Legislature(2009 - 2010)CAPITOL 120

02/03/2010 01:00 PM House JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HJR 8 CONST. AM: APPROP. LIMIT/MINERAL REVENUE TELECONFERENCED
Heard & Held
+ HB 146 TRANSFER RESTRICTIONS ON TRUSTS TELECONFERENCED
Moved CSHB 146(JUD) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HJR 8 - CONST. AM: APPROP. LIMIT/MINERAL REVENUE                                                                    
                                                                                                                                
1:08:01 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  first order of business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  8,  Proposing  amendments  to  the                                                               
Constitution of the State of  Alaska limiting appropriations from                                                               
certain  mineral   revenue,  relating  to  the   balanced  budget                                                               
account, and relating to an appropriation limit.                                                                                
                                                                                                                                
1:10:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE KELLY,  Alaska  State Legislature,  sponsor,                                                               
explained that  [if voters  approve HJR  8's proposed  changes to                                                               
Article  IX, Section  16,  of the  Alaska  State Constitution,  a                                                               
maximum of]  a five-year average -  of the amounts from  the four                                                               
preceding years and  the estimated amount for the  current year -                                                               
of the  revenue from [mineral  lease rentals,  royalties, royalty                                                               
sale  proceeds,  federal  mineral revenue  sharing  payments  and                                                               
bonuses, and every State tax  on minerals, mineral production, or                                                               
mineral transportation] would be available  in any given year for                                                               
appropriation  via a  simple majority  vote; at  the end  of each                                                               
fiscal year,  any of  that revenue not  so appropriated  would go                                                               
into  a  proposed balanced  budget  account,  and could  then  be                                                               
transferred to the  general fund (GF) via a  simple majority vote                                                               
in years when  that revenue did not amount  to the aforementioned                                                               
five-year  average;  and  any amount  in  the  proposed  balanced                                                               
budget account in excess of  the combined amounts so appropriated                                                               
for the current  fiscal year and the preceding  fiscal year would                                                               
be transferred to the constitutional  budget reserve fund (CBRF).                                                               
The  proposed balanced  budget account  would receive  funds when                                                               
the  State  has  what  he called  "excess  revenues,"  and  would                                                               
provide funds "when  we are short, for balancing  the budget," he                                                               
added.                                                                                                                          
                                                                                                                                
1:13:47 PM                                                                                                                    
                                                                                                                                
DEREK  MILLER, Staff,  Representative  Mike  Kelly, Alaska  State                                                               
Legislature,  on behalf  of  the  sponsor, Representative  Kelly,                                                               
added  that [if  HJR  8 is  passed by  the  legislature and]  its                                                               
proposed changes  to the Alaska  State Constitution  are approved                                                               
by the voters  in 2010, it would apply to  appropriations made in                                                               
fiscal year 2012  (FY 12), and every year  thereafter.  Referring                                                               
to  a  PowerPoint  presentation,  he noted  that  under  existing                                                               
Article IX,  Section 16,  of the  Alaska State  Constitution, the                                                               
appropriation limit is $2.5 billion  plus adjustments for changes                                                               
in   population  and   inflation;  this   was  estimated   to  be                                                               
approximately  $7.9  billion in  FY  08,  and approximately  $8.3                                                               
billion  in FY  09.   These  estimates are  far  higher than  the                                                               
budgets that actually passed the  legislature in those years.  He                                                               
then  offered his  understanding that  establishment of  the CBRF                                                               
[Article IX,  Section 17, of  the Alaska State  Constitution] was                                                               
another  attempt to  control State  spending, and  mentioned that                                                               
accessing the CBRF requires an affirmative three-fourths vote.                                                                  
                                                                                                                                
