Legislature(2005 - 2006)
04/25/2005 08:39 AM House W&M
| Audio | Topic |
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| Start | |
| HJR1 | |
| HJR2 | |
| HB223 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 1-CONST AM: BALANCED BUDGET AMENDMENT 8:40:31 AM CHAIR WEYHRAUCH announced that the first order of business would be HOUSE JOINT RESOLUTION NO. 1, Proposing a balanced budget amendment to the Constitution of the State of Alaska relating to an appropriation limit. REPRESENTATIVE WILSON moved that the committee adopt CSHJR 1, Version 24-LS0156\Y, Cook, 3/7/05, as its working document. There being no objection, Version Y was before the committee. 8:41:12 AM REPRESENTATIVE ROKEBERG, speaking one of the sponsors of HJR 1, explained that Alaska has no constitutional requirement for a balanced budget, instead Alaska has a statutory requirement for the succeeding years after a current year of a balanced budget. He related his belief that Alaska should have a balanced budget policy, particularly for the current fiscal year. The constitution and the statutes seem to allow a situation in which there is a current deficit that is financed by tax anticipation notes and [the legislature can] merely budget for the succeeding year's budget, which would result in continual deficits to be corrected after the fact. This resolution is the first step in developing a long-range fiscal plan, he added. 8:42:53 AM REPRESENTATIVE ETHAN BERKOWITZ, Alaska State Legislature, speaking as one of the prime sponsors, said this resolution proposes two things: to transition to a balanced budget requirement and to require the legislature to pass a balanced budget. He related that the constitutional amendment should be simple and easy to understand with statements of principle. Any further explanation of what constitutes "balanced" can be addressed statutorily, he said. He added that this resolution will aid in finding consensus between both parties' caucuses. CHAIR WEYHRAUCH inquired as to the cite for the statutory requirement to have a balanced budget for succeeding years. REPRESENTATIVE ROKEBERG specified that the statute is AS 37.07.020(c). 8:47:09 AM REPRESENTATIVE WILSON asked how HJR 1 would change the [process that the legislature currently undergoes when balancing a budget]. REPRESENTATIVE ROKEBERG answered that there might not necessarily be many differences in terms of the "end product," instead the change will be the process the legislature uses to get to that end product. This process will provide assurance to the public that the legislature has adequate funds. He related that the constitutional budget reserve (CBR) fund has been utilized often in order to balance the budget, which is evident to the public. However, this year supplemental budgets, new funds, and other devices have been utilized, all of which seems to confuse the public, he opined. Representative Rokeberg reiterated that [under the current process] it would be possible for the legislature to actually pass an imbalanced budget and then realign in the next legislature, which he opined is bad public policy. 8:48:58 AM CHAIR WEYHRAUCH related his understanding that in the context of HJR 1, the term "balanced" refers to revenues equaling expenses rather than "fair." REPRESENTATIVE BERKOWITZ answered, "Yes." 8:49:12 AM CHAIR WEYHRAUCH proposed a hypothetical situation in which the legislature passes a budget in which revenues equal expenses, and related his understanding that the legislature could appropriate the funds to the CBR and the corpus of the permanent fund while not having enough money for state government. He surmised that the aforementioned could be considered "balanced." Furthermore, the governor could veto, through his line item authority, provisions of any budget legislation and thus the governor could throw the budget out of balance. He asked whether the aforementioned actions of the governor could be considered an unconstitutional act because this resolution only provides for the legislature. REPRESENTATIVE ROKEBERG responded that the resolution's language speaks to the submission of the budget by the governor, with follow-up action by the legislature. He opined that the aforementioned is an "excellent point" that will have to be addressed in subsequent legislation. 8:50:55 AM CHAIR WEYHRAUCH asked how this resolution would prevent fiscal gaps from occurring during low oil prices. He then questioned whether this resolution would be bad public policy because it would force the spending of money [the legislature] doesn't want to spend because oil prices are so high and revenues are greater than anticipated expenses. 