Legislature(2001 - 2002)

02/04/2002 01:57 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                        February 4, 2002                                                                                        
                           1:57 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Norman Rokeberg, Chair                                                                                           
Representative Scott Ogan, Vice Chair                                                                                           
Representative Jeannette James                                                                                                  
Representative John Coghill                                                                                                     
Representative Kevin Meyer                                                                                                      
Representative Ethan Berkowitz                                                                                                  
Representative Albert Kookesh                                                                                                   
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
CS FOR SENATE JOINT RESOLUTION NO. 24(RLS)                                                                                      
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to the budget reserve fund.                                                                                            
     - HEARD AND HELD                                                                                                           
HOUSE JOINT RESOLUTION NO. 15                                                                                                   
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to inflation-proofing the permanent fund.                                                                              
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS ACTION                                                                                                               
BILL: SJR 24                                                                                                                  
SHORT TITLE:AMEND CONSTITUTIONAL BUDGET RESERVE FUND                                                                            
SPONSOR(S): FINANCE                                                                                                             
Jrn-Date   Jrn-Page                     Action                                                                                  
04/09/01     1013       (S)        READ THE FIRST TIME -                                                                        
04/09/01     1013       (S)        FIN                                                                                          
04/17/01                (S)        FIN AT 9:00 AM SENATE FINANCE                                                                
04/17/01                (S)        Heard & Held                                                                                 
04/17/01                (S)        MINUTE(FIN)                                                                                  
04/23/01                (S)        FIN AT 9:00 AM SENATE FINANCE                                                                
04/23/01                (S)        Moved Out of Committee                                                                       
04/23/01                (S)        MINUTE(FIN)                                                                                  
04/23/01     1215       (S)        FIN RPT 6DP 3NR                                                                              
04/23/01     1215       (S)        DP: DONLEY, KELLY, GREEN,                                                                    
04/23/01     1215       (S)        LEMAN, WARD;                                                                                 
04/23/01     1215       (S)        NR: AUSTERMAN, HOFFMAN, OLSON                                                                
04/23/01     1216       (S)        FN1: (GOV)                                                                                   
04/30/01                (S)        RLS AT 11:50 AM FAHRENKAMP                                                                   
04/30/01                (S)        <Bill Postponed to 5/1/01> --                                                                
                                   Time Change --                                                                               
04/30/01                (S)        RLS AT 4:45 PM FAHRENKAMP 203                                                                
04/30/01                (S)        -- Meeting Canceled --                                                                       
05/01/01                (S)        RLS AT 12:15 PM FAHRENKAMP                                                                   
05/01/01                (S)        -- Time Change --                                                                            
05/01/01                (S)        MINUTE(RLS)                                                                                  
05/01/01     1412       (S)        READ THE SECOND TIME                                                                         
05/01/01     1412       (S)        RLS CS ADOPTED UNAN CONSENT                                                                  
05/01/01     1413       (S)        ADVANCED TO 3RD READING                                                                      
                                   FAILED Y14 N6                                                                                
05/01/01     1413       (S)        ADVANCED TO THIRD READING 5/2                                                                
05/01/01     1401       (S)        RULES TO CAL W/CS 1OR 5/1                                                                    
                                   SAME TITLE                                                                                   
05/01/01     1401       (S)        FN1: (GOV)                                                                                   
05/02/01     1443       (S)        READ THE THIRD TIME CSSJR
05/02/01     1444       (S)        HELD IN THIRD READING TO 5/3                                                                 
05/03/01     1472       (S)        HELD IN THIRD READING TO 5/4                                                                 
05/04/01     1503       (S)        BEFORE THE SENATE IN THIRD                                                                   
05/04/01     1503       (S)        PASSED Y14 N6                                                                                
05/04/01     1504       (S)        ELLIS NOTICE OF                                                                              
05/05/01     1571       (H)        READ THE FIRST TIME -                                                                        
05/05/01     1571       (H)        JUD, FIN                                                                                     
05/05/01     1527       (S)        RECON TAKEN UP - IN THIRD                                                                    
05/05/01     1527       (S)        PASSED ON RECONSIDERATION Y14                                                                
05/05/01     1559       (S)        TRANSMITTED TO (H)                                                                           
05/05/01     1559       (S)        VERSION: CSSJR 24(RLS)                                                                       
10/19/01                (H)        JUD AT 11:00 AM Anch LIO Conf                                                                
10/19/01                (H)        Heard & Held                                                                                 
10/19/01                (H)        MINUTE(JUD)                                                                                  
02/04/02                (H)        JUD AT 1:00 PM CAPITOL 120                                                                   
WITNESS REGISTER                                                                                                              
SENATOR DAVE DONLEY                                                                                                             
Alaska State Legislature                                                                                                        
Capitol Building, Room 506                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  Presented SJR 24 on behalf of the Senate                                                                   
Finance Committee, sponsor.                                                                                                     
JAMES BALDWIN, Assistant Attorney General                                                                                       
Governmental Affairs Section                                                                                                    
Civil Division (Juneau)                                                                                                         
Department of Law (DOL)                                                                                                         
PO Box 110300                                                                                                                   
Juneau, Alaska  99811-0300                                                                                                      
POSITION STATEMENT:  Presented the department's position on SJR
24 and responded to questions.                                                                                                  
BRAD PIERCE, Senior Economist                                                                                                   
Office of the Director                                                                                                          
Office of Management & Budget (OMB)                                                                                             
Office of the Governor                                                                                                          
PO Box 110020                                                                                                                   
Juneau, Alaska  99811-0020                                                                                                      
POSITION STATEMENT:  During discussion of SJR 24 responded to                                                                   
DAVID TEAL, Legislative Fiscal Analyst                                                                                          
Legislative Finance Division                                                                                                    
Alaska State Legislature                                                                                                        
PO Box 113200                                                                                                                   
Juneau, Alaska  99811-3200                                                                                                      
POSITION STATEMENT:  During discussion of SJR 24 responded to                                                                   
ACTION NARRATIVE                                                                                                              
TAPE 02-9, SIDE A                                                                                                               
Number 0001                                                                                                                     
CHAIR  NORMAN  ROKEBERG  called   the  House  Judiciary  Standing                                                               
Committee  meeting  to  order  at   1:57  p.m.    Representatives                                                               
Rokeberg, Ogan,  Coghill, and Meyer  were present at the  call to                                                               
order.  Representatives James, Berkowitz,  and Kookesh arrived as                                                               
the meeting was in progress.                                                                                                    
SJR 24 - AMEND CONSTITUTIONAL BUDGET RESERVE FUND                                                                             
Number 0065                                                                                                                     
CHAIR ROKEBERG  announced that  the committee  would hear  CS FOR                                                               
SENATE JOINT RESOLUTION NO. 24(RLS),  Proposing amendments to the                                                               
Constitution  of  the State  of  Alaska  relating to  the  budget                                                               
reserve fund.                                                                                                                   
Number 0073                                                                                                                     
SENATOR  DAVE  DONLEY,  Alaska  State  Legislature,  speaking  on                                                               
behalf of the  Senate Finance Committee, sponsor,  noted that the                                                               
House  Judiciary Standing  Committee  held a  hearing  on SJR  24                                                               
during the  interim.  To  recap, he  explained that SJR  24 would                                                               
amend the [Alaska  State] Constitution [in order]  to restore the                                                               
original  intent  of  the constitutional  budget  reserve  [fund]                                                               
