Legislature(2001 - 2002)
04/17/2001 09:14 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JOINT RESOLUTION NO. 24 Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. This was the first hearing for this resolution in the Senate Finance Committee. Co-Chair Donley detailed the history of the CBR. He surmised that this resolution would restore "the original intent" of the constitutional language. He stated it would also clarify the conditions under which funds are drawn from the CBR and when a three-quarters legislative vote is required. Co-Chair Donley explained that currently a three-quarters vote is determined by a comparison of revenue in the current fiscal year with appropriations from the prior fiscal year. He stressed that this has little to do with the size of the fiscal gap. He detailed how the proposal compares revenue and appropriations from the same fiscal year, thus making a more accurate determination of a fiscal gap. Co-Chair Donley informed the intent of the existing CBR constitutional amendment is in years where the legislature is proposing to spend less than in a previous year, the CBR could be accessed by a simple majority vote. He continued that if a legislature proposed to spend more than in the previous year, a three-quarters vote would be necessary to draw from the CBR to fund the extra spending. Co-Chair Donley remarked that this creates a "natural limitation" on the growth of government by requiring three-quarters of legislators agree that the increased spending was necessary. Co-Chair Donley spoke to court cases dealing with interpretation of the original constitutional amendment. He said that the court granted a more expansive definition of funds available for appropriation then the legislature normally considers during the budget process. As a result, he said the three-quarters vote is now needed even if spending is not higher than in the previous year. He noted that in the past five years, the spending was not higher, yet the three-quarters vote was required to access funds from the CBR to balance the spending. Co-Chair Donley asserted that the dynamic that occurred is "the exact opposite from what was intended by the Republican minority" when the original constitutional amendment was proposed. This dynamic, he expressed is that the three-quarters vote has been used by the current minority to encourage additional spending on additional items. He concluded that the original intent has changed from establishing a method to limit government growth to a vehicle almost requiring growth. Co-Chair Donley continued that the situation was even worse because of a "sweep provision" included in the original CBR language. This provision he detailed, stipulates that even if the CBR funds are not required to balance the budget in a particular year, such as when oil revenues were high, money borrowed in previous years must be paid back into the CBR and a three-quarters vote is needed to do so. He stressed that because the legislature has withdrawn several billion dollars from the CBR in the past, the three-quarters vote is required each year to avoid the sweep provision, which would confiscate all non-general fund revenues for deposit into the CBR as payment toward the debt. Co-Chair Donley opined that although the CBR has been successful as a savings account, the mechanism to access this account is flawed and does not operate as originally intended. Co-Chair Donley addressed the resolution, explaining that it revises the CBR constitutional amendment clarifying that in years with proposed spending less than the prior year, the CBR could be accessed with a simple majority vote and also eliminates the sweep provision. He noted that the three-quarters legislative vote would still be necessary in years of increased spending. Co-Chair Kelly asked what would happen if the three-quarter vote to appropriate money from the CBR failed, but the appropriation legislation passed. Co-Chair Donley replied that the sweep provision would apply. He stressed that while, "a lot of people would not like the consequences of the sweep, life would go on." Co-Chair Kelly remarked the reason for hearing this resolution at this time is to begin debate on the issue. He did not want the legislature to be allowed to have "a runaway budget" and opined that future legislatures would benefit from the restraint exercised in the past few years. Senator Austerman stated that the entire CBR has been "a thorn in my side" since he was first elected to the legislature. He did not think the current method operates as it was originally intended and instead functions as a savings account used to balance the state budget each year. He surmised that the intent of the fund was to provide a buffer for years of hardship, such as in 1986 when the oil prices dropped. He understood that each year the legislature would be required to prepare and approve a budget and would argue over it, but suggested that at least guidelines could be put in place. Co-Chair Kelly stated that SJR 23 was an appropriate first step in getting the public to consider different funding sources. Senator Ward shared recent discussions on the CBR he participated in while in his district. He said the conversation expanded to include future revenue from oil development and other sources. He stated that the public must know that there is a spending plan. Co-Chair Kelly ordered the resolution HELD in Committee.