MR.  MILLER  referred  to  charts   included  in  his  PowerPoint                                                               
presentation  that  illustrated  inflation-adjusted  GF  spending                                                               
from FY 90 through FY  09; inflation-adjusted GF spending from FY                                                               
90 through  FY 09  compared with  actual GF  spending; inflation-                                                               
adjusted  GF spending  from FY  90  through FY  09 compared  with                                                               
actual GF spending and total GF revenue including non-mineral-                                                                  
related revenue;  and inflation-adjusted  GF spending from  FY 00                                                               
through FY 10 compared with  actual GF spending, total GF revenue                                                               
including  non-mineral-related  revenue,  and  the  amounts  that                                                               
would have been available for  appropriation had HJR 8's proposed                                                               
changes to  the Alaska  State Constitution  been in  effect since                                                               
FY 00.   He then,  in part in  response to  questions, reiterated                                                               
points made by  the sponsor during his explanation of  the HJR 8,                                                               
and assured  the committee that  HJR 8's proposed changes  to the                                                               
Alaska State  Constitution would not affect  the Alaska permanent                                                               
fund  - either  dividends, principal,  or earnings  - or  [monies                                                               
related to  the Amerada Hess  litigation], and that  the proposed                                                             
balanced budget account would not  be subject to what he referred                                                               
to as  the CBRF "sweep"  [outlined in Article IX,  Section 17(d),                                                               
of the Alaska State Constitution].                                                                                              
                                                                                                                                
MR. MILLER  then offered  his understanding that  a chart  in his                                                               
PowerPoint  presentation   provides  an  estimate  of   what  the                                                               
proposed five-year-averaged  appropriation limit would  have been                                                               
for  FY 10  had  HJR 8's  proposed changes  to  the Alaska  State                                                               
Constitution already been in effect.   In response to a question,                                                               
he indicated that  funds in the proposed  balanced budget account                                                               
would  not  be  limited  with   regard  to  what  they  could  be                                                               
appropriated for.                                                                                                               
                                                                                                                                
REPRESENTATIVE  KELLY   concurred.     In  response   to  another                                                               
question,  he indicated  that  HJR 8's  proposed  changes to  the                                                               
Alaska State Constitution would not  address any of the perceived                                                               
problems  currently  associated  with  the  CBRF's  appropriation                                                               
requirement of an affirmative three-fourths  vote, though in some                                                               
years,  the   proposed  changes   might  mitigate  the   need  to                                                               
appropriate from the CBRF.                                                                                                      
                                                                                                                                
MR. MILLER,  referring to  his PowerPoint  presentation, remarked                                                               
that HJR  8's proposed changes  to the Alaska  State Constitution                                                               
would  encourage  a  better and  simpler  budgeting  system  than                                                               
exists  now, would  avoid problems  with statutory  appropriation                                                               
constraints, would  allow the  voters to weigh  in on  the issue,                                                               
and would accommodate any future  approach that might be taken of                                                               
funding government with Alaska permanent fund earnings.                                                                         
                                                                                                                                
The committee took an at-ease from 1:27 p.m. to 1:28 p.m.                                                                       
                                                                                                                                
REPRESENTATIVE KELLY, in response  to comments, reiterated points                                                               
he'd made earlier in explanation of HJR 8.                                                                                      
                                                                                                                                
1:32:06 PM                                                                                                                    
                                                                                                                                
TAMARA COOK,  Director, Legislative Legal and  Research Services,                                                               
Legislative  Affairs  Agency  (LAA), in  response  to  questions,                                                               
explained that the  language on page 1, lines 8-9,  of HJR 8 that                                                               
reads, "mineral lease rentals,  royalties, royalty sale proceeds,                                                               
federal mineral  revenue sharing  payments and bonuses"  can also                                                               
be  found  in  Article  IX,  Section  15,  of  the  Alaska  State                                                               
Constitution  pertaining  to  the   Alaska  permanent  fund,  and                                                               
surmised,  therefore,  that  the  Alaska  Court  System  and  the                                                               
executive branch already have some  experience in construing that                                                               
language  in terms  of  which sources  are  dedicated under  that                                                               
constitutional provision.   Language  on page  1, lines  9-10, of                                                               
HJR  8  that  reads,  "every   State  tax  on  minerals,  mineral                                                               
production, or mineral transportation" would  be new and thus not                                                               
currently  addressed by  Article IX,  Section 15,  of the  Alaska                                                               
State Constitution.                                                                                                             
                                                                                                                                
