Legislature(2021 - 2022)ANCH LIO DENALI Rm

09/01/2021 01:00 PM JUDICIARY

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01:02:39 PM Start
01:04:00 PM HJR7
02:22:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Rescheduled From 8/31/21 --
+= HJR 7 CONST. AM: PERM FUND & PFDS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
               HJR 7-CONST. AM: PERM FUND & PFDS                                                                            
                                                                                                                                
1:04:00 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced  that the only order of  business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  7,  Proposing  amendments  to  the                                                               
Constitution  of  the State  of  Alaska  relating to  the  Alaska                                                               
permanent fund,  appropriations from the permanent  fund, and the                                                               
permanent  fund  dividend.    [Before  the  committee  was  CSHJR
7(STA).]                                                                                                                        
                                                                                                                                
CHAIR  CLAMAN   paraphrased  the  introductory  paragraph   of  a                                                               
memorandum  ("memo") [included  in  the  committee packet]  dated                                                               
8/31/21,  with  a subject  of  "Topics  and Questions  for  House                                                               
Judiciary Committee Meeting  on September 1, 2021,"  which he had                                                               
sent to those invited to testify.   The paragraph read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Proposed    constitutional     amendments    addressing                                                                    
     financial issues  raise questions about funds  that are                                                                    
     subject  to  the  "sweep"  provisions  in  Article  IX,                                                                    
     Section 17. The leading  case applying those provisions                                                                    
     is Hickel v.  Cowper, 847 P.2d 922  (Alaska 1994). Most                                                                    
     recently, the  Superior Court  in Alaska  Federation of                                                                    
     Natives  v.   Dunleavy  ruled   that  the   Power  Cost                                                                    
     Equalization  Fund  ("PCE")  was not  "in  the  general                                                                    
     fund" and  was not sweepable under  Article IX, Section                                                                    
     17. These two cases lead to a number of questions.                                                                         
                                                                                                                                
CHAIR  CLAMAN  opined  that  the  two court  cases  bear  on  the                                                               
consideration of HJR 7, thus  he said he invited a representative                                                               
from the  Department of Law  and from Legislative  Legal Services                                                               
to answer the questions in the memo.                                                                                            
                                                                                                                                
1:06:03 PM                                                                                                                    
                                                                                                                                
CORY  MILLS,  Deputy Attorney  General,  Office  of the  Attorney                                                               
General,  Civil  Division,  Department   of  Law,  addressed  the                                                               
aforementioned list of questions.  The first question:                                                                          
                                                                                                                                
     1. Are there cases other  than Hickel v. Cowper and AFN                                                                
     v. Dunleavy  that address whether particular  funds are                                                                  
     subject to sweep?                                                                                                          
                                                                                                                                
MS.  MILLS said  she was  unaware of  any such  cases.   She said                                                               
Hickel  v. Cowper  is  the  one [Alaska]  Supreme  Court case  to                                                             
interpret  the phrase  "available for  appropriation."   She said                                                               
that  was  actually  more  in  regard to  subsection  (b)  -  the                                                               
constitutional  amendment, not  the sweep  - but  the court  said                                                               
that  "available for  appropriation" should  be "interpreted  the                                                               
same for both of those provisions."  She continued:                                                                             
                                                                                                                                
     It  did not  address what  is in  the general  fund for                                                                    
     purposes  of the  sweep.   And that's  AFN v.  Dunleavy                                                                  
     superior  court case.    The state  has  chosen not  to                                                                    
     appeal that case,  and so, it is binding as  to the PCE                                                                    
     but otherwise not binding on other courts.                                                                                 
                                                                                                                                
MS. MILLS addressed the second question:                                                                                        
                                                                                                                                
     2.  Has  Judge Garton's  decision  in  AFN v.  Dunleavy                                                                  
     changed how  the Department of Law  analyzes whether or                                                                    
     not a fund is sweepable? How?                                                                                              
                                                                                                                                
MS. MILLS  said she thinks  DOL's approach to the  superior court                                                               
decision is to  look at the PCE and the  facts surrounding it and                                                               
[to ask]  whether there are  other similarly situated  funds that                                                               
DOL  otherwise  considered  sweepable  but should  no  longer  be                                                               
considered  sweepable because  they are  so similar  to the  PCE.                                                               
She said the  PCE is unique; it  is the only fund that  is on the                                                               
sweep  list that  exists  within the  public  corporation but  is                                                               
otherwise available  for appropriation.  She  stated that because                                                               
of its unique nature, DOL did  not find any other funds that "fit                                                               
that exact  fact pattern."   She said that "the  Hickel decision"                                                               
is the binding precedent so far  since it is a supreme court case                                                               
on issues regarding the sweep.                                                                                                  
                                                                                                                                
1:08:47 PM                                                                                                                    
                                                                                                                                
MS. MILLS addressed the third question:                                                                                         
                                                                                                                                
     3. The  administration did not appeal  AFN v. Dunleavy.                                                                  
     What is  the precedent  of the superior  court decision                                                                    
     and how will it  affect other Alaska courts considering                                                                    
     whether  funds are  subject to  sweep?  Is the  court's                                                                    
     discussion on page 12, footnotes  76 and 77, binding on                                                                    
     future courts?                                                                                                             
                                                                                                                                
MS.  MILLS  said AFN  v.  Dunleavy  was  a superior  court  case;                                                             
therefore, it is not binding,  and opinion will not be published.                                                               
Its only  impact relates to the  PCE; the court ordered  that the                                                               
PCE not be  swept.  In accordance with that  legal mandate by the                                                               
superior court,  the administration is  not "sweeping PCE."   She                                                               
said anything  else in  that decision is  "persuasive only."   If                                                               
another case  is brought, another  court does not have  to follow                                                               
the superior  court reasoning or  decision.  She said  the Alaska                                                               
Supreme Court is in no way bound by a superior court decision.                                                                  
                                                                                                                                