8:52:30 AM REPRESENTATIVE BERKOWITZ related his belief that a balanced budget requirement forces fiscal discipline because there is no requirement for any legislature, in a year of surplus, to spend all its revenues. He recalled that previous discussions concerning long-range fiscal plans have been "too fast and too controversial" and as a consequence no progress is made. Representative Berkowitz opined that in order to make progress, the legislature needs to slowly remove some of the options for tangential amendments and debates. 8:54:01 AM REPRESENTATIVE ROKEBERG reiterated that there is no requirement [in HJR 1] to spend more than the state has, which is merely sound fiscal prudence. He then focused on Representative Wilson's question regarding potential changes with the passage of HJR 1, and suggested that this resolution would prohibit the tactic of a bifurcated budget. He explained that a bifurcated budget could result from a situation in which the majority is not able to obtain a three-quarter vote and thus decides to adjourn the session without passing a budget. The aforementioned would result in a partially funded cash flow that doesn't go into the CBR, and upon returning in January the [budget] would be revisited. Although he opined that the aforementioned tactic isn't particularly prudent, it has been discussed out of frustration. 8:55:37 AM REPRESENTATIVE GRUENBERG related his belief that HJR 1 is very clear and most voters could understand it. Although he acknowledged Representative Berkowitz's concern that there are too many undefined terms in HJR 1, he pointed out that the courts and the legislature define the terms rather than the constitution, which is what differentiates the constitution from a statute. He reiterated that the resolution should be simple so that people can understand it. CHAIR WEYHRAUCH commented that one of the issues that he reviews with these types of amendments is regarding the balance of power between the executive and the legislative branch. In reviewing HJR 1 it seems that the following language: "[Section 16.] General fund appropriations by the legislature shall not exceed anticipated revenue." cedes authority to the executive branch. However, the resolution doesn't specify the governor's authority once that happens. Also all of [the appropriation legislation] would have some impact on the budget and necessitate review of the mix as a whole in order to determine the effect on revenues and expenditures. He questioned how one would manage that in the legislature and the executive branch. He also questioned whether [the legislature] would simply cede the authority for the balanced budget amendment to the governor because if [the legislature] passes bills that don't have a balance, then it may be engaging in [an] unconstitutional act. 8:59:34 AM REPRESENTATIVE ROKEBERG, speaking to Representative Gruenberg's comments regarding the original HJR 1, related that the statement, "The budget for each fiscal year shall be balanced with the appropriations do not exceed the amounts available for expenditures under the appropriations," is different than stating, "Appropriations shall not exceed anticipated revenues." He related his belief that there is a significant problem with the [definition of] "anticipated revenues," particularly because Alaska has various sources of funds available for appropriation, including the CBR and various dedicated funds. The debate is whether or not those are considered "revenues," which is why Version Y takes a more "neutral" standpoint on the issue. REPRESENTATIVE ROKEBERG then turned his attention to Chair Weyhrauch's comments, and stated that the budget building process should ultimately be determined by the legislature and balanced before adjournment. The duty of the Finance Committees is to explain to the legislature the expenditures in the budget [and how they] will be covered by available revenues. The legislature can't restrict the ability of the governor to exercise his veto power because that's a conflict of law within the constitution. However, by exercising his/her veto power, the governor can only decrease spending as opposed to increasing it. 9:02:24 AM REPRESENTATIVE GRUENBERG related his understanding that 44 states have balanced budget amendments. He opined that perhaps an analysis of the aforementioned amendments could help determine the appropriate language for Alaska's proposal. He related that he strongly supports a balanced budget amendment. He offered that the amendment could simply state, "General fund appropriations shall not exceed anticipated revenue" in order to clarify the purpose of the resolution. He asked if the resolution should state that each house in the legislature has to pass a balanced budget to the other house or should it state that the final budget bill given to the governor has to be balanced. He noted that Representative Berkowitz intended [the later to be the intent of HJR 1]. Representative Gruenberg then