Legislature(2001 - 2002)
04/17/2001 09:14 AM Senate FIN
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SENATE JOINT RESOLUTION NO. 24
Proposing amendments to the Constitution of the State of
Alaska relating to the budget reserve fund.
This was the first hearing for this resolution in the Senate
Finance Committee.
Co-Chair Donley detailed the history of the CBR. He surmised that
this resolution would restore "the original intent" of the
constitutional language. He stated it would also clarify the
conditions under which funds are drawn from the CBR and when a
three-quarters legislative vote is required.
Co-Chair Donley explained that currently a three-quarters vote is
determined by a comparison of revenue in the current fiscal year
with appropriations from the prior fiscal year. He stressed that
this has little to do with the size of the fiscal gap. He detailed
how the proposal compares revenue and appropriations from the same
fiscal year, thus making a more accurate determination of a fiscal
gap.
Co-Chair Donley informed the intent of the existing CBR
constitutional amendment is in years where the legislature is
proposing to spend less than in a previous year, the CBR could be
accessed by a simple majority vote. He continued that if a
legislature proposed to spend more than in the previous year, a
three-quarters vote would be necessary to draw from the CBR to fund
the extra spending.
Co-Chair Donley remarked that this creates a "natural limitation"
on the growth of government by requiring three-quarters of
legislators agree that the increased spending was necessary.
Co-Chair Donley spoke to court cases dealing with interpretation of
the original constitutional amendment. He said that the court
granted a more expansive definition of funds available for
appropriation then the legislature normally considers during the
budget process. As a result, he said the three-quarters vote is now
needed even if spending is not higher than in the previous year. He
noted that in the past five years, the spending was not higher, yet
the three-quarters vote was required to access funds from the CBR
to balance the spending.
Co-Chair Donley asserted that the dynamic that occurred is "the
exact opposite from what was intended by the Republican minority"
when the original constitutional amendment was proposed. This
dynamic, he expressed is that the three-quarters vote has been used
by the current minority to encourage additional spending on
additional items. He concluded that the original intent has changed
from establishing a method to limit government growth to a vehicle
almost requiring growth.
Co-Chair Donley continued that the situation was even worse because
of a "sweep provision" included in the original CBR language. This
provision he detailed, stipulates that even if the CBR funds are
not required to balance the budget in a particular year, such as
when oil revenues were high, money borrowed in previous years must
be paid back into the CBR and a three-quarters vote is needed to do
so. He stressed that because the legislature has withdrawn several
billion dollars from the CBR in the past, the three-quarters vote
is required each year to avoid the sweep provision, which would
confiscate all non-general fund revenues for deposit into the CBR
as payment toward the debt.
Co-Chair Donley opined that although the CBR has been successful as
a savings account, the mechanism to access this account is flawed
and does not operate as originally intended.
Co-Chair Donley addressed the resolution, explaining that it
revises the CBR constitutional amendment clarifying that in years
with proposed spending less than the prior year, the CBR could be
accessed with a simple majority vote and also eliminates the sweep
provision. He noted that the three-quarters legislative vote would
still be necessary in years of increased spending.
Co-Chair Kelly asked what would happen if the three-quarter vote to
appropriate money from the CBR failed, but the appropriation
legislation passed.
Co-Chair Donley replied that the sweep provision would apply. He
stressed that while, "a lot of people would not like the
consequences of the sweep, life would go on."
Co-Chair Kelly remarked the reason for hearing this resolution at
this time is to begin debate on the issue. He did not want the
legislature to be allowed to have "a runaway budget" and opined
that future legislatures would benefit from the restraint exercised
in the past few years.
Senator Austerman stated that the entire CBR has been "a thorn in
my side" since he was first elected to the legislature. He did not
think the current method operates as it was originally intended and
instead functions as a savings account used to balance the state
budget each year. He surmised that the intent of the fund was to
provide a buffer for years of hardship, such as in 1986 when the
oil prices dropped. He understood that each year the legislature
would be required to prepare and approve a budget and would argue
over it, but suggested that at least guidelines could be put in
place.
Co-Chair Kelly stated that SJR 23 was an appropriate first step in
getting the public to consider different funding sources.
Senator Ward shared recent discussions on the CBR he participated
in while in his district. He said the conversation expanded to
include future revenue from oil development and other sources. He
stated that the public must know that there is a spending plan.
Co-Chair Kelly ordered the resolution HELD in Committee.
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