MS. MILLS, regarding the dicta  in footnotes 76 and 77, explained                                                               
that on  page 12 the  court says there  are other funds  that the                                                               
legislature has determined are separate  funds and cites statutes                                                               
that refer  to "separate funds".   She said it appears  the court                                                               
was trying  to show how  the legislature  has acted in  regard to                                                               
funds, because  there is no  fund that is "precisely  similar" to                                                               
the  PCE endowment  fund.   That  said, Ms.  Mills remarked  that                                                               
there is  no evidence  that the court  looked at  the legislative                                                               
history and was interpreting those  statutes to determine whether                                                               
the funds  were in the general  fund (GF) or not;  "it was simply                                                               
citations  to footnotes  for purposes  of illustrating  different                                                               
ways  in which  the legislature  has explained  funds within  the                                                               
law."   Without any analysis by  the court or legal  mandate, she                                                               
said, there  is nothing  binding about  those footnotes,  and DOL                                                               
continues to  use Hickel v. Cowper  as the main case  by which to                                                             
interpret the sweep provision.                                                                                                  
                                                                                                                                
MS. MILLS moved on to the forth question:                                                                                       
                                                                                                                                
     4. Please explain the difference, if any, between the                                                                      
     general fund and the state treasury.                                                                                       
                                                                                                                                
MS.  MILLS  indicated the  answer  may  vary depending  on  which                                                               
statute is  read, because  the terms  are not  used consistently.                                                               
She  named  some  terms:    fund,  account,  general  funds,  and                                                               
treasury.  She said it is  not clear when the legislature enacted                                                               
all the  statutes whether  they had  different meanings  in mind,                                                               
and to  figure that  out would  require delving  into legislative                                                               
history to determine  the intent of the legislature  when it used                                                               
those  terms.    For  example, in  some  places,  "treasury"  and                                                               
"general fund" seemed to indicate  the same thing, while in other                                                               
circumstances they do not.                                                                                                      
                                                                                                                                
1:13:44 PM                                                                                                                    
                                                                                                                                
MS. MILLS prefaced the fifth  question to mention that aside from                                                               
the PCE  and any funds  as can be categorized  as PCE -  and none                                                               
were  found  by  DOL  -  the  sweep  analysis  has  not  changed;                                                               
therefore, "the list  that the Office of Management  & Budget has                                                               
continues to  remain the same in  terms of what's subject  to the                                                               
sweep and what's not."  The fifth question:                                                                                     
                                                                                                                                
     5.  Please  advise  whether  the  following  funds  are                                                                    
     subject to sweep and why or why not:                                                                                       
          a.  The Permanent  Fund  Earnings Reserve  Account                                                                    
     (Art. IX, Sec. 17)                                                                                                         
          b.  Funds such  as the  school construction  grant                                                                    
     fund (AS 14.11.005) that are  expressly created "in the                                                                    
     general fund"                                                                                                              
          c. Funds  such as  the curriculum  improvement and                                                                    
     best   practices   fund   (AS   14.07.182)   that   are                                                                    
     "established," but not "in the general fund"                                                                               
          d.  Funds   such  as  the  in-state   natural  gas                                                                    
     pipeline fund (AS 31.25.100) that  are established in a                                                                    
     state corporation                                                                                                          
          e.  Funds such  as  the disaster  relief fund  (AS                                                                    
     26.23.300) that  are established "in the  Office of the                                                                    
     Governor"                                                                                                                  
          f.  Funds  such  as the  power  cost  equalization                                                                    
     endowment fund (AS 42.45.070)  that are established "as                                                                    
     established  as a  separate fund"  of  a state  entity,                                                                    
     such as the Alaska Energy Authority                                                                                        
          g. Funds  such as  the (statutory)  budget reserve                                                                    
     fund  (AS 37.05.540(a))  or  the Servicemembers'  Group                                                                    
     Life  Insurance premium  fund (AS  26.05.263) that  are                                                                    
     established   as  a   separate  fund   "in  the   state                                                                    
     treasury."                                                                                                                 
                                                                                                                                
MS. MILLS  said the Permanent  Fund Earnings Reserve  Account was                                                               
specifically pointed  out in Hickel  v. Cowper as not  subject to                                                             
the  sweep because  it  exists  in the  permanent  fund, not  the                                                               
general fund.   She said  the school construction grant  fund has                                                               
never been subject  to the sweep because it can  be spent without                                                               
an appropriation,  thus failing  "the second  part of  the test."                                                               
She explained  that the  test is  whether a fund  is both  in the                                                               
general fund and  available for appropriation, and  this is based                                                               
on  the  Hickel  v.  Cowper   analysis.    She  said  the  school                                                             
construction grant fund  is in the general fund  but "was already                                                               
not on  the sweep list for  another reason."  Ms.  Mills said the                                                               
curriculum improvement  and best practices fund  "doesn't mention                                                               
where it's at; it just establishes  the fund."  She said DOL does                                                               
not read  any meaning into that;  "it has to go  somewhere."  The                                                               
fact that  it does  not say  general fund  does not  change DOL's                                                               
analysis.  That  said, she commented that the fund  has never had                                                               
any money  in it,  so it  has not been  swept.   Furthermore, she                                                               
offered  her  understanding  that   it  could  be  spent  without                                                               
appropriation, so  it would  not be  on the  sweep list  to begin                                                               
with.                                                                                                                           
                                                                                                                                
