03/25/1997 08:07 AM House STA

 HB 78 - AMEND DEFINITION OF "PROGRAM RECEIPTS"                                
                                                                               
 The next order of business to come before the House State Affairs             
 Standing Committee was HB 78, "An Act relating to the definition of           
 certain state receipts; and providing for an effective date."                 
                                                                               
 Number 1550                                                                   
                                                                               
 JAMES BALDWIN, Assistant Attorney General, Governmental Affairs               
 Section, Civil Division, Department of Law, was the first person to           
 testify in Juneau.  The purpose of the bill was to establish in the           
 budget the program receipts as their own funding sources to provide           
 an incentive for agencies to engage in revenue generating                     
 activities that would finance state governmental operations.  The             
 funding sources would not be considered a part of the unrestricted            
 general fund.  The idea was to emphasize that these activities                
 would receive more favorable budget treatment.  Mr. Baldwin cited             
 an example whereby the Department of Law discovered that processing           
 judgments was beneficial to the department.                                   
                                                                               
 MR. BALDWIN further explained there were allegations that the bill            
 could create a dedicated fund.  However, the statutes addressed in            
 the bill made it very clear that the money would not be dedicated.            
 In other words, the power of the legislature was not restricted to            
 appropriating the money to the purpose designated in law.  That was           
 why they were referred to as "designated program receipts".  The              
 statute generally indicated that the legislature "may" appropriate            
 the money.  It was not required by law; it was a statement of                 
 intent by the legislature which almost always was honored.  Mr.               
 Baldwin cited the Marine Highway Fund as an example.  The bill,               
 therefore, would have the effect of a separate funding source in              
 the budget.  It also recognized another type of funding source -              
 corporate receipts.  The bill also provided for the receipts of               
 test marketing programs such as the fisheries.                                
                                                                               
 Number 1773                                                                   
                                                                               
 CHAIR JAMES stated her biggest concern was that these programs                
 were, currently, kept separate.  She was also concerned about the             
 practice of companies paying a large amount of money to speed up              
 the permitting process, as well as the Governor's concept of "open            
 for business".  In addition, she wondered who should pay the                  
 government to provide services - the big companies?                           
                                                                               
 TAPE 97-33, SIDE B                                                            
 Number 0001                                                                   
                                                                               
 CHAIR JAMES asked who would take care of the little guy who could             
 not afford to speed up the permitting process.  She wondered why              
 the collection of the judgments was not already being done, because           
 it was the job of the department.  She asked:  Why would it only              
 consider doing the job if the money stayed in the department?  She            
 said this was an attitude about government that she did not want to           
 go towards.                                                                   
                                                                               
 Number 0034                                                                   
                                                                               
 MR. BALDWIN replied that the department was largely funded by the             
 general fund; when there was a budget cut, it was the area that               
 received the most scrutiny, requiring a shift of resources to areas           
 of the greatest need.  There were also areas that generated                   
 revenues but were not very glamorous.  Therefore, by having that              
 revenue source available, the department could devote resources               
 away from the other general fund activities.                                  
                                                                               
                                                                               
 MR. BALDWIN further stated that there was a statute that said the             
 department could not charge the public for the provision of a                 
 normal government service unless authorized by law.  Therefore, the           
 control rested with the legislature.  The bill would not change               
 that either.  The bill controlled the development of the program              
 receipts as a funding source for activities that were sustaining              
 and providing revenue for the state treasury.  Program receipts               
 should not be held to the same standards as other unrestricted                
 general fund activities that were viewed differently by the                   
 legislature.                                                                  
                                                                               
 Number 0165                                                                   
                                                                               
 CHAIR JAMES asked Mr. Baldwin whether it would be possible for the            
 Department of Law to ask for authorization from the legislature for           
 the collection of the judgments.                                              
                                                                               
 Number 0186                                                                   
                                                                               
 MR. BALDWIN replied that the request would convert general fund               
 money into contractual money.                                                 
                                                                               
 Number 0195                                                                   
                                                                               
 CHAIR JAMES replied that the program receipts were still general              
 funds.                                                                        
                                                                               
 Number 0207                                                                   
                                                                               
 MR. BALDWIN replied that general funds were what the legislature              
 said they were.  They were decided and defined by law.  He said we            
 did not want to create a designation of the money by law, taking              
 away the power of the legislature.  He cited the court case of                
 Salmon v. Hickel that validated the approach.                                 
                                                                               
 Number 0267                                                                   
                                                                               
 MIKE GREANY, Legislative Fiscal Analyst, Legislative Finance                  
 Division, Legislative Agencies and Offices, was the next person to            
 testify in Juneau.                                                            
                                                                               
 Number 0277                                                                   
                                                                               
 CHAIR JAMES asked Mr. Greany why the bill was needed and what the             
 benefits were.                                                                
                                                                               
 Number 0283                                                                   
                                                                               
 MR. GREANY replied that from a budgetary standpoint, it was a                 
 policy call that the legislature would have to make.  It was a                
 question of how budget sources should be characterized in the                 
 budget.  When the Legislative Finance Division created a general              
 appropriation bill, it contained three columns:  general funds,               
 other funds and total funds.  House Bill 78 allowed for the funds             
 from the program receipts now in the general funds to be moved into           
 the "other funds" column.  The funds would not be counted as state            
 funds or as caps.                                                             
                                                                               
