Legislature(2021 - 2022)GRUENBERG 120

05/26/2021 01:00 PM JUDICIARY

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01:02:53 PM Start
01:03:41 PM HJR7
02:55:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HJR 7 CONST. AM: PERM FUND & PFDS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
By:
- Cori Mills & Bill Milks, Dept. of Law
- Joe Geldhof, Law Office of Joseph W. Geldhof
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                          May 26, 2021                                                                                          
                           12:19 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Matt Claman, Chair                                                                                               
Representative Liz Snyder, Vice Chair                                                                                           
Representative Harriet Drummond                                                                                                 
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative David Eastman                                                                                                    
Representative Christopher Kurka                                                                                                
Representative Sarah Vance                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 7                                                                                                    
Proposing amendments to the Constitution of the State of Alaska                                                                 
relating to the Alaska permanent fund, appropriations from the                                                                  
permanent fund, and the permanent fund dividend.                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR  7                                                                                                                  
SHORT TITLE: CONST. AM: PERM FUND & PFDS                                                                                        
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/18/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/21       (H)       STA, JUD, FIN                                                                                          
04/20/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/20/21       (H)       Heard & Held                                                                                           
04/20/21       (H)       MINUTE(STA)                                                                                            
05/04/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/04/21       (H)       Heard & Held                                                                                           
05/04/21       (H)       MINUTE(STA)                                                                                            
05/06/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/06/21       (H)       Moved CSHJR 7(STA) Out of Committee                                                                    
05/06/21       (H)       MINUTE(STA)                                                                                            
05/10/21       (H)       STA RPT CS(STA) 4DNP 2NR 1AM                                                                           
05/10/21       (H)       DNP: CLAMAN, EASTMAN, VANCE, TARR                                                                      
05/10/21       (H)       NR: STORY, KREISS-TOMKINS                                                                              
05/10/21       (H)       AM: KAUFMAN                                                                                            
05/14/21       (S)       FIRST SPECIAL SESSION BILL                                                                             
05/20/21       (H)       FIRST SPECIAL SESSION BILL                                                                             
05/24/21       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
05/24/21       (H)       Heard & Held                                                                                           
05/24/21       (H)       MINUTE(JUD)                                                                                            
05/26/21       (H)       JUD AT 1:00 PM GRUENBERG 120                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
CORI MILLS, Deputy Attorney General                                                                                             
Office of the Attorney General                                                                                                  
Civil Division                                                                                                                  
Department of Law                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HJR 7.                                                                   
                                                                                                                                
JOE GELDHOF, Attorney at Law                                                                                                    
Law Office of Joseph W. Geldhof                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and  responded to questions during                                                             
the hearing on HJR 7.                                                                                                           
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:02:53 PM                                                                                                                  
                                                                                                                              
CHAIR MATT  CLAMAN called the House  Judiciary Standing Committee                                                             
meeting to order at 12:19  p.m.  Representatives Vance, Drummond,                                                               
Snyder,  and   Claman  were  present   at  the  call   to  order.                                                               
Representatives   Eastman,   Kurka,   and   Kreiss-Tomkins   (via                                                               
teleconference) arrived as the meeting was in progress.                                                                         
                                                                                                                                
               HJR 7-CONST. AM: PERM FUND & PFDS                                                                            
                                                                                                                                
[Contains discussion of HB 69.]                                                                                                 
                                                                                                                                
1:03:41 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced  that the only order of  business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  7,  Proposing  amendments  to  the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund,  appropriations from the permanent  fund, and the                                                               
permanent  fund  dividend.    [Before  the  committee  was  CSHJR
7(STA).]                                                                                                                        
                                                                                                                                
CHAIR  CLAMAN  stated  that  the  committee  would  hear  invited                                                               
testimony  on constitutional  and  statutory issues  raised by  a                                                               
potential  overdraw  of the  earnings  reserve  account (ERA)  as                                                               
proposed by the executive branch.                                                                                               
                                                                                                                                
1:05:55 PM                                                                                                                    
                                                                                                                                
CORI  MILLS,  Deputy Attorney  General,  Office  of the  Attorney                                                               
General,  Civil  Division, Department  of  Law,  stated that  her                                                               
office  had been  asked to  address whether  the legislature  can                                                               
appropriate more money from the  ERA than the 5 percent statutory                                                               
percent  of market  value (POMV)  cap.   She emphasized  that the                                                               
office considers  this a policy  question along the lines  of how                                                               
to spend the earnings reserve money,  whether to go over the cap,                                                               
and whether to fund the permanent  fund dividend (PFD).  She said                                                               
the  Office of  the Attorney  General  has heard  from those  who                                                               
think the  original formula  for the PFD  should be  followed and                                                               
others who  think the  formula for the  statutory 5  percent POMV                                                               
should be followed.   She reiterated these  are policy questions,                                                               
not legal  questions.   Therefore, she said  the short  answer is                                                               
that  yes, the  legislature has  the constitutional  authority to                                                               
spend  the  income   from  the  permanent  fund   from  the  ERA,                                                               
regardless  of what  the POMV  cap  and dividend  formula are  in                                                               
statute.                                                                                                                        
                                                                                                                                
MS.  MILLS reviewed  the statutes  to build  a framework  for the                                                               
discussion  of  the   issue.    She  said   Alaska  Statute  (AS)                                                               
37.13.140(b)   sets  forth   that   the   amount  available   for                                                               
appropriation is  5 percent  of the average  market value  of the                                                               
fund for the  first five of the preceding six  fiscal years.  Ms.                                                               
Mills related  that AS 37.13.145(e)  states that  the legislature                                                               
may  not appropriate  from the  ERA to  the general  fund (GF)  a                                                               
total   amount   that   exceeds    the   amount   available   for                                                               
appropriation.    She noted  that  37.13.145(f)  states that  the                                                               
combined  total transfer  of  money  to the  dividend  and the  5                                                               
percent limit  in subsection (e) may  not exceed the amount  of 5                                                               
percent.   In other words, "The  amount to the dividend,  as well                                                               
as what you use for the general fund can't exceed 5 percent."                                                                   
                                                                                                                                
MS.  MILLS said  since [Senate  Bill 26  was signed  into law  on                                                               
6/27/18, during  the Thirtieth Alaska State  Legislature], it has                                                               
been the  opinion of the Department  of Law (DOL) that  it is not                                                               
binding on  the legislature, because the  constitutional power of                                                               
appropriation  and   the  prohibition  of  the   dedicated  funds                                                               
forecloses the statute being  binding; therefore, the legislature                                                               
gets to make those annual appropriation choices every year.                                                                     
                                                                                                                                
1:09:18 PM                                                                                                                    
                                                                                                                                
MS.  MILLS  advised  that  it   is  necessary  to  seek  out  the                                                               
Constitution  of  the State  of  Alaska.    She said  the  Alaska                                                               
Supreme Court does not spend a  lot of time on statutory language                                                               
in terms  of these  questions; rather, the  court first  looks to                                                               
the constitution  to set  up the  framework, and  then determines                                                               
whether the  statute fits  within that framework.   She  said the                                                               
dedicated funds clause  is in Article 9, Section 7,  of the state                                                               
constitution prohibiting dedication of  funds unless an exception                                                               
applies.  She continued as follows:                                                                                             
                                                                                                                                
     For  a statute  to limit  the legislature's  ability to                                                                    
     spend   funds   that   are  otherwise   available   for                                                                    
     appropriation,   you   must   have   a   constitutional                                                                    
     exception to the  dedicated funds clause.   And we know                                                                    
     from  the  Alaska  Supreme   Court  already  that  they                                                                    
     determined  the  income  from  the  permanent  fund  is                                                                    
     available  for  appropriation.   ...  That's  based  on                                                                    
     Wielechowski  v.  State.    ... We  view  this  as  the                                                                  
     seminal case;  it's the only  case to  have interpreted                                                                    
     the  permanent fund  amendment,  and particularly  this                                                                    
     second sentence  in the amendment that  talks about the                                                                    
     permanent fund income.                                                                                                     
                                                                                                                                
