Legislature(1993 - 1994)

04/11/1994 09:15 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE BILL NO. 505                                                           
       An  Act   making  appropriations   to   and  from   the                 
       constitutional budget reserve fund under  art. IX, sec.                 
       17(c),  Constitution   of  the  State  of  Alaska,  for                 
       operating and capital expenses of state  government for                 
       fiscal year 1994; and providing for an effective date.                  
  Co-chair Pearce  directed that  CSHB 505  (Fin)(brf fld)(efd                 
  fld)  be  brought before  committee  for presentation  of an                 
  overview by representatives of the  administration.  The Co-                 
  chair referenced  file materials  consisting of  transmittal                 
  information from the Governor, the  original House Bill, and                 
  the  version  that   ultimately  passed  the  House.     She                 
  specifically noted House failure of  both the budget reserve                 
  fund and the effective date.                                                 
  Senator Kerttula inquired concerning a  legal analysis.  Co-                 
  chair Pearce said there  is none.  She explained  that Judge                 
  Reese provided a one-page decision with details to follow.                   
  SHELBY STASTNY,  Director, Office of  Management and Budget,                 
  came  before committee.    He  advised  of support  for  the                 
  original  bill as  submitted  by the  Governor  and lack  of                 
  support for the version passed by  the House.  The intention                 
  of  HB  505 was  to lay  out  in the  findings a  history of                 
  amounts  flowing to the  constitutional budget  reserve fund                 
  and   thereafter   placed  in   the   general  fund.     The                 
  administration believes  that action taken  by the  attorney                 
  general was  appropriate.   The administration  subsequently                 
  did as required and followed  the attorney general's opinion                 
  in placing moneys  in the  general fund.   To cure  problems                 
  raised   in   litigation,   the    administration   proposed                 
  appropriation of $945  million from the general  fund to the                 
  constitutional budget  reserve fund.   Addition  of interest                 
  through the end of  March brings the total to  $978 million.                 
  Once  appropriated to  and deposited  in the  constitutional                 
  reserve, the funding would  be immediately transferred  back                 
  to  the general  fund to  meet ongoing  expenditures.   That                 
  action would satisfy the court's direction.                                  
  The  administration's proposal  was  that  funding would  be                 
  transferred   under  Sec.   17(c)   of  the   constitutional                 
  amendment--the subsection that  requires the  three-quarters                 
  Discussion followed between Co-chair  Pearce and Mr. Stastny                 
  concerning disputed amounts to accrue to the  constitutional                 
  budget  reserve.  Mr.  Stastny advised  of ongoing  Dept. of                 
  Revenue research over whether the amount in question was the                 
  acknowledged $70 million  or up to $200  million--the amount                 
  collected on cases where an assessment was made but the case                 
  was settled prior to informal conference.                                    
  Co-chair  Frank referenced  SB  331 (APPROP:  BUDGET RESERVE                 
  FUND TO GEN.FUND), the Senate version of the bill, and noted                 
  that Sec. 4  appropriation of $416.6 million  represents the                 
  amount  the  legislature  anticipated  would  be  needed  to                 
  balance the  current budget.    Mr. Stastny  concurred.   He                 
  added, however, that with the reduction in revenues from the                 
  decline in oil  prices, an additional $529  million will now                 
  be required to fund the budget.  Further, "another couple of                 
  hundred  million dollars" will be required  "to be taken out                 
  by a vote to fund capital  and operating budgets."  Co-chair                 
  Frank voiced his understanding that Sec. 6 would appropriate                 
  an unspecified amount  to be  determined at the  end of  the                 
  fiscal year.  Mr.  Stastny concurred.  The last  estimate of                 
  that amount is  approximately $350 million.   Co-chair Frank                 
  noted that  foregoing amounts  total the  $1.3 billion  draw                 
  from the constitutional  reserve needed to bring  the budget                 
  "flush to the  end of fiscal  year 94."   Mr. Stastny  again                 
  Senator Kerttula asked  if Judge  Reese's decision would  be                 
  appealed.  Mr. Stastny said  that the administration intends                 
  to await  a  detailed explanation  of  the ruling  prior  to                 
  making a decision.  He then voiced his personal opinion that                 
  appeal would be pursued.                                                     
  Senator  Rieger  inquired  concerning   the  total  of   the                 
  constitutional  budget reserve fund  once the  proposed $945                 
  million is  appropriated  back to  the  fund.   Mr.  Stastny                 
  responded, "about $1.7 billion."   The Senator then observed                 
  that  approximately  $400  million  would  remain  following                 
  withdraws  to  satisfy  FY  94 budget  needs.    Mr. Stastny                 
  In response to questions from  Senator Kerttula, Mr. Stastny                 
  said that while the administration may  not agree with Judge                 
  Reese's  opinion   that  HB  58   is  unconstitutional,  the                 
  administration believes that  appropriations should be based                 
  on a  three-quarter vote  to eliminate  the question in  the                 
  Co-chair   Frank   voiced   his    recollection   that   the                 
  administration  supported  the  House plan  for  funding  of                 
  education from  the budget reserve.   Mr. Stastny  said that                 
  the administration is supportive of  any reasonable approach                 
  that "gets the three-quarter vote."                                          
  Mr. Stastny next  spoke to $150  to $200 million in  funding                 
  based on assumptions of transfers  from AHFC ($180 million),                 
  and a $60 million transfer  from AIDEA resulting from  AIDEA                 
  purchase  of assets  owned  by  the  Dept. of  Commerce  and                 
  Economic Development.  He further advised of an agreement by                 
  the  administration  to  a  $50  million  reduction  in  the                 
  proposed  budget.    Calculation  of  all of  the  foregoing                 
  results  in   a  $130  or   $140  million  balance   in  the                 
  constitutional budget reserve  fund after funding of  the FY                 
  95 budget.  The  current spending plan indicates that  if at                 
  the end of  FY 95 the state continues to spend, based on the                 
  Governor's budget and the latest  revenue projection, at the                 
  end of FY  95 the constitutional  budget reserve fund  would                 
  have a -$82 million balance,  "assuming everything is funded                 
  out of the  constitutional budget reserve fund."   The above                 
  $50 million  reduction, moneys transferred  from AHFC  ($180                 
  million) and AIDEA ($60 million), and one half ($60 million)                 
  of  hoped  for  additional tax  revenues  provide  a counter                 
  Senator Kerttula inquired  concerning support for additional                 
  taxes.    Mr.  Stastny  acknowledged  that  revenue  raising                 
  measures had not received a warm reception.                                  
  In response to  a question from  Senator Kelly, Mr.  Stastny                 
  said that the  $50 million reduction would  be unrestricted.                 
  It could flow from both operating and capital funding.                       
  Senator  Kerttula  asked  if  future  settlements  had  been                 
  factored into spending  plans.   Mr. Stastny responded  that                 
  while  the administration  is aware of  them, they  were not                 
  factored into budget projections.                                            
  Co-chair Pearce called for additional  questions.  None were                 
  forthcoming.  She advised that CSHB 505 (Fin) (brf fld) (efd                 
  fld) would be HELD in committee for further review.                          
                       RECESS - 9:40 A.M.                                      
                      RECONVENE - 9:50 A.M.                                    

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