(CBRF) section, providing  that in a year where  spending was not                                                               
more than  the previous  year, the  legislature could  access the                                                               
constitutional budget reserve (CBR)  with a simple majority vote.                                                               
With a  simple majority  vote, the  legislature could  access the                                                               
[CBR] for  funds "to make up  the difference up to  the amount of                                                               
last year's  spending."   He offered that  this was  the original                                                               
intent, and  noted that research  has indicated that  the voter's                                                               
guide,  the  lieutenant  governor's  statement,  the  legislative                                                               
affairs  [agency's] legal  statement, the  proponents' statement,                                                               
and the  opponents' statement all said  that in a year  where the                                                               
legislature did  not develop  a budget that  spent more  than the                                                               
previous year, the  legislature could access "up  to that amount"                                                               
if there was a revenue shortfall.                                                                                               
SENATOR DONLEY  said that subsequent  to "that,"  the legislature                                                               
attempted  to define  some of  the  terms in  the [Alaska  State]                                                               
Constitution,  specifically "available  for  appropriation".   He                                                               
explained that  a court subsequently said  that the legislature's                                                               
definition  was not  good enough  and that  in the  court's view,                                                               
"available  for  appropriation"  meant something  different  than                                                               
what  either  the legislature  or  the  folks who  developed  the                                                               
[CBRF] intended, and  changed "it" so that  now a [three-fourths]                                                               
vote  is  needed   to  access  the  [CBRF]   for  virtually  "any                                                               
function."   He  said  that  SJR 24  would  restore the  original                                                               
intent as was  told to the voters of Alaska  in the voter's guide                                                               
"when they  pretty much overwhelmingly approved  adding the [CBR]                                                               
portion to  the [Alaska State]  Constitution.  He noted  that SJR
24 also does  away with so-called "sweep" provision;  "to make it                                                               
work logically, you pretty much have to do away with that too."                                                                 
Number 0333                                                                                                                     
SENATOR DONLEY explained that the  sweep provision is a provision                                                               
in the existing [CBR] section  of the [Alaska State] Constitution                                                               
which says that in any year "where there was not a [three-                                                                      
fourths]  vote not  to, then  all  funds that  are available  for                                                               
appropriation - subject  to appropriation - in  any accounts that                                                               
may be  held by state  government would  be removed and  put into                                                               
the  [CBR]."   He listed  accounts  such as  the "marine  highway                                                               
fund,  science  and  technology  fund,  power  cost  equalization                                                               
fund";  all those  would be  subject to  the sweep  and would  be                                                               
zeroed out  to replace  the money  that was owed  to the  CBR, as                                                               
that debt  may exist from  year to year.   So to really  make the                                                               
"simple majority to  access for no more than  the previous year's                                                               
spending" work, the  sweep provision would have  to be eliminated                                                               
as well, he said, "or you're going to lose all those accounts."                                                                 
SENATOR DONLEY said, "I think in  the court's world of looking at                                                               
what  the words  'available  for appropriation'  meant, it  might                                                               
have been  a reasonable conclusion  to reach the  conclusion they                                                               
did."  Unfortunately,  he added, it wasn't what  was intended, it                                                               
wasn't  what the  voters were  told they  were getting  when they                                                               
voted  for the  CBR.   Instead of  being a  tool to  help enforce                                                               
fiscal  discipline, it  turned  into  a tool  that  did just  the                                                               
opposite, where, unlike any American  government that he is aware                                                               
of, to create  a budget now, a [three-fourths]  vote is required,                                                               
he observed.   And unless a tremendous amount is  going to be cut                                                               
out of  the [spending budget] each  year, it is a  very difficult                                                               
situation.   Regardless of  whether the  legal conclusion  of the                                                               
court was correct,  it's not what the voters of  Alaska were told                                                               
they were getting when they voted for "this" provision, he said.                                                                
REPRESENTATIVE MEYER noted that he  found it interesting that the                                                               
House  "passed the  budget  at  a certain  amount,  and then  the                                                               
Senate passed a budget at a  certain amount, and then somehow the                                                               
number that  came back to the  body ended up being  a much larger                                                               
number."   He said  he was  mystified how  that happened  and was                                                               
told that  it was  because of  the [CBR]  and the  requirement of                                                               
getting  a  [three-fourths] vote.    He  surmised that  [SJR  24]                                                               
"would  certainly help  in  that  matter."   He  asked when  [the                                                               
provisions of SJR 24] would go into effect.                                                                                     
Number 0609                                                                                                                     
SENATOR  DONLEY  explained  that   [the  provisions  of  SJR  24]                                                               
wouldn't  go into  effect until  after "it"  was approved  by the                                                               
voters and  then it  would apply to  the subsequent  fiscal year.                                                               
If  the legislature  placed SJR  24 on  the ballot  [at the  next                                                               
election] and the  voters approved it, it would be  in effect for                                                               
the 2004 fiscal year (FY).                                                                                                      
REPRESENTATIVE BERKOWITZ  asked:   "At current rates,  what's the                                                               
projected amount in the CBR at that time?"                                                                                      
SENATOR DONLEY said  it depends on who's  making the projections;                                                               
there's  a whole  series  of  assumptions that  have  to be  made                                                               
before any  projection can be made.   "First of all,  you have to                                                               
assume  revenue -  and of  course that's  more of  an art  than a                                                               
science because  nobody really knows  what's going to  happen out                                                               
there  in the  geopolitical world."   And  second, he  said, "you                                                               
have to assume a particular  level of expenditure," and while the                                                               
governor  has  a  proposed  level   of  expenditure,  that  isn't                                                               
necessarily  the level  of expenditure  that the  legislature may                                                               
end  up  finally  approving.     With  all  the  assumptions  the                                                               
Department of  Revenue (DOR) is making  - which, he said,  he did                                                               
not  necessarily agree  with -  it is  projecting a  $1.2 billion                                                               
deficit in  [FY] '03.   He opined that  many people would  have a                                                               
different projection of what the fiscal gap may be.                                                                             
Representative  BERKOWITZ said:    "Regardless, the  CBR will  be                                                               
substantially smaller than it is today, at that point."                                                                         
SENATOR DONLEY offered  that it is undisputed that  there will be                                                               
a draw on the CBR for the next  fiscal year.  Although the CBR is                                                               
earning money each  year, he added, so that offsets  that to some                                                               
[degree], and there  may be some additional  settlements come in,                                                               
[though] the [DOR]  has relayed that they won't  be anywhere near                                                               
the magnitude of the past years.                                                                                                
Number 0786                                                                                                                     
JAMES BALDWIN,  Assistant Attorney General,  Governmental Affairs                                                               
Section, Civil  Division (Juneau), Department of  Law (DOL), said                                                               
that  he'd had  the  educational experience  of representing  the                                                               
state - during the time when  "this provision" was adopted by the                                                               
voters  and enacted  - in  the Hickel  et al.  v. Cowper  [Alaska                                                             
Supreme Court] case, which was decided  in two parts.  "The first                                                               
part  dealt with  other provisions  of the  constitutional budget                                                               
reserve amendment, [and]  the second case dealt  with the meaning                                                               
of the term  'available for appropriation', which I  think is the                                                               
reason that spawns [SJR 24]," he said.                                                                                          
MR. BALDWIN said that in that  case, "we" attempted to define the                                                               
meaning of  the amendment via  statute, and "we"  were attempting                                                               
to put forward a little bit  different meaning from what is being                                                               
put  forward in  [SJR  24], though  a similar  idea.   "We"  were                                                               
trying to limit  the meaning of "available  for appropriation" to                                                               