MS. MILLS cited most of  the fourth paragraph of the introduction                                                               
portion of the opinion from  Wielechowski v. State, which read as                                                             
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     The  narrow  question before  us  is  whether the  1976                                                                    
     amendment  to  the  Alaska  Constitution  exempted  the                                                                    
     legislature's  use of  Permanent Fund  income from  the                                                                    
     Constitution's   anti-dedication  clause.   The  answer                                                                    
     cannot be found by weighing  the merits of the dividend                                                                    
     program   or  by   examining  the   statutory  dividend                                                                    
     formula. The  answer is found  only in the  language of                                                                    
     the Alaska Constitution. And, as  we explain below, the                                                                    
     answer is  no   the  1976 amendment did not  exempt the                                                                    
     legislature's  use of  Permanent Fund  income from  the                                                                    
     Constitution's anti-dedication clause.                                                                                     
                                                                                                                                
MS. MILLS  said that  is the  end of the  analysis.   She stated:                                                               
the  permanent  fund  income   is  available  for  appropriation;                                                               
appropriations have to be done  through an appropriation bill, as                                                               
mandated  under Article  2; appropriations  cannot be  done under                                                               
substantive  law;  placing  a  cap  on  spending  permanent  fund                                                               
income, as was  done under Senate Bill 26, is  merely a guideline                                                               
- it  is not binding;  to be binding, a  constitutional amendment                                                               
is required.                                                                                                                    
                                                                                                                                
1:12:46 PM                                                                                                                    
                                                                                                                                
MS.  MILLS  highlighted another  portion  of  the Alaska  Supreme                                                               
Court's  opinion [found  under "3.  Wielechowski's arguments"  at                                                               
"c.   Plain  meaning"],   which   read   as  follows,   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     The phrase "unless otherwise provided  by law" does not                                                                    
     plainly  allow the  legislature  to dedicate  Permanent                                                                    
     Fund income;  the phrase appears  to simply  provide an                                                                    
     alternative to  depositing the income into  the general                                                                    
     fund.                                                                                                                      
                                                                                                                                
MS.  MILLS brought  attention to  language [further  down in  the                                                               
same paragraph under  "c. Plain meaning," which  read as follows,                                                               
original punctuation provided:                                                                                                  
                                                                                                                                
     The  second  sentence  of  the  Permanent  Fund  clause                                                                    
     permits the  creation and use  of the  earnings reserve                                                                    
     for    deposit   of    the   fund's    income   pending                                                                    
     appropriation;  it does  not give  the legislature  the                                                                    
     authority to dedicate that income.                                                                                         
                                                                                                                                
MS.  MILLS explained  that that  phrase  allows the  money to  be                                                               
deposited somewhere,  but ultimately,  the legislature  still has                                                               
its full appropriation authority over the income from the fund.                                                                 
                                                                                                                                
MS. MILLS talked  about legislative history specific  to when the                                                               
statutes [under  Senate Bill  26] were created.   She  said there                                                               
were  comments  made  on  the  floor  that  illustrate  that  the                                                               
legislature knew at the time the  POMV was passed that it was not                                                               
binding,  and that  the legislature  would need  a constitutional                                                               
amendment.   She said one  legislator indicated that  Senate Bill                                                               
26  and its  effective date  were  meaningless and  likely to  be                                                               
ignored;  another commented  that  it would  not  limit draws  or                                                               
require future  dividends to be  paid; another admitted  that the                                                               
legislature  would  likely  be  pushed to  spend  more  than  the                                                               
statutory cap  and gave the  example of the 90-day  session limit                                                               
that  has  not  been  binding on  the  legislature;  and  another                                                               
comment  made at  the  time was  that  future legislatures  could                                                               
ignore the limitation,  since it is merely statutory.   Ms. Mills                                                               
said this illustrates that the  legislative history supports what                                                               
the Alaska Supreme Court has said about the interpretation.                                                                     
                                                                                                                                
MS. MILLS  discussed the  specific proposed  appropriations where                                                               
there is  an overdraw beyond  the statutory  cap, at least  as it                                                               
has been "put  forward so far to the legislature."   She said the                                                               
two proposals  she is aware  of are HB  69, to pay  the dividend,                                                               
and  "the governor's  bridge gap  proposal of  $3 billion."   She                                                               
said in  both cases the  money is  not being appropriated  to the                                                               
general  fund.   She  reviewed that  under  AS 37.13.145(e),  the                                                               
legislature may not  appropriate from the ERA to the  GF [a total                                                               
amount  that exceeds  the  amount  available for  appropriation].                                                               
She added,  "So, the 5  percent cap applies to  appropriations to                                                               
the general  fund, which, to us,  shows how difficult it  is when                                                               
you have this broad appropriation power  to put any sort of limit                                                               
on it outside of the constitution."                                                                                             
                                                                                                                                
MS. MILLS  stated that the  HB 69  appropriation would go  to the                                                               
Alaska Housing  Capital Corporation  account.  She  added, "There                                                               
may be a question there as  to whether that's the general fund or                                                               
not, but  then the second  one, the  governor's, would go  to the                                                               
CBR  - the  constitutional budget  reserve, and  that is  not the                                                               
general fund; and so, it technically  still ... does not meet the                                                               
prohibition in the statute."  In conclusion, Ms. Mills stated:                                                                  
                                                                                                                                
     We think the constitution trumps,  and in this case the                                                                    
     constitution allows  the legislature full  authority to                                                                    
     spend the income of the  permanent fund in whatever way                                                                    
     you deem appropriate.                                                                                                      
                                                                                                                                
1:16:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KURKA offered  his  understanding  that when  the                                                               
budget is signed  by the governor, it  is state law.   He said he                                                               
does not hear that point being referenced.                                                                                      
                                                                                                                                
MS. MILLS responded that under  Article 2, appropriations must be                                                               
made under an  appropriation bill, while substantive  law is made                                                               
in a  separate type of bill.   She said, "So,  when the permanent                                                               
fund language says, 'unless otherwise  provided by law', 'by law'                                                               
is an appropriation."                                                                                                           
                                                                                                                                
1:18:02 PM                                                                                                                    
                                                                                                                                
[Due   to  technical   difficulties,   the   question  asked   by                                                               
Representative Eastman  and the subsequent response  by Ms. Mills                                                               
was  not  audible.    They   repeated  the  question  and  answer                                                               
following an at-ease.]                                                                                                          
                                                                                                                                
1:19:46 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:19 p.m. to 1:20 p.m.                                                                       
                                                                                                                                
1:20:41 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN   asked  Representative   Eastman  to   repeat  his                                                               
question.                                                                                                                       
                                                                                                                                
1:20:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  for  a  description  of  all  the                                                               
sources of funding that can be used for appropriation.                                                                          
                                                                                                                                
1:21:29 PM                                                                                                                    
                                                                                                                                
MS. MILLS  suggested reading Article  9, Section 7, of  the state                                                               
constitution, under which the dedication  of funds is prohibited,                                                               
which  means "you  can't  limit how  the  legislature decides  to                                                               
spend money."   There  are exceptions,  such as  federal funding.                                                               
Article 9,  Section 13, states  that no money shall  be withdrawn                                                               
from the  treasury except in accordance  with appropriations made                                                               
by  law.   She  explained  that  means  the legislature  gets  to                                                               
determine  how  the  money  is  spent  in  combination  with  the                                                               
governor, "who  has the veto  authority at  the end of  the day."                                                               
The dedication and appropriations  clauses together amount to all                                                               
revenues,  including  permanent  fund   income,  which  has  been                                                               
determined by  a court to be  a type of revenue,  being available                                                               
for appropriation.   She  added, "And  in very  specific, limited                                                               
instances, those can be limited  to certain dedicated purposes in                                                               
terms of how  they're spent; but overall, it's  all available for                                                               
all spending decisions by the legislature."                                                                                     
                                                                                                                                
MS.  MILLS said  "available  for appropriation"  is  found in  AS                                                               
37.14.140 and 145 and is defined in  the first of those two.  She                                                               
reiterated her previous comments about  the 5 percent of POMV and                                                               
that the view  of the Office of the Attorney  General is that the                                                               
constitution trumps the statutory definition.                                                                                   
                                                                                                                                
1:23:56 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN asked whether the ERA is part of the general fund.                                                                 
                                                                                                                                
MS. MILLS answered that multiple  Alaska Supreme Court cases must                                                               
be  considered because  the  constitutional  budget reserve  fund                                                               
(CBRF)  has language  which distinguishes  general fund  from all                                                               
funds.                                                                                                                          
                                                                                                                                
