Legislature(1993 - 1994)

02/23/1994 01:15 PM JUD

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

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