MS. COOK, in terms of  potential constitutional problems, relayed                                                               
that  although HJR  8 does  satisfy  the single  subject rule  as                                                               
upheld in Bess v. Ulmer - in  terms of being just an amendment as                                                             
opposed  to  a revision  -  and  probably satisfies  the  court's                                                               
stipulation   that  a   proposed   constitutional  amendment   be                                                               
relatively simple and easy to  comprehend - regardless that HJR 8                                                               
is  somewhat complex  -  there  is a  possibility  that it  would                                                               
violate the  court's stipulation  that a  proposed constitutional                                                               
amendment not  seriously alter a  basic governmental  function of                                                               
one of the  major branches of government, since it  would be hard                                                               
to argue that  the power of appropriation is  anything other than                                                               
a  very basic  power  of the  legislative  branch of  government.                                                               
Therefore, to the  extent that HJR 8  would successfully restrict                                                               
the power of appropriation - and  that being its actual goal, she                                                               
pointed out  - the  question then becomes  whether the  court, in                                                               
any  ensuing  challenge, would  find  that  HJR 8  too  painfully                                                               
erodes  a   fundamental  power  of  the   legislative  branch  of                                                               
government.                                                                                                                     
                                                                                                                                
MS.  COOK, in  response  to a  question,  said she  is  not in  a                                                               
position to say  whether HJR 8 would be overturned  by the court;                                                               
instead,  she is  merely relaying  that HJR  8 is  susceptible to                                                               
challenge based on  the notion that the power  of the legislature                                                               
to appropriate  money is such  a significant power that  it ought                                                               
not  to be  eroded via  a constitutional  amendment.   She noted,                                                               
though,  that   there  were  several   constitutional  amendments                                                               
adopted  before Bess  which did  radically erode  the legislative                                                             
power  of  appropriation.   These  include  the creation  of  the                                                               
Alaska  permanent fund  -  which  placed a  great  deal of  money                                                               
outside of  the appropriation process, indefinitely,  forever, as                                                               
to the balance; the creation of  the CBRF, which imposes a higher                                                               
vote level  in order to reach  the money in most  situations; and                                                               
the  existing  constitutional  appropriation  limit,  which  some                                                               
purport to be ineffective because it's set too high.                                                                            
                                                                                                                                
MS. COOK  said that  although it could,  perhaps, be  argued that                                                               
those three examples  are more dramatic, in  monetary terms, than                                                               
HJR 8,  she is unable  to say that that  fact, in and  of itself,                                                               
could give a person a great  deal of reassurance that HJR 8 would                                                               
not be looked at very carefully  by the court, but, again, she is                                                               
not  predicting that  the court  would  necessarily overturn  it.                                                               
Rather, there  is a possibility  that the court, as  it partially                                                               
did  in Bess,  might simply  slightly rewrite  HJR 8  before it's                                                             
voted  on by  the  people,  though that  might  not  be the  case                                                               
either, and  the court might  instead just decide not  to address                                                               
the question until after it's approved by the voters.                                                                           
                                                                                                                                
1:43:27 PM                                                                                                                    
                                                                                                                                
DANA  L.  OLSON  indicated  a   concern  that  HJR  8's  language                                                               
regarding  [mineral   lease  rentals,  royalties,   royalty  sale                                                               
proceeds, federal  mineral revenue sharing payments  and bonuses,                                                               
and every State  tax on minerals, mineral  production, or mineral                                                               
transportation] might be interpreted in  such a way that it would                                                               
affect whether she could sell the oil and gas that she owns.                                                                    
                                                                                                                                
CHAIR RAMRAS closed public testimony on HJR 8.                                                                                  
                                                                                                                                
MS. COOK,  in response to questions,  provided comments regarding                                                               
the  Alaska   Permanent  Fund  Corporation  (APFC),   the  Alaska                                                               
permanent fund, and the permanent fund dividend (PFD).                                                                          
                                                                                                                                
