03/17/2021 01:30 PM House JUDICIARY

           HB 57-FUNDS SUBJECT TO CBR SWEEP PROVISION                                                                       
                                                                                                                                
2:50:36 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that the  final order of business would be                                                               
HOUSE BILL  NO. 57, "An Act  relating to the budget  reserve fund                                                               
established under art. IX, sec.  17(d), Constitution of the State                                                               
of  Alaska; relating  to money  available  for appropriation  for                                                               
purposes of applying art. IX,  sec. 17, Constitution of the State                                                               
of Alaska; and providing for an effective date."                                                                                
                                                                                                                                
2:51:00 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:51 p.m. to 2:52 p.m.                                                                       
                                                                                                                                
2:52:15 PM                                                                                                                    
                                                                                                                                
ELISE  THORNBERG, Staff,  Representative  Andy Josephson,  Alaska                                                               
State Legislature, presented the sectional  analysis for HB 57 on                                                               
behalf  of   Representative  Josephson,   prime  sponsor.     The                                                               
sectional   analysis  read   as  follows   [original  punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Section  1: Outlines  legislative intent  and findings.                                                                    
     This  section expounds  on the  principles outlined  in                                                                    
     the Alaska Supreme  Court ruling Hickel v  Cowper as to                                                                    
     how  the  constitutional  budget  reserve  (CBR)  sweep                                                                    
     provision  should be  interpreted  and also  summarizes                                                                    
     the    historic    disagreement    between    different                                                                    
     governmental   branches   and    agencies   about   the                                                                    
     interpretation of  the sweep provision. In  short, this                                                                    
     section outlines  the logic behind  and legal  need for                                                                    
     this bill.                                                                                                                 
                                                                                                                                
     Section 2: Repeals and reenacts  AS 37.10.420 (a). This                                                                    
     section  updates  the  statutory  definitions  on  "the                                                                    
     amount available  for appropriation,"  "funds available                                                                    
     for  appropriation," and  "amount appropriated  for the                                                                    
     previous  fiscal year"  to  align  with the  principles                                                                    
     outlined  in  Hickel  v Cowper.  Funds  "available  for                                                                    
     appropriation" in these definitions  are those that are                                                                    
     immediately usable  and over which the  legislature has                                                                    
     retained  appropriation  authority.  Additionally,  the                                                                    
     actual  amounts  of  appropriations of  trust  receipts                                                                    
     (such as  federal funds) and certain  monies explicitly                                                                    
     appropriated  for fund  administration are  included in                                                                    
     the  calculation  of   "available  for  appropriation".                                                                    
     Monies  not  considered "available  for  appropriation"                                                                    
     are:   illiquid    assets,   funds    already   validly                                                                    
     appropriated by  the legislature  or funds that  do not                                                                    
     require further appropriation prior to expenditure.                                                                        
                                                                                                                                
     Section  3:  Codifies  a  list  of  the  funds  already                                                                    
     determined by Legislative Finance  to not be subject to                                                                    
     the CBR sweep.                                                                                                             
                                                                                                                                
     Section  4: Creates  a  new  section, AS  37.10.420(c),                                                                    
     that  defines "general  fund" and  outlines fund  types                                                                    
     explicitly  not considered  to be  part of  the general                                                                    
     fund. The general fund, as  defined in this section, is                                                                    
     the state's main operating fund  and is composed of all                                                                    
     money  the state  receives not  legally required  to be                                                                    
     held separately.  Funds excluded from the  general fund                                                                    
     include:  funds   held  by  the  University   or  state                                                                    
     corporations,  enterprise  funds, debt  service  funds,                                                                    
     special  revenue  funds,  the  permanent  fund,  agency                                                                    
     funds and certain internal service funds.                                                                                  
                                                                                                                                
     Section 5: Provides  an effective date of  Jun 30, 2021                                                                    
     to  ensure that  this  legislation would  be in  effect                                                                    
     prior to the FY 2021 CBR sweep occurring.                                                                                  
                                                                                                                                
