1999-02-12                     Senate Journal                      Page 0239
SB 72                                                                        
SENATE BILL NO. 72 BY THE SENATE 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.                 
                                                                               
Governors transmittal letter dated February 10:                                
                                                                               
Dear President Pearce:                                                         
                                                                               
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           
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.                       
                                                                               
                                                                               

1999-02-12                     Senate Journal                      Page 0240
SB 72                                                                        
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