MS.  MILLS  said  the  instate  natural  gas  pipeline  fund  was                                                               
established   in  a   state  corporation.      She  offered   her                                                               
understanding  that  all  funds  in  corporations  can  be  spent                                                               
without appropriation,  thus are not available  for appropriation                                                               
under the Hickel  v. Cowper analysis, so this fund  is not on the                                                             
sweep list.   She added,  "But it  otherwise would be  similar to                                                               
PCE  in that  it  exists  in a  state  corporation and  therefore                                                               
wouldn't be  swept for the  second reason,  as well."   Ms. Mills                                                               
said the  disaster relief fund  was established in the  Office of                                                               
the Governor  and, since  it can  be spent  without appropriation                                                               
and cannot be swept, DOL has not done any further analysis.                                                                     
                                                                                                                                
MS. MILLS said the PCE endowment  fund was the subject of the AFN                                                             
v. Dunleavy  decision and is  not subject  to the sweep,  and the                                                             
administration has  ensured that  that money  is available.   She                                                               
said  the statutory  budget reserve  (SBR) fund  has always  been                                                               
viewed  by  both  the  legislative   and  executive  branches  as                                                               
available  for  appropriation  and  in  the  general  fund,  thus                                                               
subject to  the sweep,  and it  remains on the  sweep list.   The                                                               
service  members group  life insurance  premium  fund is  another                                                               
that can be  spent without appropriation, so DOL has  not done an                                                               
analysis because it fails one  part of the two-part test already,                                                               
so it is not sweepable.                                                                                                         
                                                                                                                                
1:18:15 PM                                                                                                                    
                                                                                                                                
MS. MILLS turned to the sixth and final question, which was:                                                                    
                                                                                                                                
     6.   HB  3003,   recently   approved   by  the   House,                                                                    
     appropriates  dividend   funds  from   the  (statutory)                                                                    
     budget  reserve to  pay  the  Permanent Fund  dividend.                                                                    
     What  is  the  administration's current  position  with                                                                    
     respect  to an  appropriation  from (statutory)  budget                                                                    
     reserve (AS 37.05.540(a))?                                                                                                 
          a. If  the SBR  funds are  subject to  sweep, when                                                                    
     does the sweep occur?                                                                                                      
          b.  If the  governor  contends the  SBR funds  are                                                                    
     subject  to sweep  and  the  legislature contends  that                                                                    
     they  are  not,  what  options  are  available  to  the                                                                    
     legislature to resolve any dispute?                                                                                        
                                                                                                                                
MS. MILLS reiterated that the  SBR has historically been found to                                                               
be  sweepable,  and  DOL  does  not think  the  AFN  v.  Dunleavy                                                             
decision  in any  way binds  the state  to a  new interpretation.                                                               
She continued as follows:                                                                                                       
                                                                                                                                
     It also isn't  a ... similarly situated  fund; it's not                                                                    
     in a corporation;  it says it's in  the state treasury.                                                                    
     As  I stated  before, exactly  what that  means and  in                                                                    
     what context  - we'd have  to go  back and look  at the                                                                    
     legislative history,  but it's  also evident  that both                                                                    
     sides  have always  considered it  sweepable, which  we                                                                    
     think points to the fact  that everyone believed it was                                                                    
     in the general fund.                                                                                                       
                                                                                                                                
MS. MILLS  said that means that  funds that were in  the SBR that                                                               
were not previously validly committed  when the clock turned from                                                               
one fiscal year  to the next were swept.   So, there basically is                                                               
not  money in  that fund  from which  to do  any new,  additional                                                               
appropriation.  She said under law,  the funds are swept into the                                                               
constitutional budget reserve  (CBR) at 11:59 p.m. on  June 30 of                                                               
any  given fiscal  year.   Then  they  are swept  back  out in  a                                                               
reverse sweep  at midnight  or 12:01  a.m. [July  1 of  any given                                                               
fiscal year].                                                                                                                   
                                                                                                                                
MS. MILLS,  addressing the  last portion  of the  sixth question,                                                               
offered  suggestions as  to what  could be  done if  the governor                                                               
contends  that  SBR  funds  are  subject  to  a  sweep,  but  the                                                               
legislature  thinks  not.    She   said  she  thinks  legislation                                                               
clarifying where  the SBR is  and making  it more similar  to the                                                               
PCE endowment  fund and  AFN v.  Dunleavy decision  would provide                                                             
clarity.  Otherwise,  she suggested, the two  branches could have                                                               
further discussion on what the terms in the constitution mean.                                                                  
                                                                                                                                
1:21:16 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN asked  whether  DOL  has a  list  of  all funds  in                                                               
sweepable and "nonsweepable" categories  that it could provide to                                                               
the committee.                                                                                                                  
                                                                                                                                
MS. MILLS deferred to Neil Steininger.                                                                                          
                                                                                                                                
1:22:18 PM                                                                                                                    
                                                                                                                                
NEIL STEININGER, Director, Office  of Management & Budget, Office                                                               
of the  Governor, said  the Office of  Management &  Budget could                                                               
provide the list.                                                                                                               
                                                                                                                                
1:22:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE  asked  whether the  administration  has  a                                                               
position on  whether the PCE fund  should continue to be  in "the                                                               
constitutional amendment  proposal" in light of  the recent court                                                               
case.                                                                                                                           
                                                                                                                                
MS. MILLS answered  that she could not speak to  that issue.  She                                                               
said she had  not heard that there are "plans  to ... change that                                                               
proposal  at this  point," but  offered to  have someone  "who is                                                               
leading that bill" get back to the committee.                                                                                   
                                                                                                                                