meaning the  amount of  the unrestricted  general fund  (GF) that                                                               
was available  for appropriation, and  that was done in  the form                                                               
of a statute, he said.  He  said that [the DOL] took that statute                                                               
to the [Alaska] Supreme Court and  argued that it should be given                                                               
great  weight in  interpreting the  [Alaska State]  Constitution.                                                               
The court  did not  agree with  that interpretation,  however; he                                                               
noted that in  putting that interpretation forward  at that time,                                                               
[the  DOL] and  the legislature  were convinced  that it  was the                                                               
meaning intended for the [Alaska State] Constitution.                                                                           
MR. BALDWIN remarked  that those statutes are still  on the books                                                               
although they've  been stricken,  in part, by  the court.   Those                                                               
appear at "AS 37.10, approximately  430, I believe, is where they                                                               
begin in the  statutes," he said.  "They"  are slightly different                                                               
than what  is being proposed  via SJR  24, he said,  pointing out                                                               
that one  of the aspects  in which  "they" are different  is that                                                               
what  that  statute sought  to  do  is  to  say that  the  amount                                                               
available   for  appropriation   means   only   amounts  in   the                                                               
unrestricted  (GF), whereas  [SJR  24] indicates  that when  "you                                                               
take money  from the budget  reserve fund  (BRF), it may  only be                                                               
used to  fund appropriations that  are funded by  the legislature                                                               
out of  the unrestricted [GF]."   That's a different  twist being                                                               
put to it than what was  originally put forward in 1994 and 1995,                                                               
when this litigation began, he noted.                                                                                           
MR.  BALDWIN said  that the  effect  of this  change in  approach                                                               
could have some unintended results;  the effect could be that "if                                                               
you could  only expend money on  unrestricted general-fund funded                                                               
appropriations,"  it may  be that  the legislature  would not  be                                                               
able to apply - using this  provision - amounts for what would be                                                               
something  funded  by  program receipts  or  some  other  funding                                                               
source.  "If  that's your intent, fine; if it's  not your intent,                                                               
you can  understand that this would  work in a way  that would be                                                               
contrary to that  intent," he added.  He remarked  that the other                                                               
thing he worries about with "this"  approach is that now "we have                                                               
general fund appropriations,  we have designated program-receipts                                                               
appropriations,  and   we  have  general   fund  program-receipts                                                               
appropriations,  and some  of us  tend to  think of  them all  as                                                               
being general fund  appropriations."  With the  ability to define                                                               
"unrestricted general  fund" by  statute, he  added, it  might be                                                               
possible  to effectively  dedicate "some  of these  other funding                                                               
sources,"  and that  may not  be something  that the  legislature                                                               
wants to do.                                                                                                                    
Number 1078                                                                                                                     
MR. BALDWIN  said:   "If that's  something that  you want  to do,                                                               
then keep  in mind  that this  opens the door  for that;  if it's                                                               
something you  don't want  to do,  then I  would say,  'Look very                                                               
hard  at that  language  and  find some  way  to protect  against                                                               
that.'"   He said that  the final legal  point he wanted  to make                                                               
regarding  [SJR 24]  is that  the so-called  sweep provision  has                                                               
been  remedied every  year by  something that  is euphemistically                                                               
referred to as  the "roundtrip appropriation" -  meaning that the                                                               
legislature  replaces  the  money  that would  be  swept,  in  an                                                               
offsetting  appropriation.   The  problem  that's  left in  "this                                                               
section," he noted, is that  over the years, an on-the-books type                                                               
of  liability has  been built  up that  is a  substantial sum  of                                                               
money and  is reported  in the state  financial report,  which is                                                               
considered by  "Wall Street and the  other financial institutions                                                               
that we do business with."                                                                                                      
MR. BALDWIN opined  that what "this provision" does is  good:  it                                                               
gets rid  of the  sweep provision,  and Senator  Donley is  to be                                                               
commended for  his purpose  in that regard.   He  added, however,                                                               
that the way "this" is  worded, because constitutional amendments                                                               
are considered to  be prospective only - they  operate from "this                                                               
day  forward"  -  it  doesn't   answer  what's  happens  to  that                                                               
liability that has  built up.  Therefore, he opined,  it would be                                                               
a  valuable  provision to  have,  in  an "amendment  like  this,"                                                               
something that  says that  the past  indebtedness is  forgiven or                                                               
dealt with in some way, so that there is no question about it.                                                                  
REPRESENTATIVE  OGAN asked  Mr. Baldwin  to clarify  his concerns                                                               
regarding the  creation of dedicated funds.   He asked:   "If, in                                                               
your opinion,  it does  that, does  that not  put tension  in the                                                               
[Alaska State] Constitution with respect  to the ban on dedicated                                                               
funds - except for ones that were in place during statehood?"                                                                   
Number 1187                                                                                                                     
MR. BALDWIN  offered that  it is "by  implication that  causes my                                                               
worry."  He  said that the language  that he is looking  at is on                                                               
[page 1] line  16, where it says that the  legislature can define                                                               
the  meaning of  "unrestricted general  fund"  by law.   He  also                                                               
opined  that on  [page  1] lines  8  and 9,  [SJR  24] says  that                                                               
amounts taken from the [BRF] by  a majority vote can be used only                                                               
to fund unrestricted  [GF] appropriations.  "Right  now, in Title                                                               
37, there  are things known  as designated program  receipts, and                                                               
then  there's  also a  category  known  as general  fund  program                                                               
receipts," he said.  As  an attorney approaching this problem, he                                                               
said  he looks  at that  all as  general fund  dollars, surmising                                                               
that the legislature, "in its heart of hearts," does too.                                                                       
MR.  BALDWIN noted,  however, that  over time,  fences have  been                                                               
built  around some  of  these funding  sources  that in  people's                                                               
minds  - not  in the  law  - have  attained the  status of  being                                                               
almost de facto dedications of those revenue sources.  He said:                                                                 
     I fear  that with the  ability - in the  [Alaska State]                                                                    
     Constitution - to be able  to point to a constitutional                                                                    
     power to  define what is known  as unrestricted general                                                                    
     fund,  that that  power  could be  used  to make  these                                                                    
     barriers around  these other  funding sources  have the                                                                    
     strength of constitutional significance.                                                                                   
REPRESENTATIVE OGAN said  that in his heart of hearts  he has had                                                               
problems  in the  past  with program  receipts  and "the  various                                                               
things that  we do"  because he thinks  it is a  de facto  way of                                                               
creating  a dedicated  fund  [that bypasses]  the  intent of  the                                                               
[Alaska  State] Constitution.   So  if [SJR  24] passed  and that                                                               
issue was ever  raised in court, "do you think  ... that maybe it                                                               
would cause  the legislature  to disband  that practice  and make                                                               
everything GF, or  do you think it might ...  [result in] further                                                               
exacerbating the problem with the ... dedicated fund," he asked.                                                                
MR. BALDWIN opined that if [SJR  24] is adopted, it will heighten                                                               
the  distinctions  that  can  be  made  between  GF  and  program                                                               
receipts, and  that it would  further exacerbate the  problem; "I                                                               
think it's a natural consequence of it."                                                                                        
REPRESENTATIVE OGAN  restated his  question regarding  tension in                                                               
the [Alaska  State] Constitution between the  "non-dedicated fund                                                               
section and this section."                                                                                                      
Number 1353                                                                                                                     
MR. BALDWIN opined that it  would introduce some uncertainty; "if                                                               
