Legislature(1995 - 1996)
01/22/1996 01:30 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE January 22, 1996 1:30 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Lyda Green, Vice-Chairman Senator Al Adams Senator Johnny Ellis MEMBERS ABSENT Senator Mike Miller COMMITTEE CALENDAR SENATE JOINT RESOLUTION NO. 30 Proposing amendments to the Constitution of the State of Alaska relating to the budget reserve fund. PREVIOUS SENATE COMMITTEE ACTION SJR 30 - No previous Senate action. WITNESS REGISTER Senator Steve Rieger Alaska State Capitol Juneau, Alaska 99811 POSITION STATEMENT: Sponsor of SJR 30 Brad Pierce Office of Management and Budget P.O. Box 110020 Juneau, AK 99811-0020 POSITION STATEMENT: Supports SJR 30 Neil Slotnick Assistant Attorney General Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Answered questions on SJR 30 ACTION NARRATIVE TAPE 96-2, SIDE A Number 001 SJR 30 USE OF BUDGET RESERVE FUND CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:30 p.m. Senators Taylor, Green, Adams, and Ellis were present. The first order of business was SJR 30. SENATOR RIEGER, prime sponsor of SJR 30, gave the following overview of the measure. The purpose of the constitutional amendment which created the budget reserve fund was to help stabilize state revenue and was passed at a time when the Legislature was anticipating major legal settlements, commonly referred to as potential windfalls. The fund was created in response to concern that if all of the money was available at once for spending, the temptation and pressure for expending it would be irresistible. The budget reserve fund was designed to hold all of the one-time settlements and to be used when there were shortfalls, in order to stabilize state spending. It was not designed as a spending limit, but was crafted so that the money would be initially separated from the general fund but could be spent with a simple majority vote as long as it did not serve to increase spending over prior years. To use that money, in any form, as part of a plan which increased spending over the prior years, would take an extraordinary majority, or 3/4, vote. The amendment was misdrafted in that excessive attention was concentrated on reference to funds available for appropriation as the standard by which to meet one or more tests, rather than the use of a standard testing the actual level of spending. The references to "funds available for appropriation" were eventually litigated with the outcome being that no spending plan can be passed by a simple majority, if there are any funds available from previous years. Those funds are placed on the table first and used in that year's calculations of spending, and are subject to the "sweep." SENATOR RIEGER explained the "sweep" process. Once draws have been made from the constitutional budget reserve, at the end of the year, either funds must be made available for an appropriation to repay the budget reserve fund, or a 3/4 vote to avoid doing so must occur. The litigation centered around which funds were available for appropriation. The general fund was available for appropriation, but funds such as the Alaska Marine Highway Fund, in which the money is collected in one year but is not spent until the following year for operations, were in question. Other funds with similar structures are the Alaska Debt Retirement Fund, the Four Dam Pool Transfer Fund, some of the Mental Health Trust monies, the Railbelt Energy Fund, and others. The Divisions of Legislative Finance and Legislative Audit have compiled a list of such funds, which essentially must be depleted unless the 3/4 vote occurs to prevent them from being depleted. Number 089 SENATOR TAYLOR asked if the Science and Technology Foundation is on the list. SENATOR RIEGER replied the Science and Technology Endowment Fund was determined to be in question by legislative auditors. Because its determination was in question, it was not used to determine the calculations of what was swept and then unswept. The Power Cost Equalization Fund was treated in the same way. He added in practice it has made no difference, since there has always been a 3/4 vote and it has never been tested. Number 100 SENATOR RIEGER explained the purpose of SJR 30 is to refocus the wording of the amendment on spending from year to year, rather than on funds available from year to year. Second, SJR 30 removes the sweep provision. When it was created, there was no practical way of foreseeing that there would ever be a way to avoid the need for a 3/4 vote to prevent a sweep from fiscal year 1996 forward, because there have already been several hundred million dollars drawn from the budget reserve fund that have not been repaid. Number 127 SENATOR ADAMS asked if, with passage of SJR 30, one had an equal amount of unrestricted general funds and the constitutional budget reserve funds, an equal amount on an annual basis, then a simple majority vote would be required, rather than the 3/4 vote. SENATOR RIEGER believed Senator Adams' interpretation to be correct. SENATOR ADAMS commented that the minority