Legislature(2003 - 2004)
05/07/2003 08:03 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HJR 9 - CONST AM: APPROPRIATION/SPENDING LIMIT Number 1083 CHAIR WEYHRAUCH announced that the next order of business would be HOUSE JOINT RESOLUTION NO. 9, Proposing amendments to the Constitution of the State of Alaska relating to an appropriation limit and a spending limit. Number 1100 GINGER BLAISDELL, Staff to Representative Bill Stoltze, Alaska State Legislature, pointed out, on behalf of Representative Stoltze, sponsor, that [CSHJR 9(W&M)] is before the committee. This resolution [proposes] an appropriations limit. Basically, CSHJR 9(W&M) has provisions that allow a 2 percent cumulative growth based on the prior two fiscal years, which, including the capital and operating budgets, equates to about $31 million a year in state general funds. CHAIR WEYHRAUCH asked whether the resolution would average the two prior years and take 2 percent of that. MS. BLAISDELL clarified that it isn't an average. The two years would be based on the most recent final fiscal year (FY). For example, they are currently working on the FY04 budget, the state is operating in FY03 fiscal year, and the FY02 fiscal year is complete. In planning FY04, therefore, one would review FY02 because it is complete. She reiterated that the figures would include capital and operating appropriations. However, there are some exclusions, which are specified in the resolution under Section 1, subsection (a). Number 1264 REPRESENTATIVE SEATON moved to adopt CSHJR 9(W&M) as the working document. REPRESENTATIVE LYNN objected for discussion purposes. CHAIR WEYHRAUCH said it would be helpful if Ms. Blaisdell could bring in an illustration of how HJR 9 actually works, how the formula is applied, and what the result of the formula would be. He noted that after recently meeting with the living delegates to the Alaska State Constitution, he would rather that amendments to the constitution be as clear and simple and grammatically correct as possible. MS. BLAISDELL said that she reviewed FY00 and calculated what the budget limitations would be today had HJR 9 been in place. She then began to go through CSHJR 9(W&M) step by step. Page 1, line 6, specifies a 2 percent growth from the prior two completed fiscal years, which amounts to approximately $31.8 million each year. On page 1, line 10, the exclusions begin. Ms. Blaisdell clarified that state spending is about $3.4 billion. REPRESENTATIVE SEATON surmised that 2 percent of $3.4 billion would be $68 million. MS. BLAISDELL agreed, but pointed out that the state spending upon which the formula is based would be two years prior. She specified that $67.1 million would be the first amount that would be used to grow from a two-year prior budget. She then returned to the exclusions from the 2 percent growth, which would also be excluded from the base budget from which the growth would begin. She reviewed those exclusions as listed under Section 1, subsection (a)(1)-(10). She clarified that Section 1, subsection (a)(8) refers to appropriations appropriated in a prior year that weren't fully spent and were therefore reassigned. She pointed out that in Section 1, subsection (a)(9) is typically referred to as interagency receipts or duplicated expenditures, and that subsection (a)(10) refers to subsection (b), which allows an additional 2 percent growth upon a three-quarters vote of the legislature. She explained that in Section 1, subsection (b) specifies that the base calculation is always a 2 percent growth but in any year that 2 percent can be exceeded with a three-quarters vote. Therefore, the maximum growth that could be achieved is 4 percent. Number 1734 REPRESENTATIVE SEATON surmised that since paragraph (10) is under subsection (a), which specifies: "This subsection does not apply to", then the 2 percent never becomes part of the base. MS. BLAISDELL answered that actually it does because paragraph (10) refers specifically to subsection (b), which specifies that an additional 2 percent growth can be obtained. She added that in Section 1, subsection (a) doesn't apply to the second 2 percent growth, and therefore the base won't ever count the 3 and 4 percent growth. The 2 percent growth would be cumulative, while the exemptions would be the nine specified items plus the additional 2 percent. CHAIR WEYHRAUCH posed a situation in which under Section 1, subsection (b), the legislature made a 4 percent [growth] in one year and a 3 percent [growth] in the second year. He asked if those would be included in the "look-back" calculation. MS. BLAISDELL replied no. CHAIR WEYHRAUCH offered his understanding, "So, it's only if you assume it was a 2 percent in the previous two years. So, all those increases above the 2 percent would be a fiction for purposes of calculating your budget increase." MS. BLAISDELL replied yes, and specified that those increases above the 2 percent would be excluded from calculating the budget increase. She confirmed that the look-back years would only be based on the 2 percent, and that the legislature could use a budget increase of less than 2 percent but not more than 2 percent. Number 1871 REPRESENTATIVE SEATON surmised that 5 percent could never be used because of the 2 percent limitation in the normal appropriation process. Under Section 1, subsection (b), a three-quarter vote would only allow an additional growth of 2 percent. CHAIR WEYHRAUCH posed a situation in which - all at the same time - the City of Anchorage was hit by an earthquake similar to that in 1964, the City of Fairbanks was hit by winds, and Southeast Alaska was subject to a Thanksgiving Day flood in addition to high tides similar to those of 1986. If the legislature was faced with such an extreme cumulative emergency, would the legislature be able to make the necessary appropriations to deal with those significant public emergencies, even if they far exceeded 6 percent. MS. BLAISDELL replied yes, and specified that appropriations for the above scenario could be any amount because they fall into the emergency category, which