REPRESENTATIVE HERRON asked whether any  attempt has been made to                                                               
set the  provisions of HJR  8 out in  statute rather than  in the                                                               
Alaska State Constitution.                                                                                                      
                                                                                                                                
MR. MILLER said  not that he's aware of, and  indicated that he'd                                                               
have to research the issue further.                                                                                             
                                                                                                                                
REPRESENTATIVE HOLMES  asked whether the calculation  outlined in                                                               
HJR 8 would be using fiscal years or calendar years.                                                                            
                                                                                                                                
MS. COOK  said it would  be using calendar years:   specifically,                                                               
the calculation  would be using  the amounts received  during the                                                               
four  full  calendar  years  immediately  preceding  the  current                                                               
fiscal year - so amounts received  during the portion of the past                                                               
calendar year that  is part of the current fiscal  year would not                                                               
be included  - and the  estimated amount expected to  be received                                                               
during the calendar year that's part of the current fiscal year.                                                                
                                                                                                                                
2:01:23 PM                                                                                                                    
                                                                                                                                
DAVID  TEAL,  Legislative  Fiscal  Analyst,  Legislative  Finance                                                               
Division, Alaska  State Legislature, in response  to comments and                                                               
questions,  explained  that  using  calendar  years  in  HJR  8's                                                               
proposed calculation is intended  to provide the legislature with                                                               
as much accurate information as  possible so that the legislature                                                               
can  determine  precisely  what amount  would  be  available  for                                                               
appropriation.    The   purpose  of  HJR  8  is   to  smooth  out                                                               
volatility, in that any peak-income  years would be averaged out,                                                               
as  would any  low-income  years; the  legislature  would not  be                                                               
constrained in any  given year by the amount  of revenue received                                                               
in that particular year.                                                                                                        
                                                                                                                                
CHAIR  RAMRAS  offered  his  understanding that  HJR  8  is  also                                                               
intended to cap spending.                                                                                                       
                                                                                                                                
MR. MILLER concurred.                                                                                                           
                                                                                                                                
MR. TEAL  pointed out, however,  that HJR  8 would not  have that                                                               
effect, because the legislature could  still access the CBRF with                                                               
an  affirmative three-fourths  vote.   House  Joint Resolution  8                                                               
would limit spending but would not  cap it; under HJR 8, spending                                                               
would be  constrained by revenue  - albeit revenue  averaged over                                                               
several  years -  whereas currently,  spending is  constrained by                                                               
both revenue and the available  balance.  In theory, the proposed                                                               
balanced  budget  account  would  never have  very  much  in  it,                                                               
because  funds would  be placed  in it  in peak  years, but  then                                                               
taken out  of it in lean  years, and, over time,  the legislature                                                               
would simply  spend everything that's  available to it  from that                                                               
account.   He  characterized  the current  spending  limit as  an                                                               
arbitrary number  unrelated to revenue  or what's  available, and                                                               
opined that  if the goal is  to have a balanced  budget, then any                                                               
such limit must be related to  the amount of revenue available to                                                               
the legislature.                                                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG, in  response to  an earlier  question,                                                               
referred to  the language on  page 2, lines  9-10, of HJR  8 that                                                               
reads,  "Money may  not be  appropriated from  the account",  and                                                               
offered  his   understanding  that  such  a   limitation  on  the                                                               
legislature's  appropriation  power  must come  from  the  Alaska                                                               
State Constitution, not from statute.                                                                                           
                                                                                                                                
MS. COOK concurred.                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG  observed that  the language on  page 2,                                                               
lines 12-13, of HJR 8 that  reads, "Section 7 of the this article                                                               
does  not  apply  to  money   deposited  into,  retained  in,  or                                                               
transferred from the  balanced budget account" is  similar to the                                                               
language contained  in Article IX,  Section 17(a), of  the Alaska                                                               
State Constitution  that reads,  "Section 7  of the  this article                                                               
does  not  apply  to  deposits   made  to  the  fund  under  this                                                               
subsection".   However,  there  is no  such  similar language  in                                                               
Article  IX,  Section  15,  of   the  Alaska  State  Constitution                                                               
pertaining to the Alaska permanent  fund.  Article IX, Section 7,                                                               
of  the   Alaska  State  Constitution,  he   ventured,  basically                                                               
prohibits dedicated funds.  He  questioned, therefore, whether an                                                               
amendment  to  Article  IX,  Section  15,  of  the  Alaska  State                                                               
Constitution  - stipulating  that  Section 7  does  not apply  to                                                               
Section 15 - would be in order.                                                                                                 
                                                                                                                                