CHAIR CLAMAN  said that  he recognizes  that specific  funds have                                                               
been created,  but once outside  the purview of  dedicated funds,                                                               
there could  be other funds  which are  part of the  general fund                                                               
and are appropriated as such.                                                                                                   
                                                                                                                                
MS. MILLS  responded that  it's all part  of the  State Treasury,                                                               
available for use as deemed appropriate by the legislature.                                                                     
                                                                                                                                
CHAIR  CLAMAN  asked  whether  money   drawn  from  the  ERA  and                                                               
transferred to  the CBRF is  simply taken  from a large  fund and                                                               
put into a dedicated fund.                                                                                                      
                                                                                                                                
MS.  MILLS responded  that, constitutionally,  it doesn't  matter                                                               
whether the  money is being  moved from  the general fund  or the                                                               
ERA.                                                                                                                            
                                                                                                                                
CHAIR CLAMAN  noted that  in the case  of Wielechowski  v. State,                                                             
Wielechowski needed  the ERA to be  a dedicated fund in  order to                                                               
force the payment  by statute, but the court's  decision that the                                                               
ERA  is  not  a  dedicated  fund made  the  funds  available  for                                                               
appropriation.                                                                                                                  
                                                                                                                                
MS.  MILLS  replied  that  the  court found  that  there  was  no                                                               
exception to the dedicated funds clause.                                                                                        
                                                                                                                                
CHAIR CLAMAN  asked whether the  Wielechowski decision  says that                                                               
because the ERA  is not a dedicated fund,  legislators cannot, by                                                               
statute, require spending  at a certain level.  He  asked why the                                                               
same analysis  applies to  the question of  "you are  supposed to                                                               
spend something, as opposed to you shouldn't spend something."                                                                  
                                                                                                                                
1:30:07 PM                                                                                                                    
                                                                                                                                
MS. MILLS  responded that  while the  case could  be viewed  as a                                                               
question of  the dedicated  funds clause,  it was  actually about                                                               
not allowing  spending for  any purpose  other than  the specific                                                               
purpose of the  fund.  The funds would remain  in the account "if                                                               
the governor  didn't want  to spend  the money  in the  exact way                                                               
that the  statute said,"  she explained.   She  said that  in her                                                               
opinion, this  is the  same situation  of restricting  money from                                                               
uses other than  those determined by statute  not being permitted                                                               
by Alaska Supreme Court precedent.                                                                                              
                                                                                                                                
CHAIR  CLAMAN asked  whether the  legislature  has ever  violated                                                               
that precedent as relates to school bond reimbursements.                                                                        
                                                                                                                                
MS. MILLS replied that she doesn't believe it has.                                                                              
                                                                                                                                
CHAIR CLAMAN  asked whether it's the  view of DOL that  the state                                                               
should  provide school  bond debt  reimbursement despite  statute                                                               
saying it shouldn't.                                                                                                            
                                                                                                                                
MS. MILLS replied, "I believe that's  where we should fall."  She                                                               
referred to  the State  v. Ketchikan  Gateway Borough  case which                                                             
dealt with  local contributions, and  in which it  was determined                                                               
that the  state and local contribution  was not a tax  or license                                                               
under the constitution, "so therefore  the dedicated funds clause                                                               
didn't  apply."   She explained  that  the appropriations  clause                                                               
still allowed the  legislature to take the actions it  did, so if                                                               
the legislature "wanted  to spend more money on  school bond debt                                                               
reimbursement  than  the statute  said,  it  could absolutely  do                                                               
that."                                                                                                                          
                                                                                                                                
CHAIR  CLAMAN  said  that  the  school  bond  debt  reimbursement                                                               
formula had  been amended yearly  until 2014, when  an adjustment                                                               
for  the following  three  years  was made.    He  said that  his                                                               
understanding is that the amount  specified by the BSA formula in                                                               
the line  item has never been  exceeded, and when more  funds are                                                               
directed to schools  it's called something else  with a different                                                               
budget line  item, but the  cap in  statute is still  adhered to.                                                               
He asked  whether it's the view  of DOL that the  legislature has                                                               
the ability to fund schools in excess of the BSA.                                                                               
                                                                                                                                
MS.  MILLS  told Chair  Claman  that  the legislature  has  "full                                                               
appropriation  authority" and  that  the BSA,  as  well as  other                                                               
items,  are in  statute because  local governments  need to  have                                                               
some  certainty in  their  budgets.   She opined  that  it was  a                                                               
"prudent move"  by the legislature  for the local  governments to                                                               
have a base of funds,  but that it's ultimately the appropriation                                                               
bill that governs.                                                                                                              
                                                                                                                                
CHAIR CLAMAN remarked that he  finds it "troubling" that the laws                                                               
governing how  the legislature manages spending  are "essentially                                                               
meaningless."                                                                                                                   
                                                                                                                                
MS. MILLS  responded that  when looking  at Alaska  Supreme Court                                                               
decisions and  the constitutional convention minutes,  it's clear                                                               
that the delegates wanted the  legislature to have flexibility in                                                               
spending  necessary  to  address  whatever is  happening  in  the                                                               
state.   She said that  the legislature has appropriated  the PFD                                                               
according  to  the formula  for  decades,  but according  to  the                                                               
Alaska Supreme Court, "ultimately the constitution governs."                                                                    
                                                                                                                                
CHAIR CLAMAN  said that  similar to the  situation with  the BSA,                                                               
it's not mandatory to follow the PFD formula.                                                                                   
                                                                                                                                
MS.  MILLS replied,  "You're exactly  right  because they  either                                                               
haven't been challenged or the  legislature's been following them                                                               
just like they did the PFD for decades."                                                                                        
                                                                                                                                
1:36:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked whether  it  would  be helpful  to                                                               
consider  an  appropriation  bill  as  a  one-time,  nonpermanent                                                               
statute.                                                                                                                        
                                                                                                                                
MS. MILLS  responded that it would  be helpful, but Article  2 is                                                               
very specific  in that appropriations  need to be done  within an                                                               
appropriation bill.                                                                                                             
                                                                                                                                
REPRESENTATIVE EASTMAN  asked what  the difference is  between an                                                               
appropriation and a transfer.                                                                                                   
                                                                                                                                
MS. MILLS explained that the CBR  is a constitutional fund, so it                                                               
has very specific  limits on moving money in and  out.  Money may                                                               
be transferred  from one sub-fund  to another within the  GF, but                                                               
it can't leave the Treasury.                                                                                                    
                                                                                                                                
1:39:24 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN asked,  "You had said you can't have  a statute that                                                               
limits an appropriation, did I get that right?"                                                                                 
                                                                                                                                
MS. MILLS responded, "Yes."   In response to a follow-up question                                                               
regarding where  that is found  in the constitution, she  cited a                                                               
portion  of  Article   II,  Section  13,  of   the  Alaska  State                                                               
Constitution, which read:                                                                                                       
                                                                                                                                
     SECTION  13.    Form  of Bills.  Every  bill  shall  be                                                                    
     confined to  one subject unless it  is an appropriation                                                                    
     bill  or   one  codifying,  revising,   or  rearranging                                                                    
     existing  laws.  Bills   for  appropriations  shall  be                                                                    
     confined to appropriations.                                                                                                
                                                                                                                                
CHAIR   CLAMAN   said  that   the   statute   doesn't  say   that                                                               
appropriations cannot be limited in a separate law.                                                                             
                                                                                                                                
MS.  MILLS responded,  "But then  you go  to the  dedicated funds                                                               
clause  and the  appropriation clause,  and you  get back  to the                                                               
same discussion we  were having before, which is  that saying you                                                               
can't touch money is the same as a dedication."                                                                                 
                                                                                                                                
1:40:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN asked  whether  moving  funds within  the                                                               
general  fund  from  one  account to  another  would  negate  the                                                               
necessity of an appropriation bill.                                                                                             
                                                                                                                                
MS.  MILLS  responded that  there  are  so  many accounts  for  a                                                               
specific purpose that  it's difficult to answer without  a set of                                                               
relevant facts.                                                                                                                 
                                                                                                                                