is excluded from this appropriations limit. She informed the committee that when the first constitutional spending limit was implemented, there was fear of losing significant federal funds. Therefore, an allowance to declare an economic disaster was included. She noted that the governor has declared disasters such as that with the Bristol Bay fisheries. As long as the disaster declaration is in place, the legislature can appropriate as many funds as necessary and from whatever fund source it decides. REPRESENTATIVE SEATON highlighted that although such funds could be appropriated, those funds would fall under the exclusions and thus wouldn't be taken into account when there is a recalculation of the base. He said he recalled that the original HJR 9 included a subsection (c) in Section 1 that directed the governor to reduce spending if the appropriations were above the limit. He asked Ms. Blaisdell for a copy of that language. MS. BLAISDELL relayed that Section 1, subsection (c), of the original HJR 9 read: If appropriations for a fiscal year exceed the amount that may be appropriated under (a) and (b) of this section, the governor shall reduce expenditures by the executive branch for its operation and administration to the extent necessary to avoid spending more than the amount that may be appropriated under (a) and (b) of 20 this section. MS. BLAISDELL said that the aforementioned provided the governor with clear instructions that spending would need to be reduced and that he/she shouldn't over spend an appropriation with the intention of declaring a disaster. The language holds the governor accountable within the 2 or 4 percent growth. Number 2128 REPRESENTATIVE SEATON expressed concern with the removal of subsection (c). The purpose of this amendment to the constitution is to place a firm cap on spending that will be enforced, he opined. Already, the legislature routinely violates the constitutional mandate to spend one-third of all appropriations on capital expenditures. If the legislature appropriates money beyond the proposed limit, then it doesn't cap spending. Therefore, he suggested inserting the language found in subsection (c) of the original HJR 9. With that language, he predicted, this constitutional amendment can be presented as an effective spending cap. He indicated that he would be willing to offer the aforementioned as a conceptual amendment. MS. BLAISDELL agreed to draft that language as an amendment. REPRESENTATIVE HOLM directed attention to the memorandum from Tam Cook, Director, Legislative Legal and Research Services. He said that Ms. Cook's memorandum expresses concern that HJR 9 is unconstitutional because it would make a sweeping change to the way the legislature conducts its business. CHAIR WEYHRAUCH pondered whether, if this is a constitutional amendment, it matters if it's unconstitutional. If an appropriations limit was adopted as a statute, it would be in conflict with the constitution but this proposes an amendment to the constitution, and would therefore be "constitutional." REPRESENTATIVE HOLM pointed out, however, that Ms. Cook's concern is that there may be a determination that this resolution tells the governor what to do. He asked how the aforementioned would relate to the powers of the branches of government, and whether it's legal for the legislature to establish upper [spending] limits. REPRESENTATIVE SEATON said he viewed subsection (c) as analogous to telling the governor that if the appropriation exceeds the constitutional mandate, it merely requires the governor to use the power the position has, the line item veto. Number 2327 CHAIR WEYHRAUCH said that he didn't see anything in the resolution that restricts the executive branch's authority to reduce the budget. This resolution merely restrains the legislature. REPRESENTATIVE HOLM interpreted Representative Seaton's comments to mean that he wanted to restrain the governor as well. REPRESENTATIVE SEATON clarified that he merely wanted to require that if the appropriation is above [the cap] the governor would be instructed to use his/her line item veto and make the necessary constitutional reductions in order to bring the budget in line with the constitution. He agreed that it would be a demand on the governor - a requirement that the governor act. REPRESENTATIVE GRUENBERG expressed concern regarding whether the legislature's hands would be tied in a significant emergency situation. He explained that in the House Special Committee on Ways and Means meeting he'd expressed concern with regard to inflation, over which the legislature has no control, and with regard to unforeseen crises. At that meeting, he relayed, it was determined that the language on page 1, line 13, might provide "an out" because of the reference to "disaster." Although normally the definition of disaster would refer to a natural disaster, perhaps that definition could be expanded to include other crises. REPRESENTATIVE GRUENBERG, referring to subsection (c) of the original HJR 9, noted that he has problems with that language because he questions whether it removes the legislature from the veto override process. He said he was glad that that language had been deleted. Number 2579 REPRESENTATIVE BERKOWITZ asked why the word "spending" was dropped from the title. MS. BLAISDELL said she wasn't sure, but noted that it occurred in the House Special Committee on Ways and Means. REPRESENTATIVE GRUENBERG commented that he didn't recall any discussion about that. REPRESENTATIVE SEATON offered that perhaps with the deletion of subsection (c), which contained the only reference to spending, that language was no longer necessary in the title. He pointed out that his suggested conceptual amendment would be to reinsert subsection (c), and therefore perhaps the reinsertion of "spending" into the title ought to be included as apart of that conceptual amendment. CHAIR WEYHRAUCH announced that HJR 9 would be held over. [The motion to adopt CSHJR 9(W&M) as the working document was left pending.]
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