00 CS FOR HOUSE BILL NO. 505(FIN)
01 "An Act making appropriations to the constitutional budget reserve fund
02 established under art. IX, sec. 17, Constitution of the State of Alaska; making
03 an appropriation to the Department of Education for support of kindergarten,
04 primary, and secondary education and community schools programs and for school
05 construction debt retirement; amending certain appropriations for education
06 programs and school construction debt retirement for fiscal year 1994 and for
07 educational facilities maintenance and construction; making appropriations from the
08 constitutional budget reserve fund under art. IX, sec. 17(c), Constitution of the
09 State of Alaska; and providing for an effective date."
10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
11 * Section 1. FINDINGS AND INTENT. (a) Following ratification by the voters, art. IX,
12 sec. 17, of the Constitution of the State of Alaska, took effect on January 2, 1991. This
13 amendment
14 (1) created a constitutional budget reserve fund;
01 (2) required that the proceeds of certain tax and mineral revenue disputes be
02 deposited into that fund; and
03 (3) established limitations on the legislature's ability to appropriate money
04 from that fund.
05 (b) That amendment dedicates to the constitutional budget reserve fund money from
06 mineral lease bonuses, rentals, royalties, royalty sale proceeds, federal mineral revenue sharing
07 payments or bonuses, and taxes imposed on mineral income, production, or property received
08 by the state after July 1, 1990," as a result of the termination, through settlement or otherwise,
09 of an administrative proceeding or of litigation in a State or federal court."
10 (c) Following the ratification of the budget reserve amendment, the Department of
11 Revenue requested that the attorney general determine whether the term "administrative
12 proceeding" in art. IX, sec. 17, of the Constitution of the State of Alaska, applied to informal
13 conferences and audits or only to formal hearings. On April 24, 1992, the attorney general
14 issued a formal opinion concluding that informal conferences do not constitute "administrative
15 proceedings" for the purposes of art. IX, sec. 17, of the Constitution of the State of Alaska.
16 The attorney general reasoned that sec. 17 applied to administrative actions that were similar
17 to litigation, such as the formal hearings held by the Department of Revenue. The opinion
18 concluded that informal conferences held for purposes of discussion and negotiation "fall
19 outside the ambit of the common understanding of litigation or legal contests."
20 (d) Since July 1, 1990, the state has engaged in several formal administrative hearings
21 and judicial proceedings to resolve oil and gas tax and mineral royalty disputes. Revenue
22 from the termination of these disputes has been deposited into the constitutional budget reserve
23 fund. During this period, the state also received oil and gas or mineral tax revenue from audit
24 assessments in the informal conference phase. In conformance with the April 24, 1992,
25 opinion of the attorney general, the Department of Revenue deposited in the general fund all
26 revenue resulting from settlement of informal tax conferences.
27 (e) The money in the general fund was available for appropriation by the legislature
28 and would be applied as necessary to meet any fiscal need.
29 (f) In passing the appropriation bills in 1993, the legislature authorized the expenditure
30 of anticipated revenue in the general fund, including amounts deposited in that fund as a result
31 of settlement of informal tax conferences. At the time the legislature passed those
01 appropriations for fiscal year 1994, revenue forecasts showed a surplus in the general fund.
02 However, due to the unanticipated decrease in state revenue, the state treasury has less money
03 than was anticipated at the time that the legislature made its appropriations in 1993. Because
04 of this shortfall, any anticipated surplus representing settlements of informal tax conferences,
05 and amounts received from informal tax conference settlements occurring after July 1, 1994,
06 must be expended to fully fund the capital and operation appropriations enacted in 1993.
07 (g) On July 12, 1993, the senate majority filed suit challenging the Department of
08 Revenue action of depositing into the general fund revenue resulting from informal tax
09 conferences. Halford v. Hickel, (3AN-93-6297 CI). On July 27, 1993, former Governor Steve
10 Cowper filed a similar complaint captioned Cowper v. Hickel (3AN-93-6848 CI). The cases
11 were consolidated.
12 (h) On November 19, 1993, the court issued its decision which concluded that art. IX,
13 sec. 17, of the state constitution applied to informal tax conferences. On November 29, 1993,
14 the state presented evidence that retroactive application of the court's ruling, requiring transfer
15 of over $940,000,000 from the general fund, would disrupt state finances and put at risk the
16 justifiable reliance interest of Alaskans and municipalities throughout the state.