REPRESENTATIVE EASTMAN asked,  "If we can do  these transfers and                                                               
they don't necessarily need an  appropriation then whatever could                                                               
be  transferred  isn't  going to  be  subject  to  appropriation,                                                               
right?"  He continued:                                                                                                          
                                                                                                                                
     I   mean,    we're   talking   about    available   for                                                                    
     appropriation,    but   if    it   doesn't    take   an                                                                    
     appropriation,  then   I  guess  that  also   would  be                                                                    
     available for transfer or some  other way of describing                                                                    
     it because we  won't need an appropriation,  so it does                                                                    
     need to be available for appropriation.                                                                                    
                                                                                                                                
MS. MILLS responded  that if the money is to  be removed from the                                                               
treasury, then an appropriation is necessary.                                                                                   
                                                                                                                                
1:43:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  asked  to   circle  back  to  the                                                               
reference  to  the reverse  sweep  and  asked whether,  from  the                                                               
perspective of the DOL, the ERA is "sweepable."                                                                                 
                                                                                                                                
MS.  MILLS stated  her belief  that this  issue was  addressed in                                                               
Hickel v.  Cowper, [874 P 2d.  922 (Alaska 1994)], but  that it's                                                             
known that  the permanent fund  was specifically noted as  not in                                                               
the GF "for purposes of the reverse sweep."                                                                                     
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS  asked whether Ms. Mills  is saying                                                               
that the  administration does not  believe the ERA  is sweepable,                                                               
since the  budget has not yet  been finalized.  He  asked whether                                                               
the administration would sweep the ERA into the CBR.                                                                            
                                                                                                                                
MS. MILLS  answered yes and  said she agreed  with Representative                                                               
Kreiss-Tomkins' statement.                                                                                                      
                                                                                                                                
1:45:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA asked why [the ERA] is not being swept.                                                                    
                                                                                                                                
MS. MILLS answered  that the CBR has very  specific language, and                                                               
subsection (d)  says that the  sweep only applies to  those funds                                                               
which are available for appropriation in the general fund.                                                                      
                                                                                                                                
1:47:20 PM                                                                                                                    
                                                                                                                                
JOE GELDHOF,  Attorney at Law,  Law Office of Joseph  W. Geldhof,                                                               
explained that he represents a  group of individuals, referred to                                                               
as the  Concerned Citizens for Constitutional  Protection (CCCP),                                                               
who have  been observing the  "fiscal crisis"  in the state.   He                                                               
expressed  that CCCP  has watched  the  statutory budget  reserve                                                               
(SBR) and  CBR be  "essentially drained," and  the state  has not                                                               
figured  out how  to address  the  ongoing use  of these  savings                                                               
accounts to come  up with a balanced and sustainable  budget.  He                                                               
noted that  the CCCP includes  individuals, including:   a friend                                                               
who  has litigated  several times  against the  State of  Alaska,                                                               
including  a  case that  involved  the  dedication of  funds  and                                                               
taxation issues; the Mayor of Homer;  and a number of others.  He                                                               
said that the  commonality within the group is  that members care                                                               
about Alaska and about the fiscal future of the state.                                                                          
                                                                                                                                
MR. GELDHOF noted that he had  provided a written decision to the                                                               
committee [included in  the committee packet] and  would be happy                                                               
to  take questions  about the  document.   He  recalled that  Ms.                                                               
Mills had  said that this is  largely a matter of  policy, and he                                                               
said he  disagrees with  that notion.   Although there  is policy                                                               
involved, the  legal issues  are the area  of most  importance to                                                               
him.   He  explained that  legal issues  arose with  the attorney                                                               
general's  contention that  "you can  basically just  do whatever                                                               
you want."   He emphasized that he also wants  to speak about the                                                               
presumption of  laws passed by the  legislature being enforceable                                                               
in  constitution.     He  shared   his  understanding   that  the                                                               
legislature passed a  statute and has been invited  by the Office                                                               
of the Attorney General  to "blow it off" and not  follow it.  He                                                               
deduced that Wielechowski  v. State is something  which is relied                                                             
on heavily.  He said that  the individuals involved in this case,                                                               
Alaska  State  Senator  Bill Wielechowski,  former  Alaska  State                                                               
Senator  Clem  Tillion,  and former  Alaska  State  Senator  Rick                                                               
Halford,  attempted to  determine whether  there was  an implicit                                                               
designation of  funds in the  constitution that  required payment                                                               
of  the  PFD.    He  explained  that  the  Alaska  Supreme  Court                                                               
unanimously  said   such  a  designation  is   "an  impermissible                                                               
dedication of  fund."   He mentioned  the statute  implemented by                                                               
the legislature  that set a 5  percent cap for withdrawal  of the                                                               
POMV  from the  combined ERA  and  permanent fund  accounts.   He                                                               
expressed  his   understanding  that  "the  overdraw   is  not  a                                                               
mandatory spending."                                                                                                            
                                                                                                                                
1:52:07 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF responded that there  is a statutory cap on spending,                                                               
and it is  easily distinguishable from the  requirement to spend.                                                               
He compared  it to the  difference between an "accelerator  and a                                                               
brake" when driving  a car.  He shared that  he has "searched and                                                               
searched" and  has not  found an Alaska  Supreme Court  case that                                                               
interprets a statute that is  based on a constitutional provision                                                               
that says,  "You can do whatever  you want and blow  through your                                                               
statutory caps."  He suggested  reading the Hickel v. Cowper case                                                             
from 1994  and shared that  his reading of  the case is  that the                                                               
Alaska Supreme  Court specifically stated that  the statutory cap                                                               
issue was not  addressed.  He said he understands  that the court                                                               
reserved  issues for  "down  the trail."   The  idea  that the  5                                                               
percent cap  can be ignored  is incorrect and, as  he understands                                                               
it, has  never been litigated.   Mr. Geldhof concluded  that CCCP                                                               
is concerned  that the  state is  going to  "throw money  that we                                                               
don't  have  and  throw  caution  to the  wind"  for  short  term                                                               
political gain.   He explained that  CCCP will ask the  courts to                                                               
rule on this issue.                                                                                                             
                                                                                                                                
1:53:57 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF  asked, "What is the  policy here?"  He  said that he                                                               
has  listened  to the  proceedings  in  the legislature  and  the                                                               
testimony from  the Office  of the Attorney  General.   He shared                                                               
his understanding  that the  legislature is  being invited  to do                                                               
exactly  what the  Callan  consultants  [from Callan  Associates,                                                               
Inc.] for  the Alaska Permanent Fund  Corporation advised against                                                               
because  it would  destroy the  combined  assets in  the ERA  and                                                               
permanent fund.   He continued  that the consultants said  that 5                                                               
percent would  be too high  while the attorney general  said that                                                               
the  legislature  can  do  "whatever   you  want"  based  on  the                                                               
Wielechowski case.   He noted  that this case provides  a slender                                                               
comfort, but is  not binding, because it is  about the dedication                                                               
of funds.   He continued that  the statute on the  5 percent POMV                                                               
is not a dedicated fund, it's a  cap, and there are other caps in                                                               
statutory law that are followed.                                                                                                
                                                                                                                                
MR. GELDHOF offered an "easy  solution": if the legislature wants                                                               
to  go on  record  as  disregarding the  advice  from the  Callan                                                               
consultants and the permanent fund  trustees in favor of spending                                                               
money, then  the statute  should be amended.   He  suggested that                                                               
the legislature go on record and  let the citizens of Alaska know                                                               
that legislators  "really don't care" about  the fiscal integrity                                                               
of  the savings  accounts in  the permanent  fund and  ERA.   Mr.                                                               
Geldhof  concluded  that  CCCP   knows  the  struggles  that  the                                                               
legislature faces,  but it wants  the legislators to  either live                                                               
within the means set out in the  statute or amend the statue.  He                                                               
demanded that  the advice "to  ignore the law" from  the attorney                                                               
general  and the  [Dunleavy]  Administration not  be  taken.   He                                                               
noted that there  is a presumption of  constitutionality and that                                                               
statues enacted by the legislature are presumed to be valid.                                                                    
                                                                                                                                
1:57:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN explained  that  he has  read the  letter                                                               
provided by  Mr. Geldhof  and understands that  he is  before the                                                               
committee  to  defend  the  cap  found in  AS  37.13.140  and  AS                                                               
37.13.145.   He asked,  since there is  a cap  on appropriations,                                                               
whether Mr. Geldhof  also believes that that cap  should apply to                                                               
the current efforts  of the legislature to move  a greater amount                                                               
of money than the cap would permit.                                                                                             
                                                                                                                                