that's tension, in your mind, then I think its possible."                                                                       
REPRESENTATIVE  OGAN  asked:    "Does not,  when  you  amend  one                                                               
section of the [Alaska State]  Constitution, by implementing that                                                               
section, it actually  [affect] other sections by  the simple fact                                                               
that  it's there?"   For  example, "the  limited entry  [section]                                                               
affects [the]  no-exclusive-fisheries section, ...  because while                                                               
the constitution says  there is no exclusive  fishery, in another                                                               
section of  the constitution  we said  there is."   He  asked Mr.                                                               
Baldwin to expand on his assessment of what [SJR 24] might do.                                                                  
MR. BALDWIN  said that in  his opinion,  the court will  try very                                                               
hard to harmonize  the provisions that are in  the [Alaska State]                                                               
Constitution, to the extent that it can.                                                                                        
REPRESENTATIVE BERKOWITZ said that [SJR  24] is touted as being a                                                               
way of reducing spending, "but it seems  to me that it's a way of                                                               
accelerating spending because it allows  access to the CBR with a                                                               
simple  majority [vote]  as opposed  to a  [three-fourths] vote."                                                               
He  noted   that  in  his  experience,   the  [three-fourths-vote                                                               
requirement]  has been  "a fairly  effective brake  on spending."                                                               
He offered:                                                                                                                     
     Hypothetically, next year, there's  a majority in power                                                                    
     which  is  inclined  to  spend   more  money  than  the                                                                    
     minority,  ... and  yet next  year it's  fairly certain                                                                    
     that  we're  going  to  need CBR  monies.    Isn't  the                                                                    
     failure to  require a  [three-fourths] vote  -- doesn't                                                                    
     it accelerate the spending of money?                                                                                       
MR. BALDWIN said he did not think he could answer that.                                                                         
Number 1465                                                                                                                     
BRAD PIERCE, Senior Economist, Office  of the Director, Office of                                                               
Management  &  Budget (OMB),  Office  of  the Governor,  said  he                                                               
didn't know.                                                                                                                    
CHAIR  ROKEBERG said  that the  problem with  the [three-fourths]                                                               
vote is that it "depends on  which perspective the power that had                                                               
the majority was in, in  terms of their proclivities for spending                                                               
or reducing budgetary monies."                                                                                                  
REPRESENTATIVE BERKOWITZ remarked:                                                                                              
     Senator Donley  has widely published what  he claims is                                                                    
     a $150  million extra  money added  to the  budget last                                                                    
     year because  of CBR negotiations; I've  never seen any                                                                    
     evidence  of  that.    I negotiated  on  it;  that  was                                                                    
       clearly not part of our package.  I think if we're                                                                       
     going to change the [Alaska State] Constitution based                                                                      
     on a faulty premise, we ought to tread carefully.                                                                          
CHAIR ROKEBERG  mentioned that  he thinks it  is very  clear that                                                               
historically, there have been increases in the budget.                                                                          
REPRESENTATIVE BERKOWITZ  stated that Senator Donley  claims that                                                               
last year's legislation regarding  "breast cancer coverage" was a                                                               
CBR  item,  whereas  he, Representative  Berkowitz,  thought  the                                                               
entire House of  Representatives voted for that  legislation.  He                                                               
remarked that  debate on [Senator  Donley's claims]  is pertinent                                                               
because  at  issue  is  whether  to  change  the  [Alaska  State]                                                               
MR.  PIERCE,  referring  to  SJR   24,  remarked:    "We've  seen                                                               
proposals like this  in the past that the  administration has not                                                               
opposed; this  one has  a few  more moving  parts to  it, though,                                                               
than  those we've  seen previously."   That's  cause for  concern                                                               
regarding  potential mischief  down the  road, he  added.   Every                                                               
year when the  spring revenue forecast comes out, he  said, he is                                                               
usually  asked  to make  the  calculation  of whether  a  [three-                                                               
fourths] vote  will be  required to  access the  CBR.   What [the                                                               
OMB]  does is  compare the  amount appropriated  in the  previous                                                               
calendar year so that "supplementals"  from the previous year are                                                               
included,  and that  would include  money  appropriated from  the                                                               
earnings  reserve account  of the  permanent fund  for inflation-                                                               
proofing and dividends.   Then, in calculating  what is available                                                               
for appropriation in  the current year - or  the prospective year                                                               
- the  net income  from the  permanent fund  is included  in that                                                               
calculation, [as  well as]  the balance  in the  earnings reserve                                                               
account (ERA).                                                                                                                  
Number 1624                                                                                                                     
MR. PIERCE said:                                                                                                                
     Because  of   the  balance  in  the   earnings  reserve                                                                    
     account, that's  usually why a [three-fourths]  vote is                                                                    
     required -  because you have  more money  available for                                                                    
     appropriation  in   the  current  year  than   you  ...                                                                    
     appropriated in the previous calendar year.                                                                                
CHAIR  ROKEBERG   said:    "Because  the   earnings  reserve  was                                                               
available for appropriation."                                                                                                   
MR. PIERCE said:  "Because  the earnings reserve is available for                                                               
appropriation, and  that's exactly what  the court did;  they put                                                               
the crosshairs  square on the  earnings reserve account  in their                                                               
CHAIR ROKEBERG  said:   "If only  the rest of  the public  in the                                                               
state  would understand  that.   That the  legislature's had  the                                                               
ability to appropriate from the  earnings reserve from the get go                                                               
but really never has."                                                                                                          
MR. PIERCE said:                                                                                                                
     That's the  concern here is  that if we're  saying with                                                                    
     this amendment  that that income of  the permanent fund                                                                    
     is excluded  from this calculation  - well,  what about                                                                    
     the  balance  in the  earnings  reserve  account?   The                                                                    
     court  clearly thought  that that  should be  front and                                                                    
     center, and  so I'm not  quite sure what the  intent is                                                                    
     here with  the earnings  - ERA -  balance, but  it's an                                                                    
     issue and  it's going to be,  probably, the cornerstone                                                                    
     of any  fiscal plan  ... that  we come  up with  in the                                                                    
     future, here.   So that's just one concern  here that I                                                                    
     think  we should  clarify  before  ... proceeding  with                                                                    
     something as serious as a constitutional amendment....                                                                     
     The  other [concern],  ... that  [Mr. Baldwin]  already                                                                    
     talked  about somewhat,  is  the "unrestricted  general                                                                    
     fund  revenue  versus  other funds"  distinction.    In                                                                    
     budgeting,  we move  stuff back  and forth  quite often                                                                    
     between general  fund and other funds.   Sometimes it's                                                                    
     ...  tobacco settlement  revenues  become other  funds,                                                                    
     when they  started out as general  funds, because we've                                                                    
     dedicated -  or we've  set aside -  the money  for debt                                                                    
     service to build schools and  so forth.  Sometimes it's                                                                    
     one-time monies  that are other  funds that  we replace                                                                    
     with general funds.                                                                                                        
Number 1760                                                                                                                     
MR. PIERCE:                                                                                                                     
     And  this flexibility  that we  have  to do  this -  it                                                                    
     benefits everybody.  It  benefits the administration in                                                                    
     trying to  build a budget, it  benefits the legislature                                                                    
