now, I don't know whether the majority helped leverage it up the other $140 million - it may well be - but our contribution and use of the CBR is clearly overstated, and to use that as a premise for advancing this constitutional amendment seems a little flawed. I also have a little difficulty reconciling the sponsor's other proposed amendment with this. In that other constitutional amendment, he requires a supermajority to get to increased funds, on the theory that if you require a supermajority, it makes it harder to spend more. And here, he seems to suggest that if we have a simple majority, you can access funds and that will decrease the budget, and it seems that those are somewhat discordant notions of how the budget works. CHAIR ROKEBERG remarked that in drawing on his own experience, with few exceptions, he does not find Representative Berkowitz's analysis of the situation to be accurate. REPRESENTATIVE BERKOWITZ asked Chair Rokeberg whether he had information to the contrary regarding how much [the House minority] negotiated, which he recalled to be roughly $10 million. Number 1924 REPRESENTATIVE JAMES said that according to her evaluation of SJR 24 it is very likely that there would never be a time when they could access the CBR with a majority vote unless "we're going to do a real ramp-down of spending." CHAIR ROKEBERG argued that [SJR 24] is "supposed to encourage it more often," since just a majority vote would be required. REPRESENTATIVE JAMES pointed out, however, that accessing the CBR could only be done "if the money that you have is less than last year's budget, and that's all the further you can go with it," otherwise a [three-fourths] vote would be required. REPRESENTATIVE BERKOWITZ remarked that from the minority's perspective, or at lease from his perspective, "this" is somewhat of a mute argument because the CBR is going to be gone in two years anyway. He reiterated that he is having a difficult time reconciling SJR 24 with the sponsor's other amendment. He continued: I also have concerns with the language here: there's loose terms - we don't know what "unrestricted general fund" is. It's unclear how the mechanism works. And, in the [Alaska State] Constitution, I thought we were striving for clarity and simplicity, and this amendment doesn't move us in that direction. CHAIR ROKEBERG remarked that in terms of clarity, Amendment 1 has certainly helped a little bit. He acknowledged that in the last couple of years, with regard to the [three-fourths] vote, there has been less difficulty in working towards common goals. He noted, however, that he does not share Representative Berkowitz's thoughts regarding the elimination of the CBR in two years. REPRESENTATIVE BERKOWITZ asked for an explanation of why, on the one hand, a [simple] majority vote on the CBR would help diminish spending while, on the other hand, a supermajority [vote] on a spending cap is also supposed to diminish spending. REPRESENTATIVE JAMES, returning to the motion regarding SJR 24, opined that the language in the resolution is complicated, and therefore she is sure that the public will vote "no" because it is not easily understood. She offered that the only way to fix the CBR is to repeal it and start over, making the language specifically clear with regard to what is intended. "The language in the original CBR was so strange and so misunderstood [because] of the way it was drafted - as I understand it, on a napkin in the middle of the night - that that's what we got, and this sounds like they're trying to fix something that's already so flawed it can't be fixed," she added. Number 2108 A roll call vote was taken. Representatives James, Coghill, Meyer, and Rokeberg voted to report CSSJR 24(RLS), as amended, out of committee. Representatives Berkowitz and Kookesh voted against it. Therefore, HCS CSSJR 24(JUD) was reported out of the House Judiciary Standing Committee by a vote of 4-2.
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