MR.  GELDHOF  responded  that  his   understanding  is  that  the                                                               
proposal is  to move $4 billion  from the ERA into  the corpus of                                                               
the  permanent  fund.     He  said  that  moving   funds  via  an                                                               
appropriation  doesn't raise  "any constitutional  image" because                                                               
the  money would  be put  into the  corpus, which  would a  "safe                                                               
harbor" that  would preclude  legislators and  the administration                                                               
from spending it.  He said  that he doesn't think that presents a                                                               
statutory or constitutional issue.                                                                                              
                                                                                                                                
REPRESENTATIVE EASTMAN asked for  clarification on how Mr. Geldof                                                               
arrived  at his  conclusion.   He  said that  he understands  Mr.                                                               
Geldof's argument to  be that there is an appropriation  cap of 5                                                               
percent,  and if  legislators were  to  appropriate money  beyond                                                               
that cap,  then it  would be  a statutory  violation.   He stated                                                               
that  he thought  he  heard  Mr. Geldof  say  contrarily that  if                                                               
legislators  appropriate $4  billion  in the  current budget  and                                                               
send it  to the corpus,  then that would not  be part of  the cap                                                               
and could  be ignored.   He asked  Mr. Geldof to  explain whether                                                               
that  is a  legal argument,  a political  argument, or  something                                                               
else.                                                                                                                           
                                                                                                                                
MR. GELDOF responded that the  fundamental purpose of the statute                                                               
and of Senate  Bill 26 was to protect the  combined assets of the                                                               
ERA and the  permanent fund.  He said that  taking funds from the                                                               
ERA and  putting these funds  where they cannot be  spent doesn't                                                               
create  any problem,  neither does  an obligation  to appropriate                                                               
money to  inflation-proof it.   He expressed that Senate  Bill 26                                                               
aims to  overdraw the  ERA in  a way  that would  diminish future                                                               
opportunities and  prospects.  He  highlighted the real  issue in                                                               
his mind as  being whether the chief executive  will exercise his                                                               
or her constitutional veto or appropriation reduction powers.                                                                   
                                                                                                                                
2:02:21 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  noted that if  money is being transferred  from the                                                               
ERA into  the corpus,  then no  changes to  the overall  fund are                                                               
being enacted.  He explained  that the withdrawal wouldn't change                                                               
the fund  value, which might be  the reason why it  gets analyzed                                                               
differently.                                                                                                                    
                                                                                                                                
MR. GELDOF  responded with his interpretation  that analytically,                                                               
Chair  Claman  is  calling for  an  accounting  methodology  that                                                               
doesn't  diminish  the overall  value  of  the combined  ERA  and                                                               
permanent fund.  He said  that that makes sense analytically, but                                                               
from a practical point of view,  if the money is not appropriated                                                               
properly and  gets utilized for  projects of  varying worthiness,                                                               
it  would  not deviate  from  the  5  percent  cap and  would  be                                                               
presumptively valid.                                                                                                            
                                                                                                                                
2:04:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN asked for  clarification that the statutes                                                               
being  referenced  are  AS  37.13.145(f),   which  is  where  the                                                               
combined total  of the  transfer is  found, and  AS 37.13.145(e),                                                               
where the information  on the cap is found.   In AS 37.13.145(a),                                                               
it is  found that the  ERA is being specifically  referenced, and                                                               
AS 37.13.145(f)  is referring to  the cap on  the appropriations.                                                               
He noted  that the way  that the statute  is written, the  ERA is                                                               
specifically  called out  and  places a  cap  on that  particular                                                               
account,  which he  stated is  one  of multiple  accounts in  the                                                               
permanent  fund.   He  suggested  that  it  might be  helpful  to                                                               
clarify legislative  history because there was  intent to protect                                                               
the account, but also to ensure  that funds going to the dividend                                                               
were  not limited.    He  mused that  if  the legislature  simply                                                               
permitted more money to  be taken out of the ERA  and sent to the                                                               
corpus, it could be taking away  from funds that could be paid as                                                               
a dividend.                                                                                                                     
                                                                                                                                
MR. GELDHOF responded  that he thinks the correct  way of reading                                                               
the statutes referenced  by Representative Eastman is  that the 5                                                               
percent application  represents the combined market  value of the                                                               
corpus, which  can't be touched.   The  proceeds from the  ERA is                                                               
added to combined value, and then  the 5 percent is applied.  The                                                               
5  percent of  the value  cannot be  taken out  of the  permanent                                                               
fund, he continued, because it can only  come out of the ERA.  He                                                               
stated that the  question becomes, "are we going to  go over that                                                               
5 percent?"                                                                                                                     
                                                                                                                                
REPRESENTATIVE  EASTMAN restated  that  his  question regards  AS                                                               
37.13.145(f),  which refers  to  the earnings  specifically.   He                                                               
explained that  the POMV is being  used to determine the  size of                                                               
the corpus, and  that is being used to decide  how much the state                                                               
can  suitably appropriate  from  this  amount.   He  asked for  a                                                               
response  from Mr.  Geldhof on  whether the  state would  need to                                                               
protect the  dividend portion of  a statute  just as much  as the                                                               
portion  of the  statute that  refers  to the  protection of  the                                                               
permanent fund's value.                                                                                                         
                                                                                                                                
2:08:59 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF  explained that he agrees  with Ms. Mills in  that it                                                               
is not  acceptable to  introduce a statute  that says,  "You must                                                               
pay."    He shared  his  understanding  that  the Office  of  the                                                               
Attorney  General   is  saying   that,  contrarily,  it   is  not                                                               
acceptable  to use  a statute  to say,  "You can't  exceed."   He                                                               
expressed that  this is wrong, and  the two uses of  statutes are                                                               
two separate  issues.  He  noted that he is  on the board  of the                                                               
Permanent Fund Defenders  and is a big proponent, as  well as the                                                               
other  board members,  of paying  a permanent  fund dividend  and                                                               
putting  the  permanent  fund  dividend   formula  in  the  state                                                               
constitution.   He said that  the issue  of whether the  state is                                                               
able to use a statute to  dedicate funds has already been settled                                                               
by the  Alaska Supreme  Court, and it  was decided  that statutes                                                               
cannot be  used in  this way.   The issue that  has not  yet been                                                               
ruled upon,  he continued, is  whether the statute that  has been                                                               
enacted has any vitality in meaning.   He shared his opinion that                                                               
he thinks  it does, and  the members of  CCCP also agree  that it                                                               
has meaning.   He concluded  that the  easy way out  of potential                                                               
litigation on this issue is to  change the statute.  He suggested                                                               
that the legislators pass a  statute that says the legislature is                                                               
going to  "suspend the 5  percent" and go  on record to  say that                                                               
there will be a deviation from the  5 percent cap.  He shared his                                                               
understanding that all  the public wants is for  this business to                                                               
be done publicly and transparently.                                                                                             
                                                                                                                                
2:11:12 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  inferred  that  the  attorney  general's  analysis                                                               
suggested   that   the    appropriation   authority   under   the                                                               
constitution  is "higher"  than  the  legislature's authority  to                                                               
pass   statutes.     He  asked   if  Mr.   Geldhof  shares   that                                                               
interpretation.                                                                                                                 
                                                                                                                                
