Legislature(1993 - 1994)
02/23/1994 01:15 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 Reserve. "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 law." 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 referral." 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 findings." 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 committee.