17 (i) The superior court dismissed the state's request that the ruling be applied
18 prospectively only. The court found the evidence of hardship "very compelling," but noted
19 that the hardship could be relieved if the legislature reappropriated the money for fiscal year
20 1994. The court ordered the governor to fully restore the constitutional budget reserve fund
21 with interest and to comply with its decision by the end of the 1994 legislative session. The
22 superior court noted "it is not clear that the Governor could legally remove the improperly
23 placed funds from the general fund [to the Budget Reserve Fund] without an appropriation
24 authorizing it."
25 (j) Following appeal to the Alaska Supreme Court, the court determined that all
26 income that resulted from the settlement or other termination of informal administrative
27 proceedings involving certain taxes since July 1, 1990, should have been deposited into the
28 budget reserve fund created by art. IX, sec. 17, of the Constitution of the State of Alaska.
29 (k) The Alaska Supreme Court ordered the governor to restore the constitutional
30 budget reserve fund, with interest from the date of receipt by the state of money described in
31 (j) of this section.
01 (l) The amount required to restore the constitutional budget reserve fund consistent
02 with judicial interpretation is $945,636,778.27, plus interest that would have been earned upon
03 investment of this money, calculated from the date of receipt by the state.
04 (m) As of February 1994, there was not sufficient unappropriated or unrestricted
05 money in the general fund to allow the governor to unilaterally transfer the money needed to
06 fully restore the constitutional budget reserve fund.
07 (n) It is the intent of the legislature that the order of the Alaska Supreme Court be
08 complied with by an appropriation from the general fund to the constitutional budget reserve
09 fund, retroactive to July 1, 1993, of the principal and interest that should have been deposited
10 into that budget reserve fund. This appropriation will restore all money to the constitutional
11 budget reserve fund that should have been deposited there since July 1, 1990, under the
12 provisions of art. IX, sec. 17, of the Constitution of the State of Alaska.
13 * Sec. 2. The sum of $945,636,778.27 is appropriated from the general fund to the budget
14 reserve fund established by art. IX, sec. 17, Constitution of the State of Alaska, to comply
15 with the judgment in Hickel v. Halford (Supreme Court No. S-6124/6134) (Alaska Jan. 27,
16 1994).
17 * Sec. 3. An amount equal to the interest that would have been earned on money received
18 by the state after June 1, 1990, as a result of termination through settlement or otherwise of
19 an informal administrative proceeding involving taxes imposed on mineral income, production,
20 or property, and subsequently deposited in the general fund, is appropriated from the general
21 fund to the budget reserve fund established by art. IX, sec. 17, Constitution of the State of
22 Alaska, to comply with the judgment in Hickel v. Halford (Supreme Court No. S-6124/6134)
23 (Alaska Jan. 27, 1994).
24 * Sec. 4. (a) The sum of $696,357,088 is appropriated from the constitutional budget
25 reserve fund and from other funds in the amounts listed to the Department of Education for
26 the purposes expressed and allocated in the amounts listed for operating expenditures for the
27 fiscal year ending June 30, 1995:
28 FUND SOURCE AMOUNT
29 Budget reserve fund (art. IX, sec. 17,
30 Constitution of the State of Alaska) $635,149,688
31 General fund/mental health trust income account
01 (AS 37.14.011) 7,916,600
02 Public school trust fund (AS 37.14.110) 6,816,600
03 School fund (AS 43.50.140) 2,668,100
04 P.L. 81-874 21,806,100
05 Federal receipts other than
06 P.L. 81-874 22,000,000
07 PURPOSE ALLOCATION AMOUNT
08 Foundation program $629,938,000
09 Child nutrition/student lunch program 22,000,000
10 Cigarette tax distribution 2,668,100
11 Tuition students 1,887,600
12 Boarding home grants 355,000
13 Youth in detention 800,000
14 Pupil transportation 31,638,148
15 Schools for the handicapped 3,277,500
16 Community schools 600,000
17 Additional district support 3,192,740.
18 (b) The amount allocated under (a) of this section for additional district support is
19 further allocated to the following school districts in the amounts listed:
20 SCHOOL DISTRICT ALLOCATION AMOUNT
21 Annette Island School District $166,530
22 Cordova School District 217,160
23 Craig City School District 151,890
24 Dillingham City School District 250,100
25 Galena City School District 156,160
26 Hoonah City School District 126,270
27 Hydaburg City School District 102,480
28 Kake City School District 136,640
29 Kashunamiut School District 206,180
30 Klawock City School District 158,600
31 Nenana City School District 164,090
01 Nome City School District 264,740
02 Pelican City School District 56,730
03 Petersburg City School District 199,470
04 St. Mary's School District 119,560
05 Skagway City School District 115,290
06 Tanana City School District 122,000
07 Unalaska City School District 200,690
08 Wrangell City School District 151,890
09 Yakutat City School District 126,270.
10 * Sec. 5. (a) The sum of $103,345,252 is appropriated from the budget reserve fund (art.
11 IX, sec. 17, Constitution of the State of Alaska) to the Alaska debt retirement fund
12 (AS 37.15.011).
13 (b) The sum of $103,345,252 is appropriated from the Alaska debt retirement fund
14 (AS 37.15.011) to the Department of Education for state aid for costs of school construction
15 under AS 14.11.100.
16 * Sec. 6. (a) Section 1(a), ch. 5, SLA 1993, is amended to read:
17 Section 1. (a) The sum of $674,531,870 is appropriated from the
18 constitutional budget reserve [GENERAL] fund and from other funds in the amounts
19 listed to the Department of Education for the purposes expressed and allocated in the
20 amounts listed for operating expenditures for the fiscal year ending June 30, 1994:
21 FUND SOURCE AMOUNT
22 Budget reserve fund (art. IX, sec. 17,
23 Constitution of the State of Alaska)
24 [GENERAL FUND] $615,783,070
25 General fund/mental health trust income account
26 (AS 37.14.011) 7,489,700
27 Public school trust fund (AS 37.14.110) 8,452,700
28 School fund (AS 43.50.140) 2,721,000
29 Interagency receipts 100,000
30 P.L. 81-874 21,885,400
31 Federal receipts other than
01 P.L. 81-874 18,100,000.
02 PURPOSE ALLOCATION AMOUNT
03 Foundation program $615,723,100
04 Child nutrition/student lunch program 18,100,000
05 Cigarette tax distribution 2,721,000
06 Tuition students 2,012,600
07 Boarding home grants 230,000
08 Youth in detention 800,000
09 Schools for the handicapped 3,077,500
10 Pupil transportation 28,975,900
11 Community schools 600,000
12 Additional district support 2,291,770.
13 (b) Section 2(a), ch. 5, SLA 1993, is amended to read:
14 Sec. 2. (a) The sum of $99,795,200 is appropriated from the budget reserve
15 [GENERAL] fund (art. IX, sec. 17, Constitution of the State of Alaska) to the
16 Alaska debt retirement fund (AS 37.15.011).
17 * Sec. 7. (a) Section 38, ch. 65, SLA 1993, page 14, line 27, is amended to read:
18 APPROPRIATION GENERAL OTHER
19 ITEMS FUND FUNDS
20 Additional district support 1,066,300 [1,066,300] 1,066,300
21 (b) The appropriation made by sec. 38, ch. 65, SLA 1993, page 14, line 27,
22 as amended by (a) of this section, is funded from the budget reserve fund (art. IX,
23 sec. 17, Constitution of the State of Alaska).
24 * Sec. 8. Section 1, ch. 83, SLA 1993, is amended to read:
25 Section 1. Contingent upon the establishment of an educational facilities
26 maintenance and construction fund by the Eighteenth Alaska State Legislature, the sum
27 of $192,408,894 is appropriated from the budget reserve [GENERAL] fund (art. IX,
28 sec. 17, Constitution of the State of Alaska) to the educational facilities maintenance
29 and construction fund (AS 37.16.010).
30 * Sec. 9. The appropriations from the constitutional budget reserve fund (art. IX, sec. 17,
31 Constitution of the State of Alaska) contained in this Act are made under art. IX, sec. 17(c),
01 Constitution of the State of Alaska.
02 * Sec. 10. Sections 1 - 3, 6, 7, and 9 of this Act are retroactive to July 1, 1993.
03 * Sec. 11. Section 8 of this Act is retroactive to July 17, 1993.
04 * Sec. 12. Sections 1 - 3 and 6 - 11 of this Act take effect immediately under
05 AS 01.10.070(c).
06 * Sec. 13. Sections 4 and 5 of this Act take effect July 1, 1994.