MR. GELDHOF  responded that Alaska  is a jurisdiction that  has a                                                               
constitution  to limit,  as well  as  assign, the  powers of  all                                                               
three branches [of  government].  He opined  that the legislative                                                               
branch is the highest and  most significant branch.  He expounded                                                               
that the  executive branch executes "faithfully  and consistently                                                               
with the  laws," while  the judicial  branch interprets  the laws                                                               
and  resolves disputes.   Regarding  the legislature's  powers of                                                               
appropriation, he said, they are  "extraordinary" but not without                                                               
restrictions.  Further,  he offered his belief  that the attorney                                                               
general's "vague" analysis  is "an invitation for  mischief."  He                                                               
pointed out  that the public  thinks that statutes passed  by the                                                               
legislature  have  meaning.    He  went on  to  convey  that  the                                                               
statutory provision  that limits the expenditure  of the combined                                                               
market  value   was  enacted   in  law   and  follows   from  the                                                               
constitutional  principal   in  Article  9,  Section   15,  which                                                               
specifies  that  the income  from  the  permanent fund  shall  be                                                               
deposited into the GF unless  otherwise provided by law; however,                                                               
the legislature  set up  the ERA.   He offered  his understanding                                                               
that the  "[otherwise] provided  by law  statute" stems  from the                                                               
legislature's general  power and constitutional power  in Article                                                               
9,  Section 15.    He  asserted that  the  legislature  set up  a                                                               
restriction  on over-appropriating  the  money, emphasizing  that                                                               
"[the  legislature]  provided by  law,  in  a statute,  which  is                                                               
binding, a  cap, and unless  and until  you change that  cap, you                                                               
should follow it."                                                                                                              
                                                                                                                                
2:14:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN questioned  whether the  income from  the                                                               
permanent fund falls under the  category of proceeds from a state                                                               
tax or license.                                                                                                                 
                                                                                                                                
MR. GELDHOF opined  that it does not [fall under  the category of                                                               
proceeds from  a state tax or  license].  Further, he  stated his                                                               
interest  in asking  that question  to Angela  Rodell, the  Chief                                                               
Executive  Officer  of  the  Alaska  Permanent  Fund  Corporation                                                               
(APFC), as well as to APFC's counsel.                                                                                           
                                                                                                                                
2:16:33 PM                                                                                                                    
                                                                                                                                
MS.  MILLS  reiterated  that despite  Mr.  Geldhof's  statements,                                                               
Wielechowski v. State advised what  the legislature could do with                                                             
permanent  fund  income.    She   cited  another  line  from  the                                                               
introductory paragraph, which stated  that "the legislature's use                                                               
of permanent fund  income is subject to  normal appropriation and                                                               
veto  budgetary   processes."    Therefore,  she   surmised  that                                                               
permanent fund income  is similar to the GF, in  that it can't be                                                               
dedicated.     In   response  to   the  previous   question  from                                                               
Representative  Eastman,  she  said,  the  Alaska  Supreme  Court                                                               
indicated that  permanent fund income  is revenue, and  under the                                                               
Alaska  Supreme Court's  precedent,  revenue is  a  state tax  or                                                               
license; thus, she  maintained that the permanent  fund income is                                                               
subject  to the  dedicated funds  clause and  is a  state tax  or                                                               
license  for  purposes  of  the  constitution.    Based  on  that                                                               
premise,  she  argued  that  permanent   fund  income  should  be                                                               
considered as any  other spending.  She questioned  if any member                                                               
of  the  legislature believes  that  a  statutory spending  limit                                                               
could be  enacted that caps  spending overall.  She  added, "[The                                                               
attorney general] doesn't  think you can do that."   To conclude,                                                               
she said  [the attorney  general] does  not view  this particular                                                               
issue as an open question because  the court has made it clear in                                                               
all its  precedents.   Furthermore, she  offered her  belief that                                                               
the legislature  has the authority  to make the  policy decision,                                                               
which should not be based on the threat of litigation.                                                                          
                                                                                                                                
2:20:00 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN considered  a scenario  in which  DOL viewed  the 5                                                               
percent as enforceable.  Based on  that scenario, he asked if the                                                               
legislature would be breaking the law  if they put the $4 billion                                                               
into the corpus from the ERA.                                                                                                   
                                                                                                                                
MS.  MILLS  said subsection  (e)  of  the statute  referenced  by                                                               
Representative  Eastman  states  that  the  legislature  may  not                                                               
appropriate, from the ERA to the  GF, a total amount that exceeds                                                               
the 5  percent.  She  noted that  subsection (f) is  the combined                                                               
total  of money  from the  ERA to  the dividend  fund.   Based on                                                               
that,  she  said,  appropriating  money   from  the  ERA  to  the                                                               
permanent fund would not fall under the statute.                                                                                
                                                                                                                                
REPRESENTATIVE CLAMAN asked [if  transferring $4 billion into the                                                               
corpus from the ERA] would be allowed.                                                                                          
                                                                                                                                
MS. MILLS answered that is correct.                                                                                             
                                                                                                                                
2:21:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  asked what DOL's position  was before the                                                               
Alaska  Supreme Court  decided  to define  state  tax or  license                                                               
equivalent to revenue.                                                                                                          
                                                                                                                                
MS. MILLS answered that she was  unsure [of DOL's opinion at that                                                               
time.]                                                                                                                          
                                                                                                                                
2:22:24 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN questioned  why putting  a cap  on GF  expenditures                                                               
would create a dedicated fund.                                                                                                  
                                                                                                                                
MS. MILLS  replied there are two  things to consider.   The first                                                               
consideration  is the  dedicated funds  clause, which  sets forth                                                               
that revenues of  the state cannot be dedicated.   She added, "If                                                               
you are saying  these can't be used in a  certain way, that's the                                                               
other side of the coin from saying  you can only spend it in this                                                               
way."   The second consideration,  she said, pertains to  the way                                                               
legislation  is  passed.    She  stated  her  understanding  that                                                               
appropriations do  not necessarily  hold a higher  authority, but                                                               
they  do   have  a  specific   process,  and  to   restrict  [the                                                               
legislature's]  authority  through  a  substantive  law  bill  on                                                               
appropriations  would  violate  the concept  that  appropriations                                                               
occur in appropriations bills.                                                                                                  
                                                                                                                                
CHAIR CLAMAN  remarked that  "that doesn't really  hold a  lot of                                                               
water" because  it only  takes 21  votes to change  the law.   He                                                               
explained that  if a  cap is  put into  law that  the legislature                                                               
does not like, then the legislature  could change the cap with 21                                                               
votes in  the House, 11 votes  in the Senate, and  the governor's                                                               
signature.  He asked how that would create a dedicated fund.                                                                    
                                                                                                                                
MS.  MILLS  emphasized that  every  year  appropriations must  be                                                               
passed in an appropriation bill.   She expounded that every year,                                                               
the legislature must consider all  the revenues and all available                                                               
money.   She suggested that  the court recognized that  passing a                                                               
statute  is  different,  which   was  an  argument  that  Senator                                                               
Wielechowski made; however, it was dismissed by the court.                                                                      
                                                                                                                                
CHAIR  CLAMAN interjected  by pointing  out that  Wielechowski v.                                                             
State is  "a different animal"  because it pertains to  a statute                                                             
that says, "You shall spend  this much money"; further, the court                                                               
decided that  it's not  a dedicated  fund.   He pointed  out that                                                               
there's  nothing   in  the  Wielechowski   case  that   says  the                                                             
legislature  does not  have the  authority to  put limits  on its                                                               
spending authority.  He asked Ms. Mills why that can't be done.                                                                 
                                                                                                                                
MS. MILLS replied that she and  Chair Claman may disagree on this                                                               
legal  point.    She  reiterated   that  [the  attorney  general]                                                               
believes    that   spending    decisions    are   done    through                                                               
appropriations.   She  maintained  that to  limit that  authority                                                               
through  a substantive  statute is  limiting [the  legislature's]                                                               
appropriation  power.   She  emphasized  that appropriations  are                                                               
done through a specific process.                                                                                                
                                                                                                                                
CHAIR CLAMAN asked whether  the legislature's appropriation power                                                               
is  included in  Article  2,  Section 1,  which  states that  the                                                               
legislative  power of  the state  is vested  in the  legislature.                                                               
Further,  he sought  confirmation that  it is  inherently in  the                                                               
legislature's power to limit itself.                                                                                            
                                                                                                                                
MS. MILLS answered,  "But Chair Claman, you can.   Every year you                                                               
get to make  those decisions and decide to hold  back, or not, on                                                               
the way you spend.  It's an annual spending decision."                                                                          
                                                                                                                                
CHAIR  CLAMAN  posited that  Ms.  Mills  is indicating  that  the                                                               
appropriation  authority  is  a   "higher"  authority  than  [the                                                               
legislature's]  statutory  authority.     He  reasoned  that  the                                                               
legislature "is  not saying how  you spend it, we're  just saying                                                               
this is all you have available to  spend."  He added that the cap                                                               
in the POMV law specifies how much  money can be spent.  He asked                                                               
why  the legislature  does not  have the  authority to  limit how                                                               
much money it has available to spend.                                                                                           
                                                                                                                                
