Legislature(2007 - 2008)SENATE FINANCE 532

01/30/2008 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 119 SCHOOL LIBRARY GRANTS TELECONFERENCED
Heard & Held
*+ SJR 14 BUDGET RESERVE FUND VOTE REQUIREMENT TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE JOINT RESOLUTION NO. 14                                                                                                
                                                                                                                                
     Proposing an amendment to the Constitution of the State                                                                    
     of Alaska relating to appropriations from the budget                                                                       
     reserve fund.                                                                                                              
                                                                                                                                
CO-CHAIR HOFFMAN,  SPONSOR, explained that he  introduced the                                                                   
bill in  order to change  the constitutional requirements  to                                                                   
extract  funds from  the budget  reserve  (CBR) account  from                                                                   
three-fourths to  two-thirds of the members of  each house of                                                                   
the legislature.   Prior legislators  have been  reluctant to                                                                   
pay back  the $5.2 billion in  the budget reserve  because of                                                                   
the high  standard to extract funds.   It has been  said that                                                                   
as a result of the three-fourths  vote, there have been votes                                                                   
that required  additional appropriations in  capital projects                                                                   
or  operating projects.   He  maintained that  was never  the                                                                   
original intent of the constitutional amendment.                                                                                
                                                                                                                                
Co-Chair  Hoffman recalled  when the  concept of raising  the                                                                   
standard was first  brought up in the House.   He pointed out                                                                   
the current  financial  position in Alaska,  where there  are                                                                   
several billions  of dollars as potential savings.   Co-Chair                                                                   
Hoffman  emphasized that  the  proper procedure  would be  to                                                                   
repay the  constitutional  budget reserve  and return  to the                                                                   
original intent of the constitution.   He thought there could                                                                   
be  a simple  majority, but  that  there should  be a  higher                                                                   
standard.                                                                                                                       
                                                                                                                                
9:57:56 AM                                                                                                                    
                                                                                                                                
Senator   Dyson  asked   about   the  committee's   intention                                                                   
regarding  the  bill.   Co-Chair  Stedman  replied  that  the                                                                   
intent was to pass it out of committee  today.  Senator Dyson                                                                   
requested that  SJR 14 be  held in committee  for a  few more                                                                   
days.  Co-Chair Hoffman said he had no problem with that.                                                                       
                                                                                                                                
9:58:55 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  related that there  is an article  from the                                                                   
Juneau Empire  stating support for  the bill (copy  on file.)                                                                   
He referred to  Senator Wilken's support for  the ideas found                                                                   
in bill.                                                                                                                        
                                                                                                                                
Senator Elton calculated that  under a two-thirds requirement                                                                   
it would take  14 votes in the  Senate to access the  CBR and                                                                   
27 in the  House, which is only  a change of one less  in the                                                                   
Senate and three less in the House.   Co-Chair Hoffman agreed                                                                   
that  the  problem  has  been  in the  House.    Three  votes                                                                   
difference in the House lowers the bar quite a bit.                                                                             
                                                                                                                                
10:00:21 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman MOVED  to ADOPT  Amendment  1, labeled  25-                                                                   
LS1350\A.1, Cook, 1/25/08:                                                                                                      
                                                                                                                                
     Page 1, line 1:                                                                                                            
     Delete "an amendment"                                                                                                    
     Insert "amendments"                                                                                                      
                                                                                                                                
     Page 1, line 2:                                                                                                            
     Delete "appropriations from"                                                                                             
                                                                                                                                
     Page 1, following line 7:                                                                                                  
     Insert a new resolution section to read:                                                                                   
     * Sec.  2. Article IX,  sec. 17(d), Constitution  of the                                                                 
     State of Alaska is amended to read:                                                                                        
          (d)  If an appropriation is made from the budget                                                                      
     reserve fund,  until the amount appropriated  is repaid,                                                                   
     the amount  of money in  the general fund  available for                                                                   
     appropriation at the end  of each succeeding fiscal year                                                                   
     shall  be  deposited in  the  budget reserve  fund.  For                                                               
     purposes of this subsection,  each amount deposited into                                                               
     the fund under  (a) of this section shall  be treated as                                                               
     a repayment of money appropriated  from the fund. If the                                                               
     amount deposited  under (a) of this section  exceeds the                                                               
     amount  due in  repayment,  the excess  amount shall  be                                                               
     treated  as a  credit to  be applied as  a repayment  of                                                               
     money  appropriated from  the  fund in  the future.  The                                                               
     legislature shall implement this subsection by law."                                                                       
                                                                                                                                
