Legislature(1999 - 2000)
02/22/1999 09:00 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 72
"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 was invited to join the committee. She said that
Commissioner Poe would conduct the explanation of the
Office of Management and Budget handout.
BOB POE, Commissioner, Department of Administration was
invited to join the committee. He explained the Projected
Daily Cash Sufficiency Balances handout sheet. (Handout
attached to original file.)
ROSS KINNEY, Deputy Commissioner, Department of Revenue was
invited to join the committee. He explained royalty
payments from the Department of Natural Resources, tax
receipts, payroll and university payments.
Commissioner Poe, with reference to the handout, continued
explaining that by the end of March we were above zero.
The first part of April we were still also above zero.
However, when payments around the tenth of April become due
they go up. By the end of April they go below zero and the
end of May they are barely covering costs. The schedule
shows that they never really recover above zero after that.
This was referred to as "checkbook accounting". Therefore,
after the 25th of March they should not be writing any more
checks.
Co-chair Parnell asked about a possible identity plan. Mr.
Kinney said this was the only consideration of the general
fund and it was a temporary situation. Monies could be
borrowed from other sub funds pending commitment from this
body. It would be like issuing a revenue anticipation
note. However, he noted that they were concerned about
what to pick and choose.
Commissioner Poe explained the sub funds. He cited oil
revenues for an example. Co-chair Parnell was not
suggesting that they go below zero and then use sub
accounts. This would just be used as a contingency plan.
According to Commissioner Poe, however, this did not mean
that the State was out of money.
Co-chair Parnell asked if there were any other charts or
graphs that Commissioner Poe might want to present to the
committee. The Commissioner responded that he had
concluded his testimony unless there were further questions
by the committee members. Co-chair Parnell thanked
Commissioner Poe and Mr. Kinney for their presentation.
Co-chair Parnell then asked Ms. McConnell to remain at the
table for any questions the members may have.
Ms. McConnell explained that the language used was the same
as in previous years.
Mr. Kinney referred to $132 million dollars and how it was
to be used. Ms. McConnell explained what was corrected
with what funds from that amount.
Senator P. Kelly asked about the availability of funds.
Commissioner Poe responded.
Co-chair Parnell asked the number necessary to meet the
appropriations of FY 99. Ms. McConnell said approximately
$1.2 CBR, total, was needed. Co-chair Parnell asked for an
exact figure? Ms. McConnell said different numbers were
being heard because of different oil returns on a daily or
weekly basis. It was impossible to predict the requirement
to meet the expenditures the Legislature set aside.
Co-chair Parnell asked where we were presently. Mr. Kinney
replied that oil had dropped below $10/barrel. The price
had averaged $12.75/barrel up until now. He advised that
the number is continuously subject to change, however, and
at present it is not looking positive.
Senator Torgerson asked Mr. Kinney to explain the
contingency plan, which authorized them to borrow money.
Mr. Kinney said by statute this authorization was granted
to the Commissioner. The problem they were facing was that
there was no money coming in at a later date to pay this
money back. A substantial draw was expected to be taken
from the CBR to meet the need. They will also need an
appropriation for interest.
Ms. McConnell further said that the reason for setting up
the CBR the reason was due to this volatility. The closer
we get to the end of the fiscal year, agencies need to
adjust their monies. This tended to create an untenable
situation.
Mr. Kinney said it would take about ninety days to procure
a packet to go to the market for a loan. In response to a
query from Senator Parnell, he said that without the
possibility of payback it would be useless to prepare this
packet for the loan.
Senator Torgerson asked if they would be required to come
back if they borrowed money to get authorization from the
Legislature? Mr. Kinney said the Commissioner could only
borrow if he had the funds to repay the interest necessary
plus the amount. Money would have to be paid back by the
end of the year. Otherwise it would have to be paid back
on a long-term basis.
Senator P. Kelly asked if they structured how government
could be financed differently would this be of help or an
incursion of the situation.
Mr. Kinney explained that there was plenty of money
available, however blocks are drawn around them and they
need a super-majority vote to get around this. For
instance, he said the Department of Education did not
really need to go out to borrow monies.
Ms. McConnell referred to the State income tax issue. She
explained the revenue anticipation. Sufficient money could
be received within a few months. She said, however, that
the present situation was different. They would not be
facing the same issue as to what they need if this
situation was structured correctly.
Commissioner Poe also responded. There were other bonds
the State had issued recently and they have gotten high
ratings. It is known that the State does have money.
Co-chair Parnell asked when the next forecast would come in
from Dr. Logsdon. Mr. Kinney said possibly in March. Ms.
McConnell also concurred saying that by approximately the
first of April the forecast would be ready.
Co-chair Parnell thanked Ms. McConnell, Commissioner Poe
and Mr. Kinney. He HELD SB 72 in committee.
He then called SB 83 and asked Ms. McConnell to remain at
the table to assist the committee members.
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