2:10:23 PM                                                                                                                    
                                                                                                                                
MS. COOK explained that such  an amendment would not be necessary                                                               
because Article IX,  Section 7, of the  Alaska State Constitution                                                               
contains language stating  that it does not apply  to Article IX,                                                               
Section 15.   In response  to comments,  she relayed that  as the                                                               
drafter of  HJR 8, she chose  not to add an  amendment to Article                                                               
IX, Section 7, of the  Alaska State Constitution stipulating that                                                               
it  wouldn't  apply  to  proposed Article  IX,  Section  16;  she                                                               
instead  chose to  imbed the  exemption from  Section 7  directly                                                               
into  proposed  Section  16,  whereas  the  person  drafting  the                                                               
language  currently  in  Section  15  pertaining  to  the  Alaska                                                               
permanent  fund  chose  the  other  approach,  that  of  amending                                                               
Section 7.                                                                                                                      
                                                                                                                                
MR.  TEAL  and  MS.  COOK then  briefly  responded  to  questions                                                               
unrelated to HJR 8.                                                                                                             
                                                                                                                                
CHAIR  RAMRAS offered  his belief  that HJR  8 complies  with the                                                               
Alaska State Constitution.                                                                                                      
                                                                                                                                
2:18:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOLMES  relayed that she  would like to  know more                                                               
about  HJR 8  before  she  would be  comfortable  moving it  from                                                               
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HERRON agreed  with  Chair Ramras,  characterized                                                               
the proposed balanced budget account  as merely a miniature CBRF,                                                               
and indicated  that he  would be  amenable to  moving HJR  8 from                                                               
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG characterized  HJR 8's  proposed change                                                               
to the Alaska State Constitution as fairly serious.                                                                             
                                                                                                                                
REPRESENTATIVE  HOLMES, in  response  to  a question,  reiterated                                                               
that she  would like to  know more about  HJR 8 before  moving it                                                               
from committee, and so would prefer that the bill be held over.                                                                 
                                                                                                                                
CHAIR RAMRAS relayed that HJR 8 would be held over.                                                                             
                                                                                                                                

Document Name Date/Time Subjects
01 HB 146 ver A.pdf HJUD 2/3/2010 1:00:00 PM
HL&C 1/25/2010 3:15:00 PM
HB 146
02 HB146 Sponsor Statement.pdf HJUD 2/3/2010 1:00:00 PM
HL&C 1/25/2010 3:15:00 PM
HB 146
03 HB146 Sectional Analysis.pdf HJUD 2/3/2010 1:00:00 PM
HL&C 1/25/2010 3:15:00 PM
HB 146
04 HB146 Public Testimony(1).pdf HJUD 2/3/2010 1:00:00 PM
HL&C 1/25/2010 3:15:00 PM
HB 146
05 HB146 Fiscal Note Dept of Law.pdf HJUD 2/3/2010 1:00:00 PM
HL&C 1/25/2010 3:15:00 PM
HB 146
01 Sponsor Statement HJR 8.pdf HJUD 2/3/2010 1:00:00 PM
02 HJR8 v A.pdf HJUD 2/3/2010 1:00:00 PM
03 HJR008-1-1-040709-GOV-Y.pdf HJUD 2/3/2010 1:00:00 PM
04 State Affairs QA.pdf HJUD 2/3/2010 1:00:00 PM
05 HJR 8 House State Affairs.pdf HJUD 2/3/2010 1:00:00 PM
06 HJR 8 Backup.pdf HJUD 2/3/2010 1:00:00 PM