REPRESENTATIVE VANCE asked  whether Ms. Mills could  speak to any                                                               
legal effects, in  light of the case, if the  PCE is not included                                                               
in the constitutional provision as proposed under HJR 7.                                                                        
                                                                                                                                
MS. MILLS responded  that even though the fund  is "not sweepable                                                               
at  the  moment,"  it  is   fully  available  for  appropriation;                                                               
therefore,  it  can   be  used  for  multiple   purposes  by  the                                                               
legislature.  She continued:                                                                                                    
                                                                                                                                
     Placing  the money  that's in  the endowment  fund into                                                                    
     the   permanent  fund   and  creating   some  sort   of                                                                    
     constitutional  protection would  make it  so that  you                                                                    
     couldn't ...  ever take the  whole fund  or appropriate                                                                    
     the whole fund  in any way.  So, that's  ... the one, I                                                                    
     guess, legal status difference that I'd point out.                                                                         
                                                                                                                                
REPRESENTATIVE VANCE, regarding the use  of the percent of market                                                               
value (POMV) for PCE in Alaska, asked:                                                                                          
                                                                                                                                
     If the  legislature wanted to  use that portion  of the                                                                    
     fund  to  invest  in  energy  infrastructure  in  rural                                                                    
     Alaska,  would  it  be permissible  under  the  current                                                                    
     language  or  is it  exclusively  for  the PCE  subsidy                                                                    
     program?                                                                                                                   
                                                                                                                                
MS. MILLS explained that she would  need to consult with the lead                                                               
attorney  on  the  constitutional   amendment  and  get  back  to                                                               
Representative Vance with an answer.                                                                                            
                                                                                                                                
1:25:51 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN asked  whether the  legislature, under  the current                                                               
structure, could  use PCE  endowment funds  to build  an electric                                                               
infrastructure in rural Alaska.                                                                                                 
                                                                                                                                
MS. MILLS  answered there  is nothing  that would  prohibit using                                                               
money from the PCE endowment fund to pay for that project.                                                                      
                                                                                                                                
1:26:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURKA cited the first  two sentences of Article 9,                                                               
Section 13,  of the  Constitution of the  State of  Alaska, which                                                               
read:                                                                                                                           
                                                                                                                                
     No money  shall be  withdrawn from the  treasury except                                                                    
     in  accordance  with  appropriations made  by  law.  No                                                                    
     obligation for  the payment of money  shall be incurred                                                                    
     except as authorized by law.                                                                                               
                                                                                                                                
REPRESENTATIVE KURKA  said he  could see  having various  laws on                                                               
the  books outlying  payments for  programs or  various expenses,                                                               
but remarked that  the money still cannot be taken  out unless it                                                               
is appropriated.   He said he is  having difficulty understanding                                                               
how  the  state   is  paying  for  things  that   have  not  been                                                               
appropriated.                                                                                                                   
                                                                                                                                
MS. MILLS  responded that there  are two types  of appropriations                                                               
that  the  legislature  does  in  the budget  bill.    There  are                                                               
appropriations  into   funds  that   then  need  to   be  further                                                               
appropriated, such as the PCE  fund.  Then there is appropriation                                                               
into  a  fund that  has  automatic  spending authority;  a  prime                                                               
example is the  permanent fund dividend.  Ms.  Mills stated, "...                                                               
The  funds   I  listed   ...,  the  money   can  then   be  spent                                                               
automatically  by the  agency per  a  statute.   There are  other                                                               
funds   where   you   appropriate   in,   but   there's   another                                                               
appropriation that's  necessary before the money  can actually be                                                               
spent from the treasury."                                                                                                       
                                                                                                                                
REPRESENTATIVE KURKA  said it sounded  like Ms. Mills  was saying                                                               
there  can  be multi-year  appropriations  instead  of an  annual                                                               
basis.                                                                                                                          
                                                                                                                                
MS. MILLS explained that the  legislature has control of only the                                                               
funds within  its purview within  a given year; that  money could                                                               
still be  expended for years in  the future.  A  good example are                                                               
the  public corporation  funds.   She  said  the legislature  can                                                               
spend only the  money that is in  front of it in  any given year;                                                               
it cannot spend "another legislature's  money."  She said that is                                                               
the  position of  DOL that  is currently  being litigated  in the                                                               
forward appropriation case.                                                                                                     
                                                                                                                                
MS. MILLS,  in response  to a  follow-up question,  clarified the                                                               
two-part  test  from  Hickel  v.  Cowper  to  determine  what  is                                                             
considered  available for  appropriation under  the CBR  both for                                                               
purposes  of subsection  (b), which  determines  when a  majority                                                               
vote is needed  versus a three-quarter vote, and  for purposes of                                                               
the sweep  where the same language  is used.  She  said the court                                                               
described "available for appropriation" as follows:                                                                             
                                                                                                                                
     Instead  we   consider  it  appropriate,  as   well  as                                                                    
     consistent with both the language  of the amendment and                                                                    
     the  intent  of the  framers,  to  focus on  the  legal                                                                    
     status of the various  funds implicated in relationship                                                                    
     to the legislative power of  appropriation.  The amount                                                                    
     available  for  appropriation  must include  all  funds                                                                    
     over which  the legislature  has retained the  power to                                                                    
     appropriate.                                                                                                               
                                                                                                                                
MS.  MILLS   said  when  talking   about  what's   available  for                                                               
appropriation for purposes of the  CBR, that's the test the court                                                               
has lined out.                                                                                                                  
                                                                                                                                