surmised that the final budget signed by the governor must be balanced as well, to which he noted both sponsors nodded in agreement. He asked if this resolution refers to [budget] bills individually or the "whole ball of wax." 9:06:10 AM REPRESENTATIVE BERKOWITZ replied, "It's the whole ball of wax." For instance, there could be a situation in which budget bills were running at a deficit, but a revenue bill provided enough revenue so that the entire package came into balance, he explained. REPRESENTATIVE ROKEBERG acknowledged that there are provisions in the constitution that make distinctions between the operating and capital budgets. Therefore, it's important to clearly state on the record that the intention is for the resolution to be all encompassing. REPRESENTATIVE GRUENBERG asked if there are other states that have constitutional provisions that accomplished encompassing all the budgets [including the capital, operating, and supplemental budgets]. REPRESENTATIVE BERKOWITZ noted that the committee packet should include information from the National Conference of State Legislatures (NCSL). REPRESENTATIVE GRUENBERG clarified that his interest is in regard to [specific] text [from those states that have constitutional provisions that accomplished encompassing all the budgets]. 9:08:07 AM REPRESENTATIVE WILSON related that she agreed with the intention of this resolution, however, the public doesn't have the "time or sometimes the inclination" to become as educated as the legislature. She opined that she has a hard time transferring the final decision to the public because they aren't as informed as is an individual who is elected and whose job she believes it is to become informed on the issues. Representative Wilson said, "There's going to be a cost involved and bottom line, I don't think ... much will change ... in the long run." 9:10:19 AM REPRESENTATIVE BERKOWITZ highlighted that during his service in the legislature he has voted against every single constitutional amendment, except for subsistence. He opined that there shouldn't be a constitutional change unless it's a statement of purpose that's absolutely necessary. The requirement of a balanced budget is an issue that the public can quickly understand, he opined. Furthermore, providing an opportunity to debate and vote on such a requirement will give the public more confidence as to what happens in Juneau and would ensure the public that the legislature isn't engaging in deficit spending. Currently, the legislature does, to a certain extent, engage in deficit spending, by using the principal of the CBR. Representative Berkowitz further opined that the public understands balancing the budget, it's simple. 9:12:30 AM CHAIR WEYHRAUCH commented that he appreciates these discussions taking place because it's important to have a record fleshing out constitutional amendments. 9:12:41 AM REPRESENTATIVE ROKEBERG related that many Alaskans, including himself, assumed there was a balanced budget mandate. However, no such constitutional mandate exists. He offered that this resolution responds to the lack of a balanced budget requirement. CHAIR WEYHRAUCH again directed attention to the following language in the original [HJR 1]: "[Section 16.] General fund appropriations by the legislature shall not exceed anticipated revenue." He related his understanding that under the aforementioned language the legislature could pass all the bills it wants and rely on the spring revenue forecast and what the oil prices are going to be in the future. Under such a scenario, the legislature could say that it anticipates high revenues and thus pass a high budget. However, when the revenue forecast falls short of its predictions because the price of oil was overestimated, then the legislature can blame [the forecasters] for not anticipating the revenue shortfall. 9:14:59 AM REPRESENTATIVE BERKOWITZ offered that the term "general fund" is very restrictive because it ignores the various other funds like the CBR and other dedicated funds, which are issues that fall outside the GF. Therefore, the exceptions would swallow-up the intent. Furthermore, language such as "Expenditures shall not exceed revenues" raises the issue of what constitutes revenue. CHAIR WEYHRAUCH highlighted that the key word in Version Y is "balanced". He recalled that when the U.S. Congress passed the Gramm-Rudman-Hollings Act they began to do things such as value Yellowstone as an asset of the U.S. Therefore, he requested clarification on the meaning of the term "balanced" in the context of this amendment because accountants will see ledger issues. He then posed a situation in which the legislature is providing for a balanced budget and a citizens' initiative wants to institute a tax for cruise ships that would provide additional revenues. In such a