Legislature(2001 - 2002)
04/23/2001 09:12 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 second hearing for this bill in the Senate Finance Committee. Co-Chair Donley testified this resolution would reform the language governing the Constitutional Budget Reserve fund (CBR) in the Alaska Constitution (Article IX, Section 17). He stated that when the constitutional amendment creating this section was initially proposed, the intent was that the CBR could be accessed by a simple majority vote of the legislature in years where the amount of general fund spending was not higher then the previous year's spending. However, in a series of rulings, he pointed out the court "misinterpreted the meaning of the language of 'all funds available' or 'unrestricted funds'". The resulting definition, he said, requires a three-quarters vote every time the CBR is accessed. Co-Chair Donley opined, "This turned the intent of the amendment effectively on its head" and transformed it from a vehicle to restrain state spending into "a vehicle that actually promotes increased state spending." He explained any group of legislators constituting at least one-forth of either the House of Representatives or the Senate could "force additional spending to occur" by refusing to vote for the CBR draw until their budget requests are included. He stated this reverses the original intent of the constitutional amendment approved by the voters. Co-Chair Donley informed this resolution clarifies the language in the constitution to allow the provision to function as originally intended. He detailed that in years of spending higher than in the previous year, the three-quarters vote would be necessary to access the CBR. Co-Chair Donley noted the "sweep provision" is removed from the constitution by this resolution. He defined the provision, saying that without a specific three-quarters vote, non-general funds, such as from the Marine Highway System and Aerospace development, are used to repay the CBR for previous withdrawals. He stated that this provision is "unpalatable" to those working in the state government as well as most Alaskans, who would be "injured" from reductions to the affected programs. Co-Chair Donley summarized that the resolution corrects an "erroneous court interpretation of amounts available for appropriation language." He remarked this would help restrain the current practice of a small group of legislators forcing increased spending, resulting in a "more fiscally responsible system that reasonably allows access" to the CBR in those years the legislature "exercises fiscal discipline" and does not spend more than in the previous year. Co-Chair Kelly asked for clarification of how this resolution addresses the sweep provision. Co-Chair Donley answered the provision is removed from the constitution thereby eliminating the necessity of a three-quarter vote to prevent "the sweep." Senator Austerman understood the current system requires a three- quarter vote to draw from the CBR. He cited language deleted from the constitution shown on page 2, lines 5 and 6 of the committee substitute, "less than the amount appropriated for the previous fiscal year, an appropriation may be made". He asked if the amount were higher than the previous year, would the three-quarter vote still be necessary. Co-Chair Donley responded if the legislature adopts a budget that spends more than the amount of general funds available for that fiscal year, a three-quarters vote would be required in order to withdraw the remaining amount from the CBR. Senator Austerman asked for the section in the resolution that addresses the three-quarter vote. Co-Chair Donley referred to the existing language in the constitution. AT EASE 9:20 AM / 9:25 AM Co-Chair Kelly understood the resolution allows the legislature to draw from the CBR without a three-quarter vote if the general fund spending is no more than that of the previous year. He continued that if the spending were higher, a three-quarter vote would be necessary. He explained funds could be withdrawn from the CBR, without a three-quarter vote, to pay the difference between the amount of general funds available and the total spending from the previous year. He commented that this would eliminate "the dance that we go through down here" to secure necessary votes for the CBR draw. Co-Chair Kelly opined the sweep provision is "probably the most threatening" aspect of the CBR language currently in the constitution. Senator Olson spoke to concerns that in a few years, the CBR would be exhausted. He asked how this resolution guarantees cost savings or increases the longevity of the fund. Co-Chair Donley noted the CBR had been expected to decline in the past few years, but that it actually has grown to a projected $3 billion at the end of the current fiscal year. He agreed the fund is still projected to decrease in the upcoming several years and remarked this resolution would protect the CBR in multiple ways and would "reverse the whole presumption of access to the CBR." He reiterated the current system "forces more spending" and larger withdrawals from the CBR because "certain elements in the legislature" "blackmail" the majority until their spending items are included in the budget. Under the proposed constitutional amendment, he continued, this practice could only occur during years of increased general fund spending. He read language from page 2, lines 7 through 12 of the committee substitute to demonstrate: "However, the amount transferred from the fund under this subsection may not exceed the amount necessary, when added to other funds available for appropriation, to provide for total funding equal to the amount of appropriations made for the previous fiscal year." He stated spending could "fill in the gap" from the previous year but that a three-quarters vote would be required for any additional spending. This, he stressed, would "hold down" withdrawals from the CBR thus making the fund last longer. Senator Wilken asked for clarification that the withdrawal from the CBR would be automatic, provided the amount of spending was no greater then in the previous year. Co-Chair Donley specified a majority vote is required to pass the budget and would serve as approval to withdraw funds from the CBR. Senator Green expressed that she hoped this resolution would provide an incentive to spend less. Co-Chair Donley affirmed it would by preventing "a very small number of legislators to force higher spending" than in the previous year by "utilizing the courts' misinterpretation of the original intent of the CBR language." Co-Chair Kelly emphasized, "the beauty of it is that we are able to fight over just the increases," which he said was the original intent of the constitutional amendment. Senator Green referred to page 2, lines 12 through 14 of the committee substitute, "For purposes of applying this subsection, amounts available for appropriation or appropriated from federal funds, income of the permanent fund, or this budget reserve fund may not be considered." She asked if this should include retained earnings, such as from the Alaska Housing Finance Corporation or the Alaska Development and Export Authority as exclusions. She noted the court excluded these earnings in Hickle vs. Halford and was concerned whether the court would reverse itself if the items were left out of the resolution if it was adopted. Co-Chair Kelly recalled that the matter of corporate receipts was discussed in relationship to the spending limit during a previous meeting. Because of this, he wanted to merge this resolution with SJR 23, Constitutional Amendment: Appropriation Limit, but that there were title restraints preventing this. Co-Chair Donley responded the issue is addressed in language on page 2 lines 14 and 15 of the committee substitute, "For the purposes of this subsection, 'unrestricted general fund' shall be defined by law." This he explained, "leaves it to the legislature to, by statute, have the flexibility to define that question." He reminded that the legislature had passed a law providing this definition after the constitutional amendment was first adopted in 1990. He stated this law was consistent with the original intent of the amendment however the court overturned it and "adopted their own interpretation of the definition" of unrestricted general funds. Senator Hoffman posed a scenario of an initial appropriation that is no greater than that of the previous year's spending until supplemental funds are appropriated thus raising the total amount above the limit. He asked if the supplemental budget would require a three-quarter vote in this situation. Co-Chair Donley surmised a three-quarter vote would be required to access those CBR funds because the spending occurs within the same fiscal year and exceeds that of the previous year. He noted if the original budget were low enough to allow for a supplemental appropriation, the three-quarter vote would not be required. Co-Chair Kelly shared that he wished the resolution to continue. Co-Chair Donley offered a motion to move SJR 24 from Committee with a zero fiscal note from the Office of the Governor, Division of Elections. There was no objection and the bill MOVED from Committee.