Legislature(1995 - 1996)
04/18/1995 08:10 AM House STA
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* first hearing in first committee of referral
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HJR 40 - REPEAL BUDGET RESERVE FUND (ART IX SEC 17) Number 485 REPRESENTATIVE TERRY MARTIN, sponsor of HJR 40, said the Constitutional Budget Reserve Fund (CBR) is not what it was intended to be. It has not accomplished any of the original goals of cutting the budget and getting state spending under control. Instead, it has helped increase state spending by compelling majority and minority members of the legislature to work out deals, including expensive capital projects, to obtain the necessary three-quarters vote to gain access to the CBR. In addition, the CBR might have a negative effect on permanent fund dividends because those funds would have to be spent before the CBR could be tapped. It could also have a devastating impact on the state's cash flow, delaying availability of funds when the general fund runs low. The legislature has borrowed from the CBR and not paid it back, in spite of the requirement that debts be paid back before the end of the next fiscal year. The voters should be allowed to repeal the CBR and avoid the potential disasters it creates. Number 562 REPRESENTATIVE MARTIN continued, adding the legislature did not intend to have to spend the permanent fund earnings before being able to use the CBR, and Alaska can't afford to keep borrowing money from the CBR. It has become inoperative and is choking Alaska. The voters need to be told the truth. Number 617 REPRESENTATIVE GREEN asked Representative Martin how a ballot measure could be phrased so it would not look like a legislative raid on an account the public had set aside. He feared it would just look like a way for the Nineteenth Legislature to get their "sticky fingers" on the money. REPRESENTATIVE MARTIN replied people are not dumb; they will be able to understand there is nothing left, and we owe $3.4 billion. They will see the CBR is not workable when they have all the information. There will be a lawsuit anyway, when the CBR is not repaid after this session. Let the people see the facts and discuss the issue during the interim. We would really get their attention if we had to tap the permanent fund dividends and there were none for the people. Number 660 REPRESENTATIVE PORTER said the problem is finding a precise definition of the CBR. People's ideas of what it means have changed. He did not believe anyone intended the CBR to be the beginning and the end of every capital budget in the state, but because of court interpretations that is what it has become. He will support the Resolution. CHAIR JAMES referred to a time when they had the statutory budget reserve, which contained the remainder of the money that was on the table, and asked if it were possible to use that when there was a cash flow shortage. She also asked, did Legislative Budget and Audit have to authorize that, or how was it accessed? REPRESENTATIVE MARTIN said that money was put into the CBR. CHAIR JAMES said technically the statutory budget reserve would go away and not be there at all until the CBR was repaid and there was money left. So in reality, there never would be any money in the statutory budget reserve, and in fact, if there were any it would be there illegally. Even if this Resolution passed, a ballot vote would still be 18 months away. If education were taken out of the budget language, there would still be money left over which should go into the CBR. She asked where money would come from for a cash flow deficit on a month-to-month basis. REPRESENTATIVE MARTIN replied the automatic use of the CBR should not be allowed, if we are to put a restraint on government spending. There should not be easy access to the CBR. TAPE 95-50, SIDE A Number 000 REPRESENTATIVE MARTIN said education funding could be prorated. CHAIR JAMES said that was her exact point. It would be easy for the legislature to prorate it and give schools 1/12 each month, but that forces them into a negative cash flow, throughout the state. There is no guarantee, even on a monthly basis, that there will be enough money. REPRESENTATIVE MARTIN agreed, noting money was being borrowed from other accounts. Number 092 CHAIR JAMES again stated that was her point. Before money can be taken from the CBR with a simple majority vote, the earnings reserve of the permanent fund must be first expended. She expressed concern about serious cash flow deficits and the devastating effects on the economy of the state as a whole. Number 135 REPRESENTATIVE MARTIN said this Resolution is not the entire answer, but it would tell the people a serious mistake had been made. The people could be shown there is no way to spend other accounts first. In any case, after the education budget is passed, there will be no money in the CBR. There will be one, maybe two, lawsuits this year. CHAIR JAMES stated $600 million of the money used from the CBR was directly from the reduction in the price of oil to less than $10 a barrel. She did not want to take the blame for that, and it could happen again before July 1. Number 173 REPRESENTATIVE MARTIN pointed out this could be a good education process for the public. Alaska is the richest state in the Union, with almost $20 billion in different accounts, and yet we are so poor we cannot pay our monthly bills. Number 187 REPRESENTATIVE GREEN moved to move HJR 40 out of committee with attached fiscal note and individual recommendations. There were no objections. REPRESENTATIVE MARTIN noted representatives from Legal and from Management and Budget would attend the next hearing on this Resolution in Judiciary.
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