Legislature(1995 - 1996)

04/18/1995 08:10 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HJR 40 - REPEAL BUDGET RESERVE FUND (ART IX SEC 17)                         
                                                                               
 Number 485                                                                    
                                                                               
 REPRESENTATIVE TERRY MARTIN, sponsor of HJR 40, said the                      
 Constitutional Budget Reserve Fund (CBR) is not what it was                   
 intended to be.  It has not accomplished any of the original goals            
 of cutting the budget and getting state spending under control.               
 Instead, it has helped increase state spending by compelling                  
 majority and minority members of the legislature to work out deals,           
 including expensive capital projects, to obtain the necessary                 
 three-quarters vote to gain access to the CBR.  In addition, the              
 CBR might have a negative effect on permanent fund dividends                  
 because those funds would have to be spent before the CBR could be            
 tapped.  It could also have a devastating impact on the state's               
 cash flow, delaying availability of funds when the general fund               
 runs low.  The legislature has borrowed from the CBR and not paid             
 it back, in spite of the requirement that debts be paid back before           
 the end of the next fiscal year. The voters should be allowed to              
 repeal the CBR and avoid the potential disasters it creates.                  
                                                                               
 Number 562                                                                    
                                                                               
 REPRESENTATIVE MARTIN continued, adding the legislature did not               
 intend to have to spend the permanent fund earnings before being              
 able to use the CBR, and Alaska can't afford to keep borrowing                
 money from the CBR.  It has become inoperative and is choking                 
 Alaska.  The voters need to be told the truth.                                
                                                                               
 Number 617                                                                    
                                                                               
 REPRESENTATIVE GREEN asked Representative Martin how a ballot                 
 measure could be phrased so it would not look like a legislative              
 raid on an account the public had set aside.  He feared it would              
 just look like a way for the Nineteenth Legislature to get their              
 "sticky fingers" on the money.                                                
                                                                               
 REPRESENTATIVE MARTIN replied people are not dumb; they will be               
 able to understand there is nothing left, and we owe $3.4 billion.            
 They will see the CBR is not workable when they have all the                  
 information.  There will be a lawsuit anyway, when the CBR is not             
 repaid after this session.  Let the people see the facts and                  
 discuss the issue during the interim.  We would really get their              
 attention if we had to tap the permanent fund dividends and there             
 were none for the people.                                                     
                                                                               
 Number 660                                                                    
                                                                               
 REPRESENTATIVE PORTER said the problem is finding a precise                   
 definition of the CBR.  People's ideas of what it means have                  
 changed.  He did not believe anyone intended the CBR to be the                
 beginning and the end of every capital budget in the state, but               
 because of court interpretations that is what it has become.  He              
 will support the Resolution.                                                  
                                                                               
 CHAIR JAMES referred to a time when they had the statutory budget             
 reserve, which contained the remainder of the money that was on the           
 table, and asked if it were possible to use that when there was a             
 cash flow shortage.  She also asked, did Legislative Budget and               
 Audit have to authorize that, or how was it accessed?                         
                                                                               
 REPRESENTATIVE MARTIN said that money was put into the CBR.                   
                                                                               
 CHAIR JAMES said technically the statutory budget reserve would go            
 away and not be there at all until the CBR was repaid and there was           
 money left.  So in reality, there never would be any money in the             
 statutory budget reserve, and in fact, if there were any it would             
 be there illegally.  Even if this Resolution passed, a ballot vote            
 would still be 18 months away.  If education were taken out of the            
 budget language, there would still be money left over which should            
 go into the CBR.  She asked where money would come from for a cash            
 flow deficit on a month-to-month basis.                                       
                                                                               
 REPRESENTATIVE MARTIN replied the automatic use of the CBR should             
 not be allowed, if we are to put a restraint on government                    
 spending.  There should not be easy access to the CBR.                        
                                                                               
 TAPE 95-50, SIDE A                                                            
 Number 000                                                                    
                                                                               
 REPRESENTATIVE MARTIN said education funding could be prorated.               
                                                                               
 CHAIR JAMES said that was her exact point.  It would be easy for              
 the legislature to prorate it and give schools 1/12 each month, but           
 that forces them into a negative cash flow, throughout the state.             
 There is no guarantee, even on a monthly basis, that there will be            
 enough money.                                                                 
                                                                               
 REPRESENTATIVE MARTIN agreed, noting money was being borrowed from            
 other accounts.                                                               
                                                                               
 Number 092                                                                    
                                                                               
 CHAIR JAMES again stated that was her point.  Before money can be             
 taken from the CBR with a simple majority vote, the earnings                  
 reserve of the permanent fund must be first expended.  She                    
 expressed concern about serious cash flow deficits and the                    
 devastating effects on the economy of the state as a whole.                   
                                                                               
 Number 135                                                                    
                                                                               
 REPRESENTATIVE MARTIN said this Resolution is not the entire                  
 answer, but it would tell the people a serious mistake had been               
 made.  The people could be shown there is no way to spend other               
 accounts first.  In any case, after the education budget is passed,           
 there will be no money in the CBR.  There will be one, maybe two,             
 lawsuits this year.                                                           
                                                                               
 CHAIR JAMES stated $600 million of the money used from the CBR was            
 directly from the reduction in the price of oil to less than $10 a            
 barrel.  She did not want to take the blame for that, and it could            
 happen again before July 1.                                                   
                                                                               
 Number 173                                                                    
                                                                               
 REPRESENTATIVE MARTIN pointed out this could be a good education              
 process for the public.  Alaska is the richest state in the Union,            
 with almost $20 billion in different accounts, and yet we are so              
 poor we cannot pay our monthly bills.                                         
                                                                               
 Number 187                                                                    
                                                                               
 REPRESENTATIVE GREEN moved to move HJR 40 out of committee with               
 attached fiscal note and individual recommendations.  There were no           
 objections.                                                                   
                                                                               
 REPRESENTATIVE MARTIN noted representatives from Legal and from               
 Management and Budget would attend the next hearing on this                   
 Resolution in Judiciary.                                                      

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