Legislature(2003 - 2004)
04/19/2004 09:05 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 226
"An Act relating to receipts of certain state agencies and the
accounting for and disposition of those receipts; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that this legislation would amend the manner
in which the State budget categorizes certain revenue by re-
designating 65 special purpose account revenues as general funds.
He noted that the Senate Rules Committee by Request of the Governor
sponsors this legislation.
CHERYL FRASCA, Director, Office of Management and Budget, Office of
the Governor, explained that State funds are categorized as General
Funds, Federal Funds, or Other Funds. She shared that the goal of
this legislation would be to re-categorize funds in order to curb
the "erosion" of the General Funds column that is occurring as the
result of more fund sources having been designated as Other Funds.
Ms. Frasca referred the Committee to the spreadsheet titled "State
of Alaska FY 2005 Governor Amended Fiscal Summary," [copy on file]
which she identified as being an extraction from the Office of
Management and Budget December 2004 Fiscal Summary. To further the
position that the Other Funds category, with an FY 04 level of $1.1
billion, has been eroding the General Funds column, she pointed out
that the Other Funds category has experienced a 55 percent increase
since its FY 96 level of $629 million. During that same timeframe,
she continued, the General Funds column has reduced from $2.5
billion to $2.3 billion, and as a result, she noted, "there is much
more continued pressure on the General Fund to fund what
traditionally are very basic traditional responsibilities of
government" such as public safety, the State troopers, the Court
System, Department of Corrections the Legislature, the Governor's
Office, and Department of Transportation and Public Facilities
highway maintenance. In addition, she communicated that the ability
of the State to support its traditional responsibilities has also
been negatively affected, over time, by the decrease in oil
revenues.
Ms. Frasca pointed out that the State's Constitution prohibits
dedicated funds, with the exception of dedicated funds that were
grandfathered at Statehood and the Permanent Fund Program, which
was approved via a statewide ballot measure. She read an excerpt
from the 1955 Constitutional Convention's Finance and Taxation
Committee document titled "Commentary on the Article on Finance and
Taxation" [copy on file] which warns against dedicating funds as
follows: "Even those persons or interests who seek the dedication
of revenues for their own projects will admit that the earmarking
of taxes or fees for other interests is a fiscal evil. But if
allocation is permitted for one interest the denial of it to
another is difficult, and the more special funds are set up the
more difficult it becomes to deny other requests until the point is
reached where neither the governor nor the legislature has any real
control over the finances of the state."
Ms. Frasca opined that "in practice," less scrutiny is provided to
items funded via Other Funds, and, as a result, she continued,
"there is tremendous pressure and demand on the General Funds side
of the column." Therefore, she continued, the goal of this
legislation would be to "re-cast the way we categorize funds so
that the General Funds column has more dollars," that the State
could allocate based "on the highest and best use." She shared that
in the FY 05 Operating Budget there are 117 designated fund sources
of which four are classified as General Funds, eight relate to
Federal Funds, and 105 are designated as Other Funds. This
legislation, she shared, would shift $160 million currently
categorized as Other Funds into the General Fund column.
Ms. Frasca noted that a letter she sent to Senator Wilken on March
11, 2004 [copy on file] contains a spreadsheet detailing the $160
million of Other Funds that would be transferred to the General
Fund.
Ms. Frasca suggested that this legislation be further considered
during the upcoming Legislative interim.
Senator Bunde categorized it as "ironic" of the Administration is
desiring to shift special funds back into the General Fund, as he
pointed out that separate legislation is being proposed that would
dedicate Permanent Fund earnings for education.
Ms. Frasca responded that that issue would require a Constitutional
Amendment to be approved by a vote of the people.
Senator Bunde expressed that "the underlying argument is still the
same, we ought not to tie our hands."
Ms. Frasca acknowledged Senator Bunde's comment as being "a good
point."
Co-Chair Wilken commented that the accounting mechanism being
presented in this legislation creates "tension …between a dedicated
fund and the concept that the cost causer is the cost payer." He
voiced comfort with the current system as he pointed out that the
Legislature has the ability to access excess money in dedicated
funds or to reappropriate funds elsewhere were it considered that
the funds were being used "unwisely." He opined that the
Legislature has been "driven" in recent years to "square up the
need with the revenue stream."
Co-Chair Wilken voiced appreciation for the efforts exerted on this
legislation, and agreed that work on it could continue during the
interim.
The bill was HELD in Committee.
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