2:55:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ANDY  JOSEPHSON,  Alaska  State  Legislature,  as                                                               
prime sponsor, presented  HB 57.  He said the  catalyst for HB 57                                                               
occurred  June 13,  2019, when  the legislature  adjourned before                                                               
getting a "reverse sweep" -  making the accounts vulnerable - and                                                               
before doing  a capital budget;  therefore, the  legislature knew                                                               
it  would have  to return.   He  relayed that  on June  28, 2019,                                                               
Governor  Mike  Dunleavy issued  "the  largest  vetoes in  Alaska                                                               
history"  - totaling  $440 million.    Then came  the dispute  on                                                               
whether the  legislature would  meet in Wasilla  or Juneau.   The                                                               
legislature  came  to Juneau  that  summer  to finish  its  work.                                                               
Because it  had not had the  reverse sweep by 11:59  p.m. on June                                                               
30, 2019,  all the  accounts were swept  into the  capital budget                                                               
reserve (CBR).   He  offered his  understanding that  the general                                                               
fund (GF)  was swept into  the CBR.  He  spoke of a  general fund                                                               
within the GF.   He said on July 19, 2019,  hearings were held in                                                               
Senate Finance to  discuss what was "swept" and  what should have                                                               
been swept.  He offered his  understanding that in 26 years there                                                               
has not  been "a real  effort to do the  thing the court  and the                                                               
law allows us to do."                                                                                                           
                                                                                                                                
2:58:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON explained that  in 1994, the legislature                                                               
laid out the rules  as to how the sweep would  work, "to sort out                                                               
what was meant by this  new constitutional provision."  He stated                                                               
that the court, in Hickel v.  Cowper, told the legislature it got                                                             
it "mostly" wrong,  but invited the legislature  "to take another                                                               
stab  at  it,"  with  guideposts  provided by  the  court.    The                                                               
Constitution of the  State of Alaska allows  [the legislature] to                                                               
explain what is meant by the CBR.   He said he wanted "to write a                                                               
bill  that required  us to  do  what the  [Alaska] Supreme  Court                                                               
said," but no  more than that.  He remarked  on the suffering and                                                               
anxiety  "that came  from sweeping  everything away"  and on  the                                                               
administration, which  appeared to  be saying that  everything is                                                               
sweepable.  He  indicated that the administration  wanted all the                                                               
funds to  compete, and he  said in  most cases they  do; however,                                                               
there  is  a  presumption  that  those  funds  will  be  used  as                                                               
designated.                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOSEPHSON said  the language in the  early part of                                                               
HB 57 is  unique and helpful; it is the  uncodified language that                                                               
he  and  Ms.  Thornberg,  with   the  aid  of  Megan  Wallace  in                                                               
Legislative Legal  Services, drafted to express  to those reading                                                               
it what the Alaska  Supreme Court said.  He said  he found that a                                                               
lot, but not all,  has to be swept.  He  noted involvement by the                                                               
Division of  Legislative Finance and the  Division of Legislative                                                               
Audit.  He said  there can be a road map  to outline those things                                                               
that cannot be  swept because "to sweep them  would violate trust                                                               
principles"  or terminate  or "threaten  a revolving  loan fund."                                                               
He said all this information is in Hickel v. Cowper.                                                                          
                                                                                                                                
3:02:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  uncodified  language shows  there                                                               
are  funds for  which  no further  appropriation  is needed,  and                                                               
agencies can spend them as needed.   He gave the example of spill                                                               
prevention response,  a fund available  for something  that could                                                               
happen, such  as the Exxon  Valdez Oil Spill  of March 1989.   He                                                               
said there are revolving loan  funds that require there always be                                                               
funds  available.   He said  there are  discussions in  Hickel v.                                                             
Cowper  about  trust principles,  where  logically  no one  would                                                             
spend  the  entire funds,  and  the  only  amount that  would  be                                                               
available  for appropriation  is  a reasonable  sum  that may  be                                                               
appropriated every  year, while the rest  remains capitalized and                                                               
acts as  "the mini corpus for  that account."  The  court said it                                                               
did not  want to disrupt  the basic fiscal principles  or funding                                                               
sources  that are  used traditionally.   He  stated, "Remarkably,                                                               
Hickel v. Cowper,  while it certainly says something  is going to                                                             
go in  the CBR, it's  not all  of it."   Representative Josephson                                                               
concluded  by invited  the  committee "to  read  and re-read  the                                                               
uncodified language."                                                                                                           
                                                                                                                                
3:04:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN announced that HB 57 was held over.