situation would the citizens' initiative not work on tax policy because the legislature is going to pass through a balanced budget. REPRESENTATIVE ROKEBERG said, in reference to the last instance, no because it's not the intent to further restrict the legislature's hands and the initiative process is really an extension of the legislature's ability to enact legislation. He reviewed the language that he had considered and related that ultimately the discussion between he and Representative Berkowitz centered on the simplicity of constitutionalizing "balance" rather than getting caught up in the minutia. REPRESENTATIVE BERKOWITZ pointed out that the language of Section 12 of the constitution is clarified by the term "balanced." He highlighted that the aforementioned section makes reference to "proposed expenditures and anticipated income." Although the definitions of those terms might be unsettled, the totality of the understanding of what a balanced budget is with proposed expenditures and anticipated income would all be contained within the current language of the constitution, he said. Because the aforementioned terms are contained in the current language of the constitution, there is no need to address the issue of injecting new terms. 9:18:36 AM CHAIR WEYHRAUCH related his belief that if this language goes before the public, [the resolution] will pass because everyone shares the notion of living within his or her means. Despite that popular support, Chair Weyhrauch expressed concern about the nuance of the amendment and what it means for the function of government, the appropriation process, and the balance of power between the executive and the legislative branches. 9:19:11 AM REPRESENTATIVE GRUENBERG highlighted that Colorado, Louisiana, and Montana all have balanced budget amendments that are simple, general, and similar to the original HJR 1. He opined that the public could understand the aforementioned constitutional amendments, particularly Louisiana's because it deals with oil and gas revenues. He reiterated that any constitutional amendment brought before the voters needs to be simple in order to prevent confusion and mistrust of the legislature. 9:20:39 AM REPRESENTATIVE ROKEBERG said that Representative Gruenberg just made the sponsor's case for a one-word change. REPRESENTATIVE GRUENBERG said he agreed, but opined that the resolution seemed to state that only the governor would have to submit [a balanced budget]. REPRESENTATIVE BERKOWITZ offered that Section 2 [should clarify that]. REPRESENTATIVE GRUENBERG suggested that it should not just be limited to the legislature and should be put in the passive in order to avoid the veto issues. 9:21:20 AM REPRESENTATIVE BERKOWITZ agreed that Section 2 doesn't address the governor's requirements and that is something that needs to be addressed. By the same token, as with any constitutional amendment, there are going to be interpretive statutes that go with it. He related his understanding that a balanced budget occurs when expenditures match income because those are the terms that are in the constitution. As a matter of constitutional policy, it's not wise to put the definition [of balanced budget] in the constitution rather it should occur statutorily. Representative Berkowitz suggested that every legislator should read the publication entitled, "Guidelines for Constitutional Amendments". He then reviewed the eight guidelines suggested by the aforementioned publication. 9:24:14 AM REPRESENTATIVE WILSON commented that she has not seen this legislature pass a budget when there aren't matching expenditures. Therefore, she asked how this resolution will change the process. 9:25:03 AM REPRESENTATIVE ROKEBERG replied that this resolution anticipates the time when the legislature will be short of anticipated revenues, which will force the legislature to finally develop a long-range fiscal plan. He noted that over the last decade, the legislature, during times of substantially reduced revenues, has been forced to review what sources of revenue are available and what expenditures should be reduced. However, the state has been fortunate in that money has come forth or price volatility has swung in the state's favor. Representative Rokeberg stressed that one of the purposes of HJR 1 is to force some discipline on the legislature and the public. 9:26:25 AM REPRESENTATIVE GRUENBERG recalled that during the Cowper Administration, the legislature didn't pass a budget and so there was a special session. He further recalled that recently the legislature passed a budget that wasn't balanced and thus the governor had to veto many things. However, this resolution seems to require the legislature to pass a balanced budget before it adjourns. [HJR 1 was held over.]
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