 MR. GREANY further stated that the framers of the constitution                
 intended that all of the fees and taxes would be on the table for             
 the legislature to appropriate as it saw fit.  At statehood, there            
 were approximately two dozen different funding sources.  Now, there           
 are 70, and each fund had a good reason for being created.  The               
 constitutional budget reserve issue was a wake-up call because it             
 forced the sorting of the funds available.                                    
                                                                               
 MR. GREANY said he was not arguing against the bill.  He saw good             
 reasons for it.  It was a way of keeping certain program receipts             
 out of the budgetary discussions.  The Marine Highway Fund, for               
 example, was swept at the end of each fiscal year to meet the                 
 Constitutional Budget Reserve (CBR) repayment provisions.  There              
 was also the provision to restore the funds back into the program.            
 It was a good business practice as many private sector businesses             
 practiced.                                                                    
                                                                               
 Number 0746                                                                   
                                                                               
 CHAIR JAMES replied that this was not a private business; this was            
 government.  She asked Mr. Greany whether there were three columns            
 in the budget currently.                                                      
                                                                               
 MR. GREANY replied that for appropriation purposes, there were only           
 "general funds" and "other funds" that were broken down further.              
 For example, there were the pure general fund, the general fund               
 match, and the general fund program receipts that were broken down            
 even further.  The Administration about two years ago took the                
 general fund program receipts and carved out the designated                   
 portion.  Right now, the designated program receipts were still               
 part of the general fund.  The bill would take the designated                 
 general fund program receipts and point to other funds.                       
                                                                               
 Number 0852                                                                   
                                                                               
 CHAIR JAMES stated that the legislature was cutting the budget                
 based on the general fund, with which she did not agree.  She asked           
 Mr. Greany how the bill would affect the bottom line of the budget.           
                                                                               
 Number 0924                                                                   
                                                                               
 MR. GREANY replied that it would depend on how the legislature                
 chose to view the budget.  Some believed that every fund type                 
 should be scrutinized, even federal funds.  The biggest scrutiny              
 had been over the general funds.  However, more were now looking at           
 the total budget.  Therefore, by identifying different funding                
 sources, they could be tracked separately.                                    
                                                                               
 Number 1031                                                                   
                                                                               
 REPRESENTATIVE ELTON stated that the letter from the Governor dated           
 January 16, 1997, asserted that the bill would not sacrifice fiscal           
 information or legislative prerogative.  The testimony of Mr.                 
 Greany almost indicated that the bill would preclude legislative              
 prerogative on how the program receipts could be spent.                       
                                                                               
 Number 1064                                                                   
                                                                               
 MR. GREANY replied that that was not his intent.  It was a matter             
 of how the funds would be tracked and where they would appear in              
 the appropriation bill.                                                       
                                                                               
 Number 1089                                                                   
                                                                               
 REPRESENTATIVE ELTON asked Mr. Greany, whether the receipts from a            
 test fishery would be identified as a program receipt, then                   
 appropriated through the appropriation process.                               
                                                                               
 MR. GREANY said yes, it could be appropriated for any other                   
 purpose.                                                                      
                                                                               
 REPRESENTATIVE ELTON asked Mr. Greany:  If the bill provided for a            
 way to show that if the receipts were cut, did it not affect the              
 budget gap?  In addition, the bill would provide a way of showing             
 that money did not need to be cut in another area to make up for              
 the growth of receipts.                                                       
                                                                               
 Number 1189                                                                   
                                                                               
 MR. GREANY replied that it depended on how the fiscal gap was                 
 defined.  Was it defined in terms of general funds or in terms of             
 the entire state budget?  The fiscal gap up to this point was                 
 looked at in terms of the general fund only.  The bill would take             
 the designated program receipts out of the fiscal gap.                        
                                                                               
 Number 1313                                                                   
                                                                               
 REPRESENTATIVE ELTON stated that any governmental service had to              
 meet a market test from those that paid for the service, unlike a             
 general fund revenue.  If a segment of the economy was willing to             
 pay for a service, it met the market test.  Therefore, if a receipt           
 was taken away, it would hurt the people willing to pay for it.  He           
 described general fund dollars as those that were coming through              
 the tax receipts.                                                             
                                                                               
 Number 1381                                                                   
                                                                               
 MR. GREANY replied that that was the philosophy that the dedicated            
 fund states operated under.  Oregon's highway dedicated fund was              
 established to fund its Department of Transportation.  The                    
 constitutional framers rejected that type of model, however, for              
 Alaska.  In addition, Mr. Greany wondered whether the money from              
 the motor vehicle services was a user fee or a tax, for example.              
 Therefore, should it be used as a dedicated fund or as a general              
 fund?  It had been characterized as a general fund, but it was                
 special because it had a program receipt designation.  The division           
 took in more money than it spent, and the rest went into the                  
 general fund.                                                                 
                                                                               
 Number 1553                                                                   
                                                                               
 CHAIR JAMES announced she would hold the bill in the committee to             
 think about it further.