1:34:36 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN,  regarding the PCE, offered  his understanding that                                                               
the court ruled  that that endowment is not in  the GF, which was                                                               
the basis of  Judge Garton's ruling, and wasn't  subject to sweep                                                               
because  it  wasn't in  the  GF,  but  it's still  available  for                                                               
appropriation.   So,  even though  the legislature  has put  that                                                               
money into the  PCE, and there are provisions that  allow for the                                                               
expenditure  of those  funds, the  legislature could  appropriate                                                               
that money  in a variety of  different ways, but it  still is not                                                               
subject to sweep.  He asked if he got that right.                                                                               
                                                                                                                                
MS. MILLS said she believed so.   She said Hickel v. Cowper dealt                                                             
only  with the  term  "available for  appropriation".   She  said                                                               
subsection (b)  of the CBR  amendment does  not refer to  the GF;                                                               
"it  just   says  ...  you're  comparing   what's  available  for                                                               
appropriation  to what  was actually  ... spent  or budgeted  the                                                               
previous  year."   She  said  subsection (d)  is  where the  term                                                               
"general fund"  is introduced.   She went  over, once  again, the                                                               
information  about  the  two-part test  for  determining  whether                                                               
monies are sweepable.   She said as Chair Claman  points out, the                                                               
PCE endowment fund was found by  the Hickel v. Cowper court to be                                                             
available  for appropriation;  the  question  the court  grappled                                                               
with is  whether it is  in the GF, since  it is designated  as in                                                               
the Alaska  Energy Authority  (AEA).   The court  determined that                                                               
because it  was in the AEA,  it was not  in the GF but  rather in                                                               
the corporation.                                                                                                                
                                                                                                                                
1:37:32 PM                                                                                                                    
                                                                                                                                
MEGAN WALLACE, Director,  Legislative Legal Services, Legislative                                                               
Affairs  Agency,  said  she  would   address  just  some  of  the                                                               
questions provided,  since she and  Ms. Mills do not  disagree on                                                               
others.   She began  with question 4,  which asks  the difference                                                               
between the general fund and the  state treasury.  She echoed Ms.                                                               
Mills' response  that that is  a complicated question  to answer.                                                               
She said that in the AFN  v. Dunleavy case, the Department of Law                                                             
took  the  position that  all  funds,  except for  constitutional                                                               
funds  - the  permanent fund  and the  CBR -  are in  the general                                                               
fund.   The plaintiff argued  there was a broader  definition and                                                               
that the  legislature had the  power to establish  separate funds                                                               
outside  of the  GF  but  would still  be  considered within  the                                                               
state's treasury and, thus, still  be bound by the constitutional                                                               
requirement  that money  could  not be  expended  from the  state                                                               
treasury absent appropriation.                                                                                                  
                                                                                                                                
MS. WALLACE  said in  AFN v. Dunleavy,  the court  looked through                                                             
legislative  history of  the  CBR amendment  and  found that  the                                                               
legislature was  not prohibited  from establishing  funds outside                                                               
the general  fund, for  example, by  the dedicated  funds clause.                                                               
She  noted that  the  opinion in  AFN v.  Dunleavy  has not  been                                                             
appealed; it is  an unpublished superior court  opinion, which at                                                               
most  will have  persuasive value  if  a separate  court were  to                                                               
consider  similar issues  in  terms  of determining  specifically                                                               
which funds  are in the  GF versus  in the state  treasury, which                                                               
would  have an  impact on  potential future  analysis as  to what                                                               
funds can be swept.                                                                                                             
                                                                                                                                
MS.  WALLACE stated  that while  Hickel  v. Cowper  is an  Alaska                                                             
Supreme Court case that does  analyze Article IV, Section 17, the                                                               
case  did  not specifically  do  any  analysis  on the  issue  of                                                               
determining which funds  were in the GF  versus the legislature's                                                               
power to set up a fund separate  from the GF but still within the                                                               
state treasury.   Ms. Wallace concurred with Ms.  Mills that when                                                               
determining whether  or not  something is  subject to  the sweep,                                                               
the  analysis is  a  two-part  test to  determine  whether it  is                                                               
available  for appropriation  and is  in the  general fund.   She                                                               
said the only  case that specifically analyzes  that second issue                                                               
is  the recent  AFN  v.  Dunleavy case.    Ms.  Wallace said  the                                                             
impact, from  her position, and in  terms of the advice  that she                                                               
gives  to the  legislature, is  that while  it's only  a superior                                                               
court decision and not binding  on future courts should the issue                                                               
arise, it should  be instructive in terms of  at least evaluating                                                               
how future courts  might come out on  the issue.  She  said it is                                                               
always possible that a court  could reach a different conclusion,                                                               
but indicated  that it is  also possible that the  decision could                                                               
be persuasive  to future courts  in analyzing these issues.   She                                                               
continued:                                                                                                                      
                                                                                                                                
     To the  extent that  there is new  interpretation about                                                                    
     what it means  to be in the general fund  versus in the                                                                    
     state treasury  - funds  that had  not been  subject to                                                                    
     that  analysis -  we may  have to  go back  and analyze                                                                    
     them in  terms of whether  or not, if those  funds were                                                                    
     looked  at, whether  a court  would reach  a conclusion                                                                    
     different  ...  [from]  what   has  been  a  historical                                                                    
     interpretation.   And an  example of  that is  ... this                                                                    
     statutory budget  reserve fund.  When  Hickel v. Cowper                                                                  
     was litigated back  in the '90s, the  parties agreed or                                                                    
     stipulated that  the statutory budget reserve  fund was                                                                    
     available  for appropriation.   And  that was  the main                                                                    
     issue  that was  being litigated  in Hickel  v. Cowper.                                                                  
     And so,  there was  no real dispute  that the  fund was                                                                    
     available for appropriation.  But  I'm not aware of any                                                                    
     specific  analysis that  has occurred  really examining                                                                    
     that  fund and  analyzing whether  or not  it's in  the                                                                    
     general fund  or whether the legislature  exercised its                                                                    
     lawmaking power and established  that fund as a special                                                                    
     fund separate from the general fund.                                                                                       
                                                                                                                                