     in  trying to  move money  around and  come out  with a                                                                    
     budget in the end.  And  so I think that when you start                                                                    
     drawing these  lines, like  [Mr. Baldwin]  referred to,                                                                    
     of unrestricted  general fund and  [that] the  CBR draw                                                                    
     can only be  applied to that part of the  budget - well                                                                    
     ... that  might make  trouble down  the road  for other                                                                    
     legislatures.   I'm  sure that  the  law of  unintended                                                                    
     consequences here  will ... drive OMB  and [Legislative                                                                    
     Finance Division] crazy down  the future, and it's very                                                                    
     likely  that we'll  have  to go  through  all kinds  of                                                                    
     gyrations to spend  this money legally.   And it's just                                                                    
     a complication, I think, that concerns me....                                                                              
     And  finally, [there's]  the issue  that [Mr.  Baldwin]                                                                    
     referred to  about the bookkeeping entry  on the books.                                                                    
     There's $3.8  billion that  we owe  the CBR  right now,                                                                    
     and every time we go to  Wall Street, that shows up and                                                                    
     we have  to explain  why it really  isn't a  debt; it's                                                                    
     only a debt that we  owe ourselves and doesn't mean any                                                                    
     thing in a  fiscal sense.  So, if we're  going to go to                                                                    
     the  trouble of  amending the  constitution here,  then                                                                    
     maybe we ought to get rid of that entry on our books.                                                                      
REPRESENTATIVE OGAN  remarked:  "Assuming  we spend all  the CBR,                                                               
which is  probably going to happen  in the next couple  of years,                                                               
it's kind  of a moot point  anyway, right?"  "We're  not going to                                                               
get  anymore  settlements that  I'm  aware  of,"  he added.    So                                                               
wouldn't it  be a simpler  approach to avoid all  these gyrations                                                               
by  repealing   "this  whole  provision"  of   the  Alaska  State                                                               
Constitution, he asked.  Other  than California, he noted, Alaska                                                               
is the only  state, that he is aware of,  that requires more than                                                               
a simple majority vote; "it seems  to me [that] if we just repeal                                                               
that  whole  section we'd  have  a  simple majority  budget,  and                                                               
that'd be the end of it."                                                                                                       
MR. PIERCE said  he has never given the concept  of repealing the                                                               
CBR provision]  any thought; he  has always "just been  trying to                                                               
deal with the complications of the thing."                                                                                      
Number 1886                                                                                                                     
REPRESENTATIVE JAMES, after noting that  she was not a legislator                                                               
"when  this passed,"  recounted  that  she voted  in  favor of  a                                                               
budget  reserve account.    She said  that she  was  sold on  the                                                               
concept because  Alaska had the  potential of receiving a  lot of                                                               
windfalls  and  there  was  a  general  attitude  that  windfalls                                                               
generally  just  get spent.    And  so  with the  budget  reserve                                                               
account, any windfalls could be set  aside "to help us out of the                                                               
difficult times."   She noted that she was a  legislator when "we                                                               
first started to implement this"  provision, and there was debate                                                               
about "what it  really meant."  She said that  when she voted for                                                               
this [provision],  it was  her understanding  that it  meant that                                                               
"if we  had less money this  year than we had  the previous year,                                                               
...  we could  spend up  to that  amount of  money with  a simple                                                               
majority vote, and  if we wanted to spend more  money than we did                                                               
the year before, we had to have a [three-fourths] vote."                                                                        
REPRESENTATIVE JAMES  said, "That's what  I voted for;  I thought                                                               
that's a good idea because that  way, if we've got some things we                                                               
need to spend money  for, in order to ... do it,  we'd have go to                                                               
a  [three-fourths]  vote."    The   language,  however,  was  not                                                               
sufficient, and  the net  result of the  court decision  was that                                                               
the  permanent  fund  earnings   were  considered  available  for                                                               
appropriation when  "it was  whether or not  we needed  a [three-                                                               
fourths]  vote,  but  when  it   came  to  the  sweep  of  moving                                                               
everything ... back in  to pay it back, it's not."   So it really                                                               
has been kind  of a cobbled up  mess of things, she  opined.  She                                                               
mentioned  that [at  one point]  she had  a bill  to repeal  that                                                               
constitutional provision, so  perhaps it would be  better to just                                                               
repeal it; "we  don't really have any of  those windfalls coming,                                                               
so the  whole purpose  of it  [has] gone away."   She  added, "We                                                               
wouldn't have  this debt  hanging over us,  because we  don't get                                                               
rid of that debt until we get rid of this [CBR]."                                                                               
CHAIR ROKEBERG said that's a policy call.                                                                                       
MR. PIERCE  noted that  he could  not speak  for the  governor on                                                               
that issue.                                                                                                                     
CHAIR  ROKEBERG asked:   "Mr.  Baldwin, you  brought forward  the                                                               
question  of   the  definition  and  the   problems  about  using                                                               
unrestricted  general fund  as --  is that  currently defined  in                                                               
MR. BALDWIN indicated uncertainty on that point.                                                                                
Number 2023                                                                                                                     
DAVID  TEAL,  Legislative  Fiscal  Analyst,  Legislative  Finance                                                               
Division,  Alaska State  Legislature,  answered:   "Yes, at  [AS]                                                               
MR. BALDWIN pointed  out that [AS 37.05.146] is  the statute that                                                               
defines the designated  program receipts.  In  [AS] 37.10.430, he                                                               
added,  is where  "we" were  attempting to  define it  during the                                                               
Hickel  Administration   -  define   the  terms   "available  for                                                               
appropriation"; he  noted that he'd testified  earlier that there                                                               
was  a  slightly  different  approach  taken  regarding  how  the                                                               
operation of the BRF amendment is defined.                                                                                      
CHAIR ROKEBERG  said he appreciates Mr.  Baldwin's concern "about                                                               
the problematic," but added that  [SJR 24] allows the legislature                                                               
to establish  the definition  via statute  if there  is confusion                                                               
regarding implementation.                                                                                                       
MR. BALDWIN  acknowledged that that  does solve the  problem "we"                                                               
ran into  the first time  around, where  the court said  that the                                                               
legislature didn't quite  get there in attempting  to put forward                                                               
an interpretation  that would carry the  day.  He said  that what                                                               
he is  trying to relay  is that  the interpretation that  was put                                                               
forward  at that  time is  different in  some important  respects                                                               
than the interpretation that is put  forward [via SJR 24].  There                                                               
was nothing  in that  approach, taken  back then,  about limiting                                                               
what  could be  spent -  what kind  of appropriations  "you could                                                               
support  with  the [CBRF]  balance  ...  being  freed up  by  the                                                               
majority vote"; that's a new concept here, he added.                                                                            
MR.  BALDWIN  noted that  "the  way  it  was  gone at,"  at  that                                                               
particular time,  was to  define the  term "the  amount available                                                               
for  appropriation" to  only refer  to unrestricted  general fund                                                               
sources as being available for  appropriation; "we were trying to                                                               
narrow  it and  limit it  just to  those kinds  of sources."   He                                                               
added that  that's where  "we" got into  getting crossed  up with                                                               
the  court, where  the court  said, "No,  the language  should be                                                               
interpreted  broader to  include  not  only unrestricted  general                                                               
fund sources, but also permanent  fund sources and other 'general                                                               
fund group  fund' sources."   And so  those kinds of  things were                                                               
all added  into the  mix, and  then the  equation became  hard to                                                               
meet in order to provide for majority-vote access to the [CBRF].                                                                
REPRESENTATIVE BERKOWITZ  asked Mr. Baldwin if  he had "suggested                                                               
language for that proposed amendment."                                                                                          