would then not play a part in the priorities needed in the state. He added if SJR 30 were enacted, the 12 Republicans could focus on their priorities, while the 8 Democrats would have no say. SENATOR RIEGER replied that prior to the passage of the constitutional budget reserve, it was always technically possible for any majority to pass a budget with no consideration given to the concerns of the minority, but in practice it is more complex than that. SENATOR ADAMS disagreed and expressed concern that SJR 30 would eliminate minority party participation in budget priorities in both houses. Number 152 SENATOR ADAMS noted Section 2 repeals the payback provision. He asked how much money is owed to the constitutional budget reserve at present. SENATOR RIEGER did not have the dollar amount available. He explained that the section being repealed requires that if appropriations are made from the budget reserve fund, the amount available for appropriation shall be deposited in the budget reserve fund until it is repaid in its entirety. This requires the "sweep" every June 30, which effects the general fund and other funds not originally determined to be in the general fund. Number 179 BRAD PIERCE, senior policy analyst with the Office of Management and Budget, stated the Administration generally supports SJR 30. Regardless of the short term political considerations, it follows the intent of the original constitutional amendment. The Administration also supports repeal of the "sweep" provision. SENATOR ADAMS asked Mr. Pierce what the amount of money borrowed from the constitutional budget reserve is. MR. PIERCE offered to provide that information at a later time. Number 200 NEIL SLOTNICK, assistant attorney general, offered to answer questions, as he participated in much of the litigation involving the constitutional budget reserve, and in the attempts of the Legislature to enact definitions implementing the original amendment. He pointed out that SJR 30 deletes the term "in the previous calendar year" which would effectively allow the Legislature to change the amount in the calculus by passing supplemental appropriations. This language was originally included to prevent the Legislature from manipulating the previous year's budget by raising that amount with supplementals. Additionally, he explained that by focusing on unrestricted revenue, and defining unrestricted revenue to mean all monies received by the state during a fiscal year, any possible general fund carry forward is ignored in the calculus as to whether a 3/4 vote would be necessary. Number 231 SENATOR TAYLOR asked for further explanation of whether those funds would still be unrestricted merely because the year had passed. He noted frequently revenue is not even calculated within the year in which it was due. That calculation often runs 3 to 4 months into the next fiscal year before the amount of the carry forward, as of July 1, is known. MR. SLOTNICK replied that he was focussing on unrestricted revenue, meaning all money received by the state during a fiscal year. SENATOR TAYLOR stated it was received during the year even though the amount was undetermined. MR. SLOTNICK responded if it was a budget surplus left over from the previous year, it would not be considered received during that year. Number 250 MR. SLOTNICK commented the Department of Law would appreciate a thorough legislative history of this issue since there was not a great deal of legislative history available when this issue was litigated. SENATOR ADAMS asked if Mr. Slotnick was saying that from the total of the unrestricted general fund and the constitutional budget reserve, the carry forward money would be subtracted. MR. SLOTNICK stated the carry forward might not be unrestricted. He clarified his interpretation of the language in SJR 30 to mean that the unrestricted carry forward would not be subtracted. That money would not be part of the calculus. One would be comparing what was available unrestricted revenue in one year against what was appropriated out of unrestricted revenue and the constitutional budget reserve for the previous year. If there was a decrease in revenue, you could then appropriate out of the constitutional budget reserve by a simple majority without looking at any surplus that might have carried forward from the previous year. Number 264 SENATOR RIEGER stated that Mr. Slotnick's testimony describes the original cause of the problem. Mr. Slotnick is speaking about an undesignated carry forward sitting in the general fund. In trying to access those funds, the Legislature inadvertently caught carry forwards which were designated, but in a literal reading, were not designated enough to make them unavailable, such as the Marine Highway Fund. To categorize each fund would be too complex. Number 279 SENATOR TAYLOR discussed the need to review SJR 30 further and announced the measure will be scheduled again next week. There being no further business before the committee, the meeting was adjourned at 1:50 p.m.
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