1:46:58 PM                                                                                                                    
                                                                                                                                
MS.  WALLACE said  her office  had not  had time  to look  at the                                                               
legislative  history  and conduct  a  full  analysis of  all  the                                                               
funds; however, she  restated her understanding that  she and Ms.                                                               
Mills are  consistent in understanding what  the test is:   Is it                                                               
available for appropriation?  Is it in the GF?  She continued:                                                                  
                                                                                                                                
     If   a   fund   can   be   expended   without   further                                                                    
     appropriation,  meaning  the  legislature  has  already                                                                    
     appropriated money once  into that fund ...  and by law                                                                    
     that  money can  be  spent without  having  to enact  a                                                                    
     further appropriation,  then those funds,  under Hickel                                                                  
     v. Cowper, are not sweepable.                                                                                            
                                                                                                                                
     The earnings  reserve account, which  was on  the list,                                                                    
     ...  was specifically  addressed by  Hickel v.  Cowper,                                                                  
     and  the Alaska  Supreme Court  noted that  even though                                                                    
     that fund  was available for appropriation,  it was not                                                                    
     in the general  fund, and therefore not  subject to the                                                                    
     sweep.                                                                                                                     
                                                                                                                                
1:48:57 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN,  directing attention to  question 6, asked  for Ms.                                                               
Wallace's perspective on  whether SBR funds are  subject to sweep                                                               
in light of the AFN v. Dunleavy case.                                                                                         
                                                                                                                                
MS. WALLACE responded  that when the court  was analyzing whether                                                               
the PCE fund was in the  general fund, it specifically noted that                                                               
the legislature  has previously expressly  created many  funds in                                                               
the general fund.  The court  also noted that the legislature has                                                               
created separate  funds.   In footnote  77, the  court "evidences                                                               
separate funds that the legislature  has established," and one of                                                               
them  is  the SBR,  which  is  found  in  AS 37.05.540(a).    She                                                               
indicated that in  any further litigation there  could be another                                                               
opinion from  the Alaska Superior  Court or Alaska  Supreme Court                                                               
holding that the SBR is  "another fund that's outside the general                                                               
fund and therefore not subject to  the sweep."  She said based on                                                               
"the position that was just  described" [by Ms. Mills], it sounds                                                               
like   DOL's    administration   "has   not    reconsidered   the                                                               
'sweepability'  of  that fund  in  light  of this  decision,  and                                                               
therefore,  to the  extent that  there's disagreement  about what                                                               
the AFN  case really means with  respect to the SBR,"  she thinks                                                               
there  is  the  potential  for litigation,  particularly  if  the                                                               
disagreement is  about how much  money from the SBR  is available                                                               
to the legislature for appropriation going forward.                                                                             
                                                                                                                                
1:53:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS    asked   Ms.    Wallace   about                                                               
formalities of legal precedent and  whether the question could be                                                               
forced to get  a concrete precedent on the record  so that Alaska                                                               
would  not be  subjected to  this  uncertainty and,  if so,  what                                                               
recourse exists through the legal system to do so.                                                                              
                                                                                                                                
MS. WALLACE  answered that the  only mechanism for this  issue to                                                               
be decided  by the Alaska Supreme  Court would be for  one of the                                                               
parties involved to appeal Judge  Garton's decision, but that did                                                               
not happen.   She said  the Alaska  Supreme Court does  not issue                                                               
revisory opinions.  Ms. Wallace  said if there is further dispute                                                               
about the  sweepability of the SBR  or any other fund,  she could                                                               
almost guarantee the Garton opinion  would be cited; however, the                                                               
issue  would have  to  be  separately litigated,  so  the AFN  v.                                                             
Dunleavy  case would  not  be considered  binding  evidence.   In                                                             
response  to a  follow-up  question, she  said  either party  can                                                               
appeal a decision.                                                                                                              
                                                                                                                                
1:59:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS asked Ms.  Mills if she could speak                                                               
in  more concrete  terms as  to  why the  administration did  not                                                               
appeal  to  the  Alaska  Supreme  Court  given  that  the  Alaska                                                               
Superior   Court  disagreed   with  the   administration's  legal                                                               
interpretation of the sweep.                                                                                                    
                                                                                                                                
MS. MILLS replied that the decision  to not appeal a decision has                                                               
multiple facets.   She said  PCE is  a unique fund,  and everyone                                                               
was in agreement  about getting the payments made, so  it was not                                                               
a decision that the administration felt like appealing.                                                                         
                                                                                                                                
2:00:46 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN asked  whether, specific  to  the PCE,  it was  Ms.                                                               
Mills' opinion that the court's  decision would be binding on the                                                               
administration 10 years from now.                                                                                               
                                                                                                                                
MS.  MILLS  answered that  unless  there  is intervening  supreme                                                               
court precedent that would reverse  or overturn that position, it                                                               
is an injunction on the state that lasts.                                                                                       
                                                                                                                                
CHAIR  CLAMAN  asked,   "So,  it's  not  just   binding  on  this                                                               
administration;  it would  be binding  on future  administrations                                                               
unless  the supreme  court issued  an opinion  that would  give a                                                               
basis to say that [Judge] Garton's analysis is flawed?"                                                                         
                                                                                                                                