Number 2161                                                                                                                     
MR. BALDWIN said:   "No, I don't,  but if it's the  desire of the                                                               
committee, we  could help  you with  that."   He added  that with                                                               
regard  to [Article  IX, Section  17(d)], there  are a  couple of                                                               
approaches that could be taken.                                                                                                 
SENATOR DONLEY remarked  that a question raised by  the press is:                                                               
"If  you're trying  to create  something that  helps with  fiscal                                                               
discipline,   wouldn't   this   backfire  if   ...   a   fiscally                                                               
conservative  group was  in the  minority; wouldn't  you want  to                                                               
maintain  that authority?"   He  said that  his response  to that                                                               
question is,  "No, it doesn't do  that, because it only  runs one                                                               
way."  The original intent was:   "Before you could access with a                                                               
simple majority, you  had to be exercising  fiscal discipline and                                                               
not spend  more than  the previous  year."  So  by going  back to                                                               
that, he  offered, it actually  does just the opposite  of giving                                                               
up the  authority of  a fiscally  disciplined minority;  it would                                                               
say that the  majority has to impose fiscal  discipline before it                                                               
would be able to use a simple majority [vote] to access this.                                                                   
SENATOR  DONLEY noted  that language  in Section  1(b) of  SJR 24                                                               
specifies  that  the  definitions  used  therein  apply  to  that                                                               
subsection.   He said that the  intent of using such  language is                                                               
to ensure that  those definitions do not spill over  to any other                                                               
section of  the [Alaska State] Constitution;  the definitions are                                                               
intended  to only  deal  with the  CBR in  that  subsection.   He                                                               
opined  that  such language  is  "crystal  clear" though  if  the                                                               
legislature so  chooses, a letter of  intent could be added.   He                                                               
noted that he would be  willing to entertain any suggestions from                                                               
the DOL,  and would  check with  the drafter  to see  whether any                                                               
other clarifying language was needed to prevent any spill over.                                                                 
Number 2229                                                                                                                     
SENATOR DONLEY  said that another  question that has  been raised                                                               
is:   "What  has been  the cost  of the  CBR vote  to the  budget                                                               
process, getting to the [three-fourths] requirement."  He said:                                                                 
     This  is a  very complex  issue; this  is not  a simple                                                                    
     issue  by  any means,  and  it's  become more  complex.                                                                    
     Obviously, it's  been the  subject of  legislation that                                                                    
     was overturned by the [Alaska]  Supreme Court.  This is                                                                    
     not simple  business here.   So in trying to  convey to                                                                    
     the  public this  issue and  why it  may be  important,                                                                    
     we've  tried   to  do  our  best   to  balance  between                                                                    
     understandability and  complexity - you know,  the full                                                                    
     details.  One of the standards  that we tried to find -                                                                    
     to try to  [quantify], somehow, what kind  of an impact                                                                    
     this  has -  was  to go  back and  look  at what  floor                                                                    
     amendments were  proposed by the minority  in the House                                                                    
     and the  Senate that  did not pass,  where subsequently                                                                    
     that  money  was  placed  within  the  final  operating                                                                    
     budget document.   And those  were the  quantities that                                                                    
     the Representative referred to.                                                                                            
     We've tried to  clarify that that was what  we did, and                                                                    
     ...  there's a  good argument  that maybe  those things                                                                    
     would  have been  done anyway,  because you  can see  a                                                                    
     pattern over the four or five  years.  You go back five                                                                    
     or six years,  it starts about $5 million,  and then it                                                                    
     grows up to  about $150 million last year.   Now, would                                                                    
     some  of that  money been  included anyway  in a  final                                                                    
     gasp  to get  some  sort of  consensus  on the  budget?                                                                    
     Possibly.  But even if you  were [to] discount it by 50                                                                    
     percent  - those  numbers -  you'd still  have a  very,                                                                    
     very significant number, even if  you discount it by 75                                                                    
     percent,  you'd have  a very,  very significant  number                                                                    
     given the budget situation we're in.                                                                                       
     So  this  was just  an  attempt  to quantify  what  the                                                                    
     impact's been, and to make  that attempt you got to put                                                                    
     some parameters  on it.  So,  with full acknowledgement                                                                    
     that ...  those numbers  may vary, we  did the  best we                                                                    
     could to  try to  not overlap and  ... say,  "Oh, there                                                                    
     were  two motions  here,"  and try  to  use apples  and                                                                    
     apples as much  as possible.  But I  recognize ... it's                                                                    
     a  speculative number,  and by  its  very nature,  it's                                                                    
     going to be, because that's  the political process.  So                                                                    
     I recognize that  but I would suggest that  even if ...                                                                    
     you discount  it, which ...  could be fair,  it's still                                                                    
     going to  be a significant  number and in no  way would                                                                    
     it go the other direction.                                                                                                 
SENATOR DONLEY continued:                                                                                                       
     [Mr. Teal and I] spent quite  a bit of time this summer                                                                    
     examining  this  question of  the  ongoing  debt -  the                                                                    
     liability that  was owed  to the  constitutional budget                                                                    
     reserve.  ... It was  our impression that this was good                                                                    
     the way it  was because as we vote year  to year, we're                                                                    
     eliminating that ongoing debt.                                                                                             
Number 2420                                                                                                                     
MR. TEAL said:                                                                                                                  
     We  did discus  that  issue with  Legal [and  Research]                                                                    
     Services  [Division]; the  final answer  was that  once                                                                    
     [subsection]  (d) is  gone,  then  all the  legislature                                                                    
     needs to  do is appropriate  the $3.8 billion  from the                                                                    
     general  fund into  the constitutional  budget reserve,                                                                    
     and the debt will be met  - the liability will be met -                                                                    
     and then the money is simply  drawn out again.  So it's                                                                    
     the same kind of roundtrip  issue; we do owe ourselves,                                                                    
     and it's simply removing it from the books.  It would                                                                      
     require a [three-fourths] vote to do that.                                                                                 
CHAIR  ROKEBERG  asked:    "What  if we  didn't  have  the  [$3.8                                                               
MR. TEAL said:  "We don't."                                                                                                     
CHAIR ROKEBERG asked:   "Wouldn't that cause  a slight accounting                                                               
problem if we try to sweep and balance?"                                                                                        
MR. TEAL  replied:  "Well,  I suppose it does  but no more  of an                                                               
accounting  problem than  we have  now with  the CBR  vanishing."                                                               
"All of  these definitions are  difficult," he added, and  if the                                                               
money is  appropriated, then  "we don't  have it  ... -  we don't                                                               
have  any cash  - but  we're  simply crossing  liability off  the                                                               
books by  making that  appropriation, because  we'd grab  it from                                                               
the place that we just paid it to."                                                                                             
TAPE 02-9, SIDE B                                                                                                               
Number 2478                                                                                                                     
REPRESENTATIVE  BERKOWITZ  commented that  it  sounds  to him  as                                                               
though  Senator  Donley  is  retreating a  little  bit  from  the                                                               
assertions he made  in "this magazine that was  passed out, where                                                               
you explicitly said the cost  [of] this [provision to] access the                                                               
CBR  with a  [three-fourths]  supermajority vote  to balance  the                                                               
