03/10/1999 01:35 PM House FIN

HOUSE BILL NO. 95                                                                                                               
                                                                                                                                
"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."                                                                                               
                                                                                                                                
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND                                                                           
BUDGET, OFFICE OF THE GOVERNOR presented the Committee with                                                                     
an update on the state FY99 cash flow situation. She                                                                            
observed that there is a three-day lag on the four-year                                                                         
historical average for cash in and cash disbursements. She                                                                      
stated that the state should be okay through March 25, 1999.                                                                    
The March 1, 1999 oil revenue update estimated that the                                                                         
state would need to draw $485 million dollars from the                                                                          
Constitutional Budget Reserve for FY99. The spring forecast                                                                     
will occur around April 1, 1999. She noted that the                                                                             
additional $200 million dollar draw authorized by the                                                                           
supplemental might not be sufficient to get through the end                                                                     
of the year. She observed that the final numbers could shift                                                                    
even after the Legislature adjourns. She recommended that                                                                       
the Constitutional Budget Reserve amount be sufficient to                                                                       
cover items that occur at the end of the fiscal year. Funds                                                                     
were identified in the order that they would be swept from                                                                      
General Fund sub-accounts, such as the Railbelt Energy Fund                                                                     
and the Municipal Matching Grant Fund.                                                                                          
                                                                                                                                
Co-Chair Mulder asked if $485 million dollars would cover                                                                       
the year. Ms. McConnell clarified that this amount is based                                                                     
on the March 1, 1999 update. She noted that the additional                                                                      
draw is due to lower production forecasts. The price update                                                                     
is slightly higher than forecasted. She emphasized that                                                                         
there needs to be room to maneuver in case prices drop in                                                                       
June.                                                                                                                           
                                                                                                                                
Representative J. Davies clarified that the interest                                                                            
earnings were included. Ms. McConnell explained that the                                                                        
vote covers both the principle and the interest. The                                                                            
projections of how much additional money is needed take into                                                                    
account the interest earnings on the Constitutional Budget                                                                      
Reserve.                                                                                                                        
                                                                                                                                
Ms. McConnell estimated that there would be another                                                                             
calculation in early May. The amount depends on timing of                                                                       
tax payments in and school district payments out. The spring                                                                    
forecast will occur in early April.                                                                                             
                                                                                                                                
HB 95 was HELD in Committee for further consideration.