Legislature(1995 - 1996)
04/24/1995 01:12 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HJR 40 - REPEAL BUDGET RESERVE FUND (ART IX SEC 17) Number 700 JOHN BITNEY, Legislative Assistant, Representative Terry Martin, sponsor of HJR 40, introduced the resolution. This started off in the Senate as a major fiscal reform package that included other changes to the Constitution as well as various amendments to statute. As the package was moving through the body, and through discussions on all facets of the package as a whole, some of the portions became amended and some of them dropped off. What finally went through the last night of the legislative session in 1990, was the language that we have now in the Constitution which creates the constitutional budget reserve (CBR). That concept was placed on the ballot last year and was passed by the voters. Once we actually tried to apply the language that was in the constitutional budget reserve, it quickly became apparent that there was a lot of ambiguity in the language in terms of how it was to be applied. Immediately, the question came up over Section (a) of the amendment which described which proceeds were to go into the constitutional budget reserve. There was a key phrase in there called "all proceeds from an administrative proceeding." The question immediately came up as to what exactly an administrative proceeding meant. This became a matter of contention until we received an Attorney General's Opinion from Charlie Cole which said that we did not take the proceeds from any administrative proceeding until it got to the point of adjudication, where we had to go in front of a hearing officer or the court system to resolve a dispute between the state and a company. However, within statute, we have a process by which most claims are settled between the state and a company, called an informal conference. This was, by far, where most of the settlements that come to the state actually occur. Under the Attorney General's Opinion at the time, he decided that the informal procedures could go into the general fund. Shortly afterward, we had a lawsuit on that matter, and they construed that term "administrative proceeding" a little bit more liberally than the attorney general had. The result was that last session, the legislature was faced with returning some substantial sums that had come into the state's treasury under that informal process. MR. BITNEY said we had a bill last year that attempted to define some of the terms in subsection (b) of the constitutional reserve in regards to what is available for appropriation, and how we access the CBR under subsection (b) with a majority vote. The legislature passed a vote trying to define those terms. Again we were taken to court, and then now we have another decision from the Alaska Supreme Court. Section (c) of the CBR states that the legislature may appropriate from the constitutional budget reserve with a three quarters vote for any public purpose. Subsection (d) states that you have to pay it back. MR. BITNEY said that what he was getting at is that Representative Martin feels that we basically have a section of our Constitution that is unworkable, and that what was given to the voters turned out not to be entirely true, in practice. It is his hope, realizing that this resolution would require a two thirds vote in both the House and the Senate, as well as approval by the voters. We realize this is an interim project, and will probably take a lot of discussion with the public to present what has happened and what we would like to do. It is his hope to work on it in the House Finance Committee over the interim to discuss what steps need to be taken to clear up the language within the constitutional budget reserve, and perhaps look at taking a measure to the voters in next fall's election. JACK FARGNOLI, Senior Policy Analyst, Office of Management and Budget, Office of the Governor, opposed HJR 40. Part of our concern about the bill is that it would tend to pre-empt a Fiscal Planning Commission which is going to be looking at long-range reserve funds and policies, and this one in particular. That, of course, would be mitigated by holding it over with the commission trying to complete its charge. The second concern we have is that a simple repeal would leave us, in the absence of any such mechanism -- if you recall, the whole intent that is universally accepted about what this fund was supposed to do is to, in some sense, take money off the table to help avoid the shock of putting it on the table in lumps as it came in. If we were to remove it, we would have that situation again. That is the other part of our concern about it. REPRESENTATIVE FINKELSTEIN asked Mr. Fargnoli if in his opinion has this resulted in money being taken off the table that is coming in from settlements and making it harder to get at that money for use in a current budget. Have those two goals that were explained to the public been met? MR. FARGNOLI answered that in general those goals have been met. Selective litigation has created complication, but in general, it has kept money off the table and has made it harder to get money out of the fund and make it useful. To some degree that was the purpose of it, and that has happened. TAPE 95-51, SIDE B Number 000 REPRESENTATIVE TOOHEY asked if basically our costs are over and above last year, and we do not have the funds. MR. FARGNOLI answered basically that is correct. REPRESENTATIVE TOOHEY asked what would happen if we could not pay this money back and the fund goes away. MR. FARGNOLI answered that if this were repealed, there would need to be language saying that prior obligations would become void, and that money in the fund would lapse to the general fund. That would be their proposal. REPRESENTATIVE TOOHEY asked if Mr. Fargnoli had a crystal ball telling him how much money would be coming into this account in the next ten years, in terms of future settlement money. MR. FARGNOLI had no idea. REPRESENTATIVE FINKELSTEIN stated that prior to this previous settlement, it was up to $4,000,000,000, and now it is around $3,000,000,000. MR. FARGNOLI said the reason he says he has absolutely no idea is because that number has gone up and down more than one or two billion a year, in the last couple of years, so it is not like we do not know what settlements are out there, but it is difficult to tell how much there will be from time to time. The Department of Law also has confidentiality restraints. CHAIRMAN PORTER asked Mr. Fargnoli if in order to get into this constitutional budget reserve fund, without a three quarters vote, with just a majority vote, would we have to spend the earnings reserve, the permanent fund, and all of those other funds first. MR. FARGNOLI said yes, that is what would be required. NEIL SLOTNICK, Department of Law, stated he had been asked to come to the hearing in case there were questions for him. He was also asked to comment on whether they saw any legal problems with this resolution. The Department of Law does not see any legal problems with this resolution, and that it would do what it purports to do. There are a couple of potential ambiguities that could be clarified by transitional language. For example, the question of where does the money that is now in the constitutional budget reserve go if this repeal is adopted by the voters. He would argue that it would lapse into the general fund; that could be stated specifically in a transitional statement. A similar question is, what happens to the repayment obligation that is specified in Section 17(d)? In his view, that repayment obligation would be extinguished, and it could be specified in a transitional statement. CHAIRMAN PORTER closed the public hearing on HJR 40. He asked John Bitney if the motion of more clear transitional language might be something that the Finance Committee would want to look at. MR. BITNEY answered that in introducing the bill, the sponsor had preferred not to put that in at this time just for the sake of not trying to get the discussion focused on that at this point. It is his intent in introducing it, to try to focus in on the CBR language and the amendment itself, and then, yes, to actually do transitional language as we go through the process. The question remains out there as to what to do with the general funds and the permanent funds. Number 400 REPRESENTATIVE TOOHEY moved to pass the resolution out of committee with the zero fiscal note and individual recommendations. REPRESENTATIVE FINKELSTEIN objected. A roll call vote was taken. Representative Finkelstein voted no. Representatives Toohey, Green and Porter voted yes. HJR 40 passed out of committee with a three to one vote. REPRESENTATIVE FINKELSTEIN moved to rescind the vote. CHAIRMAN PORTER stated that when we have a full committee, we will move to rescind the motion and take another vote. HJR 40 - REPEAL BUDGET RESERVE FUND (ART IX SEC 17) (CONTINUED) CHAIRMAN PORTER announced they had a motion to rescind their action on failing to adopt HJR 40. Hearing no objection, that motion passed. REPRESENTATIVE GREEN moved to pass HJR 40 out of committee with individual recommendations and attached fiscal notes. REPRESENTATIVE FINKELSTEIN objected and a roll call vote was taken. Representatives Vezey, Toohey, Green and Porter voted yes. Representative Finkelstein voted no. HJR 40 moved with a four to one vote.