MS. MILLS replied, "Yes, I believe that's correct."                                                                             
                                                                                                                                
2:02:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KURKA, regarding  the authority  to create  funds                                                               
outside the GF, offered his  understanding of the Constitution of                                                               
the  State  of  Alaska  that  there is  an  intent  to  expressly                                                               
prohibit  dedicated   funds.    He   said  it  seems   like  [the                                                               
legislature] has been  "playing a game to try to  get around that                                                               
and to violate the intent of  the constitution."  He asked if the                                                               
constitution  clearly delineates  the legislature's  authority to                                                               
create separate funds outside of the GF.                                                                                        
                                                                                                                                
MS. MILLS  said she thinks Representative  Kurka was annunciating                                                               
DOL's position in  the lawsuit, which was that  when voters voted                                                               
on the  GF, they did not  think it was different  from the Alaska                                                               
Energy Authority  funds or  any other funds.   Instead  of saying                                                               
that the  term "general fund"  had a specific meaning,  the judge                                                               
found  that the  legislature can  determine  what the  GF is  and                                                               
determine "which  funds are the  general fund versus  which funds                                                               
are  not."    She  highlighted  that that  was  not  the  state's                                                               
position.    In  terms  of  whether  there  is  a  place  in  the                                                               
constitution  that  allows  the legislature  to  create  separate                                                               
funds,   she  said,   "I  don't   think  the   constitution  ever                                                               
contemplated that,  especially as it originally  stood before the                                                               
constitution  budget reserve."    At that  point,  she said,  the                                                               
constitution addressed  expenditures in  the treasury  in general                                                               
terms.  She continued:                                                                                                          
                                                                                                                                
     But then  you get the legislative  authority in Article                                                                    
     2, which  allows you to  pass legislation, and  you can                                                                    
     pass legislation  that ensures different pots  of money                                                                    
     go  different   places  so  that  ...   for  accounting                                                                    
     purposes  you know  what's  going on.    But you  still                                                                    
     can't  dedicate  those  funds, and  that's  Article  9,                                                                    
     Section  ... [7]  that doesn't  allow dedicated  funds.                                                                    
     And  so,  ...  you  have   funds,  but  they  can't  be                                                                    
     dedicated  to  specific  purposes; they  can  still  be                                                                    
     appropriated  by  the  legislature, except  for  a  few                                                                    
     exceptions.                                                                                                                
                                                                                                                                
CHAIR CLAMAN  told Representative  Kurka that Judge  Garton noted                                                               
that the term "general fund"  does not appear in the constitution                                                               
until  1986,   when  it  appears   in  Article  9,   Section  15,                                                               
establishing the permanent fund.                                                                                                
                                                                                                                                
2:06:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN  asked Ms.  Mills what her  perspective was                                                               
regarding whether the permanent fund is part of the treasury.                                                                   
                                                                                                                                
MS. MILLS responded  she does not think there is  a clear answer.                                                               
She explained  she thinks  the treasury would  be viewed  as "the                                                               
big treasury,"  but there are  arguments that the  treasury "sits                                                               
in one place"  and the permanent fund of  the constitutional fund                                                               
"sits in another."  Arguments on  the PCE were regarding what the                                                               
GF is,  for purposes of the  sweep in interpreting the  CBR.  She                                                               
reiterated that [DOL's] thought was  that the public did not know                                                               
about  "all these  little funds"  and instead  thought the  GF is                                                               
that  from  which  the legislature  can  appropriate;  therefore,                                                               
"it's  that universe  of  things  that is  in  the general  fund,                                                               
except for ... your constitutionally created funds."                                                                            
                                                                                                                                
REPRESENTATIVE CLAMAN summarized that  there could be an argument                                                               
made that  "treasury" refers to  "every dollar that is  ... owned                                                               
by the  state," and he  offered his understanding that  Ms. Mills                                                               
was not certain "where that is from a legal analysis."                                                                          
                                                                                                                                
MS. MILLS said  she would agree with that.   Then she pointed out                                                               
that there  is question  concerning how  "treasury" is  used from                                                               
statute to statute.                                                                                                             
                                                                                                                                
REPRESENTATIVE  CLAMAN asked  whether  there was  reference to  a                                                               
general fund prior to 1976.                                                                                                     
                                                                                                                                
MS. MILLS answered she does not know.                                                                                           
                                                                                                                                
REPRESENTATIVE CLAMAN  asked whether, if statute  were passed now                                                               
to provide clarity,  it would affect the  sweepability "for right                                                               
now" or if disagreement would require going to court.                                                                           
                                                                                                                                
MS. MILLS  said she thinks it  would be accurate to  say it would                                                               
not affect  things now,  because "you  have to  look at  what the                                                               
statute  was when  the sweep  occurred,  not what  a new  statute                                                               
says."  There  are still many questions about  the CBR, including                                                               
cases  regarding appropriation  availability and  what goes  into                                                               
the CBR.   She said,  "There are many surrounding  questions that                                                               
ultimately the  supreme court would  have to  ... weigh in  on to                                                               
get a definitive answer."                                                                                                       
                                                                                                                                
REPRESENTATIVE CLAMAN asked if Ms.  Mills would view the question                                                               
on the SBR as more to do with  whether it is in the GF as opposed                                                               
to whether it is available for appropriation.                                                                                   
                                                                                                                                
MS. MILLS  confirmed that is absolutely  the fundamental question                                                               
for the SBR.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CLAMAN  summarized,  "So,  the  availability  for                                                               
appropriation is  really not a particularly  challenging issue on                                                               
that fund; it's more whether it's in the general fund or not."                                                                  
                                                                                                                                