budget  was  nearly  $150  million, period."    "No  caveats,  no                                                               
qualifications, nothing,"  he added,  asking, "Is  this statement                                                               
accurate or inaccurate?"                                                                                                        
SENATOR DONLEY  replied:  "I  believe ... it's accurate;  I think                                                               
that's  what  it  actually  costs, using  that  measure  that  we                                                               
utilized."    "Now, I  believe  [there's  room] for  disagreement                                                               
there - reasonable,  honest disagreement - but I do  believe - no                                                               
question  - that  it cost  more this  year than  it had  the year                                                               
before, and ...  that it's gotten more expensive," he  added.  He                                                               
opined that  some way to quantify  it has to be  figured out, and                                                               
that  "that's"  a  reasonable  way   to  quantify  it  given  the                                                               
parameters being presented.                                                                                                     
REPRESENTATIVE BERKOWITZ said to Senator Donley:                                                                                
     It's  hard  for me  to  reconcile  that statement;  ...                                                                    
     you're taking credit on the  first page for the funding                                                                    
     you  criticize us  for leveraging  on the  second page,                                                                    
     and  it's got  to be  one or  the other  - it  can't be                                                                    
     both.    You  either  take credit  for  increasing  the                                                                    
     budget  or  you  opposed  us  trying  to  increase  the                                                                    
     budget.  Which one is it?                                                                                                  
CHAIR ROKEBERG  noted that the document  Representative Berkowitz                                                               
is referring to is not before the committee.                                                                                    
SENATOR DONLEY said that he thinks  there is no question that the                                                               
CBR vote has inflated the budget over the years.                                                                                
REPRESENTATIVE JAMES  asked:  "Senator  Donley, how  many savings                                                               
accounts do  you think  we need  to have?"   She said  she thinks                                                               
there  should  be  a reserve  account  somewhere,  but  questions                                                               
whether more than one is needed.                                                                                                
SENATOR DONLEY  said it would  depend on how  they're structured.                                                               
He offered:                                                                                                                     
     If  you  had one  big  savings  account with  different                                                                    
     criteria for  accessing under  different circumstances,                                                                    
     that might work.  If  you've got single [criterion] for                                                                    
     accessing  a particular  account, maybe  you need  more                                                                    
     than one  account for dealing  with different  types of                                                                    
     situations.   Some  people would  contend that  there's                                                                    
     funds  out  there  that  could  be  considered  savings                                                                    
     [accounts]  that we  normally -  ... the  majority [of]                                                                    
     ...  bipartisan  legislators   -  wouldn't  necessarily                                                                    
     consider to  be savings  accounts because they  kind of                                                                    
     feel those are off limits.                                                                                                 
Number 2359                                                                                                                     
REPRESENTATIVE  JAMES said  that at  the time  that she  voted on                                                               
this issue, she thought it was  a good idea for "these windfalls"                                                               
to be  set aside for some  time when there was  desperate need to                                                               
access the money.   With regard to the  [three-fourths] vote that                                                               
was  mentioned  at that  time,  she  indicated she  thought  that                                                               
surely  if  it  was  a  valid   reason  to  use  the  money,  the                                                               
legislature could get a [three-fourths]  vote because it would be                                                               
for an  emergency of some sort.   She said she  thought, further,                                                               
that if  the money  is used, it  should be paid  back.   She said                                                               
that  it bothers  her a  lot that  now "we're  talking about  not                                                               
paying it back" but still keeping the account.                                                                                  
REPRESENTATIVE  JAMES said  that she  has generally  thought that                                                               
"we" should just do away with  the CBR, period, and put the money                                                               
somewhere   else.     She   remarked   that   according  to   her                                                               
understanding  of [SJR  24], it  seems  to her  like "your  still                                                               
wanting  another  tool, here,  to  not  use  any money  from  our                                                               
savings account  without having more  than a majority  vote," and                                                               
then only  up to  the amount  that was spent  in the  prior year.                                                               
"Is that the  purpose of this," she asked Senator  Donley, or had                                                               
he given  thought to  "any other  methodology" without  having an                                                               
account that the legislature is required to pay back.                                                                           
SENATOR  DONLEY opined  that Representative  James's analysis  of                                                               
what people were told and what  they thought they were voting for                                                               
is "absolutely correct."  He continued:                                                                                         
     The  members that  are  still here,  that  were in  the                                                                    
     House at  that time, that  were the actual  sponsors of                                                                    
     that, confirm  that; it was  intended to be a  tool for                                                                    
     fiscal discipline and also as  a fiscal shock absorber,                                                                    
     so  to speak,  that could  be utilized  when necessary.                                                                    
     And while it's  worked very well, I think,  as a fiscal                                                                    
     shock absorber - a savings  account ... to be used when                                                                    
     it's needed - it hasn't  worked, as it was intended, as                                                                    
     a tool  for fiscal  discipline, because of  the court's                                                                    
     definition of "available for appropriation."                                                                               
     So that was one reason  why I didn't support just doing                                                                    
     away with it,  because it's worked well  ... to balance                                                                    
     out the  high and the  low years.  And  goodness knows,                                                                    
     we have this challenge here,  more than any other state                                                                    
     in the nation, since we're  so dependent on [the] world                                                                    
     price of  oil for our revenue  from year to year.   And                                                                    
     so I  think it was a  very wise choice, by  the voters,                                                                    
     to  have this  shock  absorber in  place  to deal  with                                                                    
     those radical sweeps in revenue  from year to year, but                                                                    
     it came with  this unintended consequence of  sort of a                                                                    
     reversal of  how it was  originally intended as  far as                                                                    
     the access  provision.   So I do  think that  there's a                                                                    
     role  for a  savings  account like  that  - to  balance                                                                    
     things out -  and I think it's worked well  to do that;                                                                    
     it just hasn't worked as  intended on the other end, as                                                                    
     a tool for fiscal discipline.                                                                                              
Number 2231                                                                                                                     
REPRESENTATIVE JAMES asked:   When it is  determined that federal                                                               
funds,  income  of the  permanent  fund,  or the  budget  reserve                                                               
account may  not be considered available  for appropriation, what                                                               
would be  the net result of  that as far as  fiscal discipline is                                                               
SENATOR DONLEY said  that for determining the  amounts that would                                                               
be available for appropriation, first  of all, "we" are trying to                                                               
exclude funds that didn't logically  fit in that category such as                                                               
federal funds that  are coming in for other sources.   "We" don't                                                               
have  any control  over  those  and most  of  the  time they  are                                                               
earmarked for  specific things so there  is not the same  sort of                                                               
flexibility as there  is with general funds.  With  regard to the                                                               
income of the permanent fund,  traditionally it is used for other                                                               
programs such as inflation-proofing  and the dividend program, so                                                               
"we"  felt  it  was  appropriate   to  remove  that  income  from                                                               
REPRESENTATIVE JAMES said:                                                                                                      
     If we  don't count  them, and  if we  used some  of the                                                                    
     earnings  of the  permanent fund  in one  year and  the                                                                    
     next year  it's not  considered again, then  that's the                                                                    
     problem that  I have.   In other words, we're  going to                                                                    
     look at last  year's budget and figure out  how much we                                                                    