MS. MILLS replied,  "Because that's not how  the constitution was                                                               
set up by our framers."                                                                                                         
                                                                                                                                
2:26:49 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  pointed out that  nowhere in the  constitution does                                                               
it read  that the [legislature's] appropriation  authority trumps                                                               
everything else that the legislature  does, "which is essentially                                                               
the argument you're making," he said.                                                                                           
                                                                                                                                
MS. MILLS remarked:                                                                                                             
                                                                                                                                
     I'm  saying that  appropriations have  to go  through a                                                                    
     specific  process and  there's an  annual process  that                                                                    
     was set  forth in  the constitution  and you  can't use                                                                    
     the  substantive  law  process  to  do  appropriations;                                                                    
     whether you  view that  as a  higher power  because you                                                                    
     have  to do  it on  an annual  basis, to  me, that's  a                                                                    
     subjective descriptor  ...; but  they are  two separate                                                                    
     processes and our  constitutional convention delegates,                                                                    
     again,   were  very   clear   that   they  wanted   the                                                                    
     legislature  to have  full  flexibility  every year  to                                                                    
     look at  the revenues,  look at what  was in  the fund,                                                                    
     and determine  how to spend  it.  Having  a substantive                                                                    
     law that you  would have to change by  statute - again,                                                                    
     I  know you  say that  Wielechowski was  different, but                                                                  
     the argument was very similar.                                                                                             
                                                                                                                                
CHAIR  CLAMAN  stated  that  the   Wielechowski  case  was  about                                                             
"whether  or  not this  was  a  dedicated  fund," and  the  court                                                               
decided  it's not;  therefore, those  funds have  to compete  for                                                               
everything else.   He  asked if  Ms. Mills  agrees that  the POMV                                                               
does not create a dedicated fund.                                                                                               
                                                                                                                                
MS. MILLS  replied, "It depends  on if you're interpreting  it as                                                               
binding  or not.    If it's  binding, I  think  there's a  really                                                               
strong argument that [it] is a prohibited dedication."                                                                          
                                                                                                                                
CHAIR CLAMAN  asked if the  legislature passed a law  that limits                                                               
spending  to no  more  than  5 percent,  why  it  would create  a                                                               
dedicated fund.  He said he  does not follow that logic and asked                                                               
Ms.  Mills to  explain.   Additionally, he  questioned what  it's                                                               
being dedicated to.                                                                                                             
                                                                                                                                
MS. MILLS answered:                                                                                                             
                                                                                                                                
     It's being dedicated  to not being spent.   It' still a                                                                    
     dedication, it's just a  negative dedication and you're                                                                    
     taking  it out  of the  pool that  the legislature  can                                                                    
     appropriate.   ... Appropriation laws are  laws, and if                                                                    
     you have  a substantive law  that says you  can't spend                                                                    
     more  than this,  why  couldn't  an appropriation  bill                                                                    
     change that?                                                                                                               
                                                                                                                                
CHAIR CLAMAN  pointed out that  the money stays in  the Treasury.                                                               
He added, "I guess I have  difficulty with the analysis that it's                                                               
somehow a negative dedicated fund."                                                                                             
                                                                                                                                
2:29:49 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN referencing the Employment  Security Act and several                                                               
other  statutes,   which  limit  how  much   the  legislature  is                                                               
obligated to pay, asked if  DOL's position is that those statutes                                                               
could be written  off because they have no binding  effect on the                                                               
state.                                                                                                                          
                                                                                                                                
MS. MILLS explained that in part,  the purpose of a statute is to                                                               
advise the executive branch how  to implement the law.  Regarding                                                               
Chair  Claman's question,  she said,  those statutes  are telling                                                               
the executive  branch how the  appropriation can  be distributed.                                                               
She added, "If  you wanted to give more or  create a new program,                                                               
that's  where   we  get  into   fuzzy  lines  about   what's  the                                                               
appropriation and what's the program."                                                                                          
                                                                                                                                
CHAIR CLAMAN  regarding employment security  benefits, questioned                                                               
whether the legislature has the  authority to increase the weekly                                                               
benefit in the budget without changing the statute.                                                                             
                                                                                                                                
MS. MILLS said she would need  to look at the specific statute in                                                               
question  and how  the appropriation  was written.   Nonetheless,                                                               
she  said  the legislature  can  "absolutely"  provide grants  to                                                               
individual Alaskans through an appropriation bill.                                                                              
                                                                                                                                
CHAIR  CLAMAN noted  that  his previous  question  was not  about                                                               
grants.   He asked  again if the  legislature could  increase the                                                               
weekly benefit in an appropriation bill.                                                                                        
                                                                                                                                
MS. MILLS opined that depending on  how it's written, it could be                                                               
done.                                                                                                                           
                                                                                                                                
2:33:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  asked  if   the  statute  route  or  the                                                               
appropriation  route  was  more  difficult,  regarding  the  veto                                                               
process.   He clarified  his question by  asking if  the governor                                                               
could  line item  veto a  piece of  legislation that  was not  an                                                               
appropriation bill.                                                                                                             
                                                                                                                                
MS. MILLS  responded that  the governor cannot  line item  veto a                                                               
substantive  law  bill.    This  came up  previously  in  a  case                                                               
regarding  bonds, she  recalled.   The  courts  had decided  that                                                               
since it  was not an  appropriation bill, the governor  could not                                                               
line   item   veto  the   legislation.      Therefore,  only   an                                                               
appropriation bill can be line item vetoed, she concluded.                                                                      
                                                                                                                                
REPRESENTATIVE  EASTMAN asked  which had  a higher  threshold, to                                                               
override  a veto  through an  appropriation bill,  or substantive                                                               
law bill.                                                                                                                       
                                                                                                                                
MS. MILLS  responded it  would be  the appropriation  bill, which                                                               
requires a three-quarters override.                                                                                             
                                                                                                                                
REPRESENTATIVE  EASTMAN referred  to  the Uniform  Rules and  how                                                               
appropriation bills  are dealt with differently  than substantive                                                               
law  bills.   He then  asked which  had more  strict controls  in                                                               
conference committees.                                                                                                          
                                                                                                                                
MS. MILLS offered her understanding  there is more flexibility in                                                               
appropriation bills  when it comes to  conference committees than                                                               
substantive law bills.                                                                                                          
                                                                                                                                
REPRESENTATIVE EASTMAN suggested that Uniform  Rule 42 may be the                                                               
one he  was referencing.  He  said Ms. Mills' answer  was not his                                                               
recollection.                                                                                                                   
                                                                                                                                
2:36:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SNYDER   clarified   that  unless   it   is   an                                                               
appropriation  bill, the  legislature cannot  limit spending  and                                                               
cannot direct spending.  She  inquired if there was anything that                                                               
disallowed the legislature  from putting a limit  or directive in                                                               
an  appropriation  bill that  would  apply  indefinitely or  over                                                               
multiple years.                                                                                                                 
                                                                                                                                
MS.  MILLS  responded that  is  a  current  issue in  the  Alaska                                                               
Supreme Court.   The court is looking at  whether the legislature                                                               
could forward fund appropriations for  education.  She said DOL's                                                               
position  is that  Alaska has  an annual  spending model  in that                                                               
every year  the legislature considers  the spending for  one year                                                               
at a time and cannot bind  the next legislature on spending.  The                                                               
case  is undecided,  and the  answer  depends on  what the  court                                                               
says, she explained.                                                                                                            
                                                                                                                                
2:37:53 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN,  regarding the question on  whether the legislature                                                               
could  forward fund,  opined  that DOL  was  taking a  distinctly                                                               
different position under the current  administration than it took                                                               
during the last administration.                                                                                                 
                                                                                                                                
MS. MILLS responded that having  looked at the history and having                                                               
been a part of it, "we just never looked at the question."                                                                      
                                                                                                                                
CHAIR CLAMAN  asked if  the notation  that one  legislature can't                                                               
bind the  next is from  Carr-Gottstein Properties v.  State, [899                                                             
P.2d 136 (Alaska 1995)], and  he asked whether that [restriction]                                                               
would have any effect regarding the POMV law.                                                                                   
                                                                                                                                