MS. MILLS answered that is correct.                                                                                             
                                                                                                                                
2:12:44 PM                                                                                                                    
                                                                                                                                
MS. MILLS recalled that Representative  Vance had asked about the                                                               
governor's constitutional  amendment and the PCE  and whether the                                                               
position  had changed  on that,  and  she reported  she had  just                                                               
received  confirmation  that the  governor  had  not changed  his                                                               
position   on   that   and   still   wants   to   see   the   PCE                                                               
constitutionalized in  order to protect the  endowment and ensure                                                               
an annual payment.                                                                                                              
                                                                                                                                
2:13:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VANCE  thanked  Ms.   Mills  for  the  clarifying                                                               
information, which she said would be helpful in decision-making.                                                                
                                                                                                                                
2:14:28 PM                                                                                                                    
                                                                                                                                
MS.  WALLACE, regarding  options  available  to the  legislature,                                                               
remarked:                                                                                                                       
                                                                                                                                
     Even though ... we are  lawyers ..., we always hesitate                                                                    
     to  jump  right to  the  recommendation  to solve  this                                                                    
     issue by  litigation because of the  risk involved, but                                                                    
     while  litigation  is  always  an  option  to  kind  of                                                                    
     understand what the answer to  this potential issue is,                                                                    
     another option that is available  to the legislature is                                                                    
     to reverse the sweep  and to reconstitute the statutory                                                                    
     budget  reserve  fund so  that  those  funds do  remain                                                                    
     available to  the legislature to appropriate.   So, ...                                                                    
     reversing the  sweep, finding additional funds  to make                                                                    
     up for  any funds  that were  appropriated in  HB 3003,                                                                    
     are  all  additional  options, aside  from  litigation,                                                                    
     that the legislature has to pursue.                                                                                        
                                                                                                                                
2:16:03 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  asked whether the  opportunity for  the legislature                                                               
to  reverse sweep  had not  already passed  because the  money is                                                               
already in the  CBR, which would require a  three-quarter vote to                                                               
move it.                                                                                                                        
                                                                                                                                
MS. WALLACE responded  that the reverse sweep has  always been an                                                               
appropriation out  of the CBR fund  back to the funds  from which                                                               
the monies  originated.  She said  it would continue to  be "just                                                               
an appropriation" under Article 9,  Section 17, from the CBR back                                                               
to the original sub-fund; the  legislature would just be enacting                                                               
a separate appropriation.  She  said she assumed that would occur                                                               
retroactively  to July  1, which  would allow  any appropriations                                                               
for the remainder  of the fiscal year "to be  funded out of those                                                               
balances."  She continued:                                                                                                      
                                                                                                                                
     A  little bit  of that  ...  appears to  be a  nonissue                                                                    
     based on the  administration's separate announcement of                                                                    
     the manner  or mechanism in  which it's going  to carry                                                                    
     out the  sweep this  year, meaning  that it's  going to                                                                    
     deem  the  FY  22   appropriations  not  available  for                                                                    
     appropriation, so those  funds will not be  swept.  But                                                                    
     ...  if the  administration sweeps  the money  from the                                                                    
     SBR to the  CBR, the legislature may  withdraw that and                                                                    
     appropriate it from  the CBR back to  the ... statutory                                                                    
     budget  reserve fund  with  a  three-quarter vote,  and                                                                    
     once it does that, there will  be money in that to fund                                                                    
     future   appropriations.     So,  if   they  did   that                                                                    
     simultaneously  and   then  used  the  funds   for  the                                                                    
     dividend,  that would  be an  option available  for the                                                                    
     legislature.                                                                                                               
                                                                                                                                
CHAIR  CLAMAN   proffered  that   that  is  different   from  the                                                               
Washington,  Wyoming,  Alaska,   Montana,  Idaho  (WWAMI)  funds,                                                               
because the  administration's position  on WWAMI funds  were that                                                               
because the  legislature had made  an appropriation on  the funds                                                               
before the end of the fiscal  year, they were no longer available                                                               
for appropriation.                                                                                                              
                                                                                                                                
MS. WALLACE responded  that is correct.  She said  the funds that                                                               
the  House was  looking to  appropriate from  the SBR  were funds                                                               
that  remained after  the  FY  22 appropriations  in  HB 69  were                                                               
accounted for.   [The House] was only looking  to appropriate the                                                               
balance, so  to speak,  of the  SBR, and so  while the  House has                                                               
appropriated  those  funds in  HB  3003,  the position  from  the                                                               
administration  is that  those funds  are  not available  because                                                               
they've been swept into the CBR.                                                                                                
                                                                                                                                
MS. WALLACE, in  response to a follow-up remark  by Chair Claman,                                                               
confirmed  that  [at the  time  HB  3003] was  being  considered,                                                               
Legislative  Legal   Service's  advice  to  [the   House  Finance                                                               
Committee] had been  that "the funds were  likely available based                                                               
on  the AFN  v. Dunleavy  litigation and  decision, based  on the                                                             
analysis that we've  already gone over in this  hearing, but with                                                               
the  caution that  that was  a superior  court decision  and that                                                               
there  was some  risk  of  using those  funds  because it  wasn't                                                               
binding precedent on future courts."                                                                                            
                                                                                                                                
2:22:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SNYDER expressed thanks for the helpful                                                                          
discussion and emphasized that the last 5 or 10 minutes had been                                                                
enlightening.                                                                                                                   
                                                                                                                                
2:22:24 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that CSHJR 7(STA) was held over.