1999-02-16                     House Journal                      Page 0222
HB 95                                                                        
HOUSE BILL NO. 95 by the House Rules Committee by request of                   
the Governor, entitled:                                                        
                                                                               
"An Act making and amending appropriations under art. IX, sec.                
17(c), Constitution of the State of Alaska, from the constitutional            
budget reserve fund; and providing for an effective date."                     
                                                                               
was read the first time and referred to the Finance Committee.                 
                                                                               
The Governor's transmittal letter dated February 10, 1999, appears             
below:                                                                         
                                                                               
"Dear Speaker Porter:                                                          
                                                                               
In 1990, Alaska voters created the Constitutional Budget Reserve               
(CBR) to cushion state services and the state's economy from some of           
the effects of oil price volatility.  Since then, state budgets have           
included a provision authorizing use of this oil volatility reserve if         
general funds are not adequate for the budget levels appropriated by           

1999-02-16                     House Journal                      Page 0223
HB 95                                                                        
the Legislature. Until last year, there was no specified limit on the          
dollar amount that could be drawn for this purpose since no one can            
predict oil prices with certainty.  Most years, we have needed far less        
CBR funds than anticipated when the budgets were passed.                       
                                                                               
The FY99 budget bill differed from prior years because it contained a          
$700,000,001 cap on the use of CBR funds.  When the budget was                 
passed last May, the Department of Revenue's spring oil price forecast         
for FY99 was $15.32, and the CBR draw was estimated to be $685                 
million.  If oil had stayed as forecast, the $700 million cap on a CBR         
draw would not have affected budget levels set by the Legislature.             
                                                                               
                                                                               
The Department of Revenue's most recent forecast predicts an annual            
oil price of $11.58.  If that price holds during the remaining four            
months of the fiscal year, general fund revenues will have to be               
supplemented with an estimated $1.2 billion from the CBR.                      
                                                                               
                                                                               
The bill I am introducing today removes the specific limit on the              
amount of CBR funds to ensure we can continue to meet the                      
expenditures authorized by the Legislature in this year's budget.              
Because no one can say exactly how much will be needed between                 
now and June 30, a CBR limit with a revised specific dollar amount             
could result in another similar problem later in the fiscal year, possibly     
even after the Legislature has adjourned.  Whether or not there is a           
limit on the CBR draw, agencies cannot expend more than the amount             
appropriated by the Legislature.                                               
                                                                               
                                                                               
This bill also corrects an inadvertent oversight from May when the             
CBR management fees did not come up for a separate CBR vote.                   
                                                                               
I urge your prompt passage of this bill so we can resolve the issue            
before incurring cash flow problems at the beginning of March.                 
                                                                               
							Sincerely,                                                              
							/s/					                                                                
							Tony Knowles                                                            
							Governor"