     Renumber the following resolution section accordingly.                                                                     
                                                                                                                                
Co-Chair Stedman OBJECTED for discussion purposes.                                                                              
                                                                                                                                
Co-Chair  Stedman  explained   that  Amendment  1  moves  the                                                                   
legislature   away   from   the    day-to-day,   year-to-year                                                                   
management of  the CBR.  When remunerations  from settlements                                                                   
are available,  the monies  go into the  CBR as an  offset of                                                                   
what  is   owed.    Most   likely  there  will   be  sizeable                                                                   
adjustments any time  there is an audit request  going out on                                                                   
PPT.  Such a payment would offset  what is owed and lower the                                                                   
debt.   The state  owes the  CBR roughly  $5 billion  and has                                                                   
about  a $3 billion  balance.   There is  a high  probability                                                                   
that a  large sum  of that  balance could  be paid  back this                                                                   
year.   Over  the next  several  years the  CBR could  easily                                                                   
approach $8 billion to $10 billion.   Co-Chair Stedman wanted                                                                   
the legislature to  recognize that when claims  were made for                                                                   
taxes  or settlements,  they would  be returned  to the  CBR.                                                                   
There will need to be future discussions  regarding what size                                                                   
the CBR should be.                                                                                                              
                                                                                                                                
10:04:02 AM                                                                                                                   
                                                                                                                                
Senator  Elton quoted  from the amendment,  "for purposes  of                                                                   
this subsection,  each amount deposited  into the fund".   He                                                                   
asked if  income earned  by the  fund is a  deposit or  if it                                                                   
only  refers  to revenues  from  the  sources stated  in  the                                                                   
constitution.   Co-Chair  Stedman replied  that it would  not                                                                   
include  realized or  unrealized earnings.   It is  targeting                                                                   
settlements such  as those from oil taxation,  which could be                                                                   
very sizeable.                                                                                                                  
                                                                                                                                
10:05:04 AM                                                                                                                   
                                                                                                                                
Senator Dyson thought  the amendment did not  quite get where                                                                   
the sponsor wants to go.  It makes  assumptions about optimal                                                                   
levels.    Senator   Dyson  reported  that  he   requested  a                                                                   
recommendation of what the ideal  level for the CBR is and he                                                                   
never received  an answer.   He applauded  the intent  of the                                                                   
amendment.   He guessed that there  was a formula  that would                                                                   
guide the  state.  He  stated support  for having a  high bar                                                                   
for removing money when the balance  is below the recommended                                                                   
level and  a lower  bar when there  is plenty  of money.   He                                                                   
wondered  what  other  large enterprises  use  as  a  guiding                                                                   
formula  for  their   rainy  day  accounts.     Part  of  the                                                                   
discussion should involve expert advice.                                                                                        
                                                                                                                                
10:07:45 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman  thought that it would be  very difficult to                                                                   
find a  comparison to the state  with its very  large wealth.                                                                   
He  did  not think  there  was  an  exact  model to  use  for                                                                   
comparison.                                                                                                                     
                                                                                                                                
10:09:10 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  WITHDREW  his OBJECTION  to  Amendment  1.                                                                   
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
Co-Chair Stedman  concluded that the intent  of the amendment                                                                   
is  to  move  from crisis  management  to  planning  for  the                                                                   
future.                                                                                                                         
                                                                                                                                
At-ease: 10:09:48 AM                                                                                                          
                                                                                                                                
Resume: 10:10:41 AM                                                                                                           
                                                                                                                                
Co-Chair Stedman referred the  committee to a copy of Article                                                                   
09, Section (a), of the Constitution  of the State of Alaska.                                                                   
He  suggested  members read  it  because  it applies  to  the                                                                   
amendment and to Senator Elton's  question regarding deposits                                                                   
to the fund.                                                                                                                    
                                                                                                                                

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