Legislature(1993 - 1994)
04/11/1994 09:15 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 vote. 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 concurred. 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 concurred. 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 future. 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 balance. 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.