MS. MILLS  answered she thinks  it does,  and that it  plays into                                                               
the annual  appropriation model that  every year  the legislature                                                               
makes  spending  decisions.    The  terminology  on  not  binding                                                               
another legislature generally has to  do with how the legislature                                                               
spends money, she explained, not  substantive law, because things                                                               
that are codified can be overturned.                                                                                            
                                                                                                                                
CHAIR CLAMAN explained  the reason he was curious  for Ms. Mills'                                                               
opinion  was because  he understood  the  Carr-Gottstein case  as                                                             
relating  to  the  incurring debt  provisions,  not  relating  to                                                               
dedicated  funds  or  appropriations.    As  per  that  case,  he                                                               
understood  that the  legislature can  enter all  the leases  the                                                               
legislature  wants,  but the  legislature  cannot  bind the  next                                                               
legislature to  renew a lease.   He  asks if he  missed something                                                               
that comes into play here.                                                                                                      
                                                                                                                                
MS.  MILLS  argued that  Carr-Gottstein  had  to with  debt,  and                                                             
whether one  legislature could bind  another to pay  dept, making                                                               
it  a  spending issue  of  whether  one legislature  could  force                                                               
another to put a debt into  the appropriation bill.  Only general                                                               
obligation   (GO)  bonds   can  require   funding  from   another                                                               
legislature.                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN concluded  that GO  bonds need  to come  before the                                                               
public  for a  vote, which  would resolve  the issue.   The  only                                                               
issue he  saw was state leases,  in which the landlord  takes the                                                               
risk that the legislature will not want to fund the lease.                                                                      
                                                                                                                                
MS. MILLS agreed with Chair Claman's understanding.                                                                             
                                                                                                                                
2:41:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE   asked  how   Ms.  Mills   reconciled  the                                                               
legislature's  power of  appropriation in  the constitution  with                                                               
the constitutional spending cap.                                                                                                
                                                                                                                                
MS. MILLS  replied that is exactly  how a spending cap  has to be                                                               
done,  through a  constitutional amendment.   She  continued that                                                               
she didn't think a statutory spending limit would be binding.                                                                   
                                                                                                                                
2:42:46 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF  stated that there has  been a lot of  talk about the                                                               
general power  of appropriation by  the legislature  according to                                                               
the  power of  the constitution.    He proposed  focusing on  the                                                               
appropriation being discussed, which comes  from the ERA, and the                                                               
source of  the ERA, the  Alaska permanent  fund.  He  argued this                                                               
issue  cannot be  looked  at abstractly,  as  if the  legislature                                                               
could  do  as  it  wished   according  to  appropriation  powers.                                                               
Generally speaking, he  stated, the legislature has  a great deal                                                               
of discretion  in terms of  appropriating.  What  the legislature                                                               
can't do,  and is not  implicated in  this case, he  declared, is                                                               
dedicate funds  and bind future  legislatures.  That is  not what                                                               
is  being  discussed,   Mr.  Geldhof  argued.     What  is  being                                                               
discussed, he  stated, was whether the  Alaska State Legislature,                                                               
in the  context of  dealing with  Article 9,  Section 15,  of the                                                               
constitution,  relating to  the permanent  fund, were  to set  up                                                               
restrictions on the amount of money in a statute.                                                                               
                                                                                                                                
MR. GELDHOF  opined that the  statutes are not  aspirational, and                                                               
the legislature is  obligated to follow them.   The legislature's                                                               
power as lawmakers to put a  restrictor device on an account uses                                                               
the  Article 9,  Section  15, provision  that states,  "otherwise                                                               
provided by law".   This money, he explained, goes  into the ERA,                                                               
because  the legislature  used its  authority to  pass a  statute                                                               
that says it will spend 5  percent of the combined permanent fund                                                               
and ERA.  Mr. Geldhof said  unless and until the legislature uses                                                               
its law  powers to change  the restriction, the  legislature must                                                               
follow it as a matter of law.                                                                                                   
                                                                                                                                
MR. GELDHOF  posed the question:   "Are  we a state  that follows                                                               
the rule of  law?"  The implication here, he  suggested, from the                                                               
Office of  the Attorney  General is  to engage  in ad  hoc fiscal                                                               
decision-making.  He opined that  would cause ruination of one of                                                               
the best ideas  that has ever come forward -  the permanent fund.                                                               
He rhetorically  asked if he  was being harsh,  before continuing                                                               
to state  that for  six years  the state  has had  an imbalanced,                                                               
unsustainable budget.   The call from the Office  of the Attorney                                                               
General  has been  to open  the floodgate  and overdraw  the ERA,                                                               
which is a part of the permanent fund.                                                                                          
                                                                                                                                
2:45:32 PM                                                                                                                    
                                                                                                                                
MR. GELDHOF  challenged committee members, asking  if they wanted                                                               
to be  part of the  group of people who  that kicks the  can down                                                               
the  road, and  overdraws  and overspends.    He drilled  further                                                               
asking if they wanted to ignore  their own statutes.  He implored                                                               
the committee, if  the legislature would continue  to behave this                                                               
way, to have the courage to  pass a law that says the legislation                                                               
is no longer binding.                                                                                                           
                                                                                                                                
MR.  GELDHOF stated  that  he believed  Wielechowski  was not  on                                                             
point in  controlling this  case, because it  was dealing  with a                                                               
mandatory spending  and a  dedication of  funds.   This is  a cap                                                               
adopted in order  to protect the permanent fund and  the ERA.  He                                                               
suggested going back  to Hickel v. Cowper.   The obvious question                                                             
that  was  unanswered,  he  declared,  was  whether  a  statutory                                                               
prohibition, the spending cap of  5 percent of POMV, precludes an                                                               
overdraw.    The court  in  Hickel  v.  Cowper talked  about  the                                                             
statute  but  said  there  is   no  statutory  or  constitutional                                                               
provision  that precludes  [an  overdraw].   He  argued that  the                                                               
court  left open  the idea  that  the legislature  could adopt  a                                                               
restriction.                                                                                                                    
                                                                                                                                
MR. GELDHOF concluded  his argument by asking  the committee what                                                               
was wrong with following the  law and whether the legislature was                                                               
so undisciplined  that it  needed to spend  money that  the state                                                               
couldn't afford.   He requested if the legislature  wanted to tap                                                               
into funds  in an unsustainable  way, that  it at least  have the                                                               
wherewithal  to change  the statute  that  limits the  draw to  5                                                               
percent.                                                                                                                        
                                                                                                                                
2:48:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  sought further understanding of  what was                                                               
behind   the  inability   to  bind   future  legislatures.     He                                                               
acknowledged that  there may  be some value  in not  allowing one                                                               
legislature to  bind those  that come after,  but he  argued that                                                               
other  legislatures don't  seem to  believe they  need to  follow                                                               
statutes.   He asked how  far a legislature  can go in  binding a                                                               
future legislature, and where the stopping point is.                                                                            
                                                                                                                                
MR.  GELDHOF replied  that he  was again  inclined to  talk about                                                               
policy.   He  surmised that  if the  legislature asked  the court                                                               
whether [statutes] meant anything and  the Office of the Attorney                                                               
General were to respond that  they do not, then legislators would                                                               
have to consider what that would  mean to their constituents.  He                                                               
concluded  by  restating  his  argument  that  a  law  should  be                                                               
changed, not ignored.                                                                                                           
                                                                                                                                
2:52:35 PM                                                                                                                    
                                                                                                                                
MS. MILLS  responded to  Representative Eastman's  question about                                                               
binding future legislatures.  She  stated that the constitutional                                                               
convention  delegates  were  concerned about  legislatures  being                                                               
able to  look at  what was  available in  resources in  any given                                                               
year and make decisions.   Specifically, they were concerned, she                                                               
explained,  that  giving a  legislature  the  ability to  bind  a                                                               
future legislature without knowing  what circumstances they could                                                               
face was  dangerous.  They  wanted to give flexibility,  and part                                                               
of that was making sure  each legislature could make decisions on                                                               
spending with the knowledge and resources based on current                                                                      
knowledge.                                                                                                                      
                                                                                                                                
2:54:59 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that HJR 7 was held over.                                                                                
                                                                                                                                
2:55:35 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Judiciary Standing Committee meeting was adjourned at 2:55 p.m.