     spent without these  monies, and if we  don't have that                                                                    
     much money, we  can do it.   It seems to me  like if we                                                                    
     use some earnings  of the permanent fund  the next year                                                                    
     and  you reduce  that whole  amount and  we don't  have                                                                    
     that  much   money  without   using  earnings   of  the                                                                    
     permanent fund, we can't go  in there.  Am I misreading                                                                    
SENATOR DONLEY  said he would like  some time to follow  out that                                                               
line of reasoning.                                                                                                              
Number 2128                                                                                                                     
CHAIR ROKEBERG  noted that SJR 24  would be held over  because he                                                               
has some concern  about "what did you call it,  the 17(d), or the                                                               
$3.8 billion  clarity; we  want to  make sure  that we  have that                                                               
SENATOR DONLEY  said he thinks  that is a  reasonable suggestion:                                                               
to make  it clear one  way or the  other whether that  debt still                                                               
exists.   It  was  always  just an  accounting  tool because,  in                                                               
reality,  each year  "we" had  removed the  liability for  paying                                                               
that  debt.   Also,  the accounts  that are  out  there that  are                                                               
subject to the sweep "aren't that much money."                                                                                  
CHAIR ROKEBERG said:  "It's a fiction and a phantom but if the                                                                  
financial community recognizes it, then we have to deal with                                                                    
REPRESENTATIVE OGAN said:                                                                                                       
     I'm  always  concerned  when we  load  up  the  [Alaska                                                                    
     State]  Constitution with  statutory language  that the                                                                    
     public can't  understand.  I mean,  I had to read  it a                                                                    
     couple of  times - I think  I understand it, ...  and I                                                                    
     do this for a living ...  at least part of the time....                                                                    
     So I'm not sure that the  average person is going to be                                                                    
     able to  read this  and really understand  what [he/she                                                                    
     is] voting  on.  And  if the average person  can't read                                                                    
     it,  that means  the lawyers  can read  what they  want                                                                    
     into it....                                                                                                                
     I want to  talk a little bit about the  CBR process and                                                                    
     what the  net result to  public policy [is]....   We go                                                                    
     through   this  whole   dog-and-pony  show   on  budget                                                                    
     subcommittee   hearings  and   then  the   subcommittee                                                                    
     chairman come  forth, and then  ... we have  the budget                                                                    
     process in the  finance committees, and then  we go out                                                                    
     on the floor  and there's a million  amendments, and at                                                                    
     the end of the  day - at the end of  session - all that                                                                    
     just kind of  goes out the window.   It's really window                                                                    
     dressing, ...  and what happens  is "let's make  a deal                                                                    
     behind closed  doors."  And  something that  the public                                                                    
     can't see  on Gavel  to Gavel ...  [is] who's  going in                                                                  
     and out of what office  and figuring out what deals are                                                                    
     being made.                                                                                                                
     And the only reason we're  doing that is because of the                                                                    
     CBR, and I think just  having that leverage by minority                                                                    
     - and I've  used it too as [part of  a] minority caucus                                                                    
     ...  for different  gain ...  - I  don't think  is good                                                                    
     public  policy.   That's why  I appreciate  what you're                                                                    
     trying  to do  here.   But  I just  think  it would  be                                                                    
     better if we  just got rid of the  whole doggone thing,                                                                    
     ... I  really do, just  because we're not  getting good                                                                    
     government  when  some   super  minority  can  leverage                                                                    
     somebody  else to  get  their way  for  schools or  for                                                                    
     whatever they've got to have to buy the vote.                                                                              
Number 1942                                                                                                                     
REPRESENTATIVE KOOKESH [brought  up] a point of order:   "I don't                                                               
see what the rhetoric here is going to get us."                                                                                 
CHAIR   ROKEBERG  acknowledged   that  Representative   Ogan  was                                                               
speaking  a little  bit  off the  subject with  his  debate.   He                                                               
mentioned  that if  the legislature  were to  adopt an  endowment                                                               
type of [account], it wouldn't  be readily accessible as a "shock                                                               
absorber cushion" if  there were an enormous  swing in [Alaska's]                                                               
"cash  flow position."   He  also mentioned  that the  "so-called                                                               
rainy day  content" of the CBR  does allow for a  budgetary shock                                                               
absorber  if  there  is  a  significant  swing  in  revenues  and                                                               
expenditures.  He said, "What we  have now is two [accounts]:  we                                                               
have the  CBR and we  have the earnings reserve.   So if  we ever                                                               
were to  change any  of that,  you could  make the  argument that                                                               
something  has  to be  there."    He  reminded members  that  the                                                               
legislature has  a constitutional  mandate to balance  the budget                                                               
every year.                                                                                                                     
SENATOR DONLEY  said that with  such a high threshold  of [three-                                                               
fourths], "I  think you do bear  a real risk that  small interest                                                               
groups can  form within the  legislature to prevent  ever getting                                                               
to that  level."  Now, as  time's gone by, he  added, groups have                                                               
become  more  and  more sophisticated  [in]  working  around  the                                                               
[three-fourths] vote;  [in the]  last several years  "we've" seen                                                               
other groups, not just the  majority and the minority, develop on                                                               
this issue.   As  that gets  more and more  complex and  more and                                                               
more  of those  groups  form,  he opined,  it's  going to  become                                                               
virtually  impossible  for enough  agreement  to  form to  get  a                                                               
[three-fourths]  vote, and  there are  some serious  downsides to                                                               
not being able to achieve that.                                                                                                 
SENATOR DONLEY said number one, the  state would have a cash flow                                                               
problem; "you" certainly  wouldn't have enough to  go through the                                                               
next fiscal  year without  access to  the CBR.   Number  two, the                                                               
sweep would  occur.  So  in the interest  of the citizens  of the                                                               
state, setting  this [three-fourths]  threshold is just  not good                                                               
public policy, he opined.                                                                                                       
Number 1819                                                                                                                     
REPRESENTATIVE JAMES pointed out:                                                                                               
     The governor  can veto the  budget and we have  to have                                                                    
     [three-fourths]  to override  the [veto];  so there  is                                                                    
     that  there.   And historically,  when you  [raise the]                                                                    
     requirement -  even from two-thirds  to [three-fourths]                                                                    
     on  any  issue  -  what  you  do  is  you  empower  the                                                                    
     minority, and  whether that's a  good idea or not  is a                                                                    
     separate  issue....   So I  agree  with your  statement                                                                    
     that  it   can  be   very  cumbersome  and   [may]  not                                                                    
     necessarily get  the best interest  of the  majority of                                                                    
     the folks met.                                                                                                             
REPRESENTATIVE OGAN said:  "I've  overheard members of the fiscal                                                               
planning caucus saying  that they're going to  withhold their CBR                                                               
vote  if they  don't get  taxes,  so ...  these are  the kind  of                                                               
things  that  get   in  the  mix  with   this  well-intended  but                                                               
troublesome provision."                                                                                                         
CHAIR ROKEBERG announced that SJR 24 would be held over.                                                                        
Number 1741                                                                                                                     
There being no further business before the committee, the House                                                                 
Judiciary Standing Committee meeting was adjourned at 3:00 p.m.                                                                 

Document Name Date/Time Subjects