Legislature(1995 - 1996)
01/31/1996 01:30 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SJR 30 USE OF BUDGET RESERVE FUND CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:30 p.m. The first item of business was SJR 30. SENATOR RIEGER, sponsor of SJR 30, responded to a previous question raised by Senator Adams regarding the amount of money drawn from the Constitutional Budget Reserve (CBR). He explained there was a quantity of money drawn from the reserve, and a quantity not deposited initially, which the court subsequently ruled should have been deposited. The amount of that deposit for fiscal years 1991- 1994 is $1,055,000,000. The number of draws are itemized as follow: $390 million to cover the shortfall between revenues and appropriations for fiscal years 1994 and 1995; $130 million for reconstitution of the Mental Health Trust; $141 million to meet the effect of Art. IX, Sec. 17(d) of the Alaska Constitution; $68 million for the state's share of oil and gas litigation from July, 1990 through February, 1994; $11 million for the legal costs of oil and gas litigation in fiscal year 1995. The total amount is $1,702,978,690. Number 051 SENATOR TAYLOR asked what the current balance of the CBR is. BRAD PIERCE, policy analyst with the Office of Management and Budget, stated the anticipated balance of the CBR, at the end of FY 96, is $2.08 billion. MR. PIERCE reiterated the Administration's support of SJR 30, particularly the elimination of the sweep provision, which was never intended to include accounts that were set aside by the Legislature for specific purposes. The Administration also supports repeal of the payback provision as it is a debt we owe ourselves, and is something that must be explained to bond rating agencies. It has become more of an administrative nuisance than anything else. He requested the Legislature leave a clear trail of the intent of SJR 30: the concern being that no one inadvertently confuse the issue by replacing the term "available for appropriation," which has been clearly defined by the court, with the term "unrestricted revenue," and resulting in another court challenge. MR. PIERCE added the Governor would like clarification, in the resolution, of when a supermajority vote would be required to draw from the CBR, primarily in the context of how it would fit into an overall fiscal plan. He stated the Long Range Financial Planning Commission discussed requiring a supermajority vote to enable any use of reserves independent of any other condition. He noted the upcoming Joint State Affairs meeting during which the Long Range Financial Planning Commission's resolution (identical to SJR 30) will be reviewed. Number 133 SENATOR TAYLOR asked what part of SJR 30, concerning the supermajority vote provision, the Governor wants clarification of. MR. PIERCE repeated the Governor would like to see it discussed in the context of an overall fiscal plan. SENATOR TAYLOR asked Senator Rieger if the intent of the supermajority vote requirement in SJR 30 would be to require it only when utilizing CBR funds to increase the budget. SENATOR RIEGER said that was correct. He explained the context of the original amendment, and the intent of SJR 30, was/is to provide a mechanism to stop the temptation to increase spending when the settlements, or the results of a determination of an administrative proceeding, cause an unusual, one-time, influx of cash into the general fund. In some respects, that money is like other revenue, because it probably resulted from a tax case. Had it not been a tax case, the money would have been received in small amounts annually; instead it accumulated and was received in a lump sum. To help restore it to how it should have come in, the money can be used in a normal operating purpose, just as any other general fund revenue is, but not to increase spending. This money can be used to stabilize a spending plan, but not to increase spending without a supermajority vote. Number 169 SENATOR ADAMS asked if the Senate Finance Committee has developed a financial plan for other Senators to review, and if so, how much money will come from the CBR. SENATOR RIEGER replied he has not drafted a financial plan. SENATOR ADAMS expressed concern about getting the necessary 14 votes to pass SJR 30. SENATOR TAYLOR asked Mr. Pierce if his request for clarification was addressed sufficiently. MR. PIERCE explained that if the Rose plan was adopted, which uses the CBR as the "fly-wheel" of a fiscal plan for the future, the Legislature might want a different requirement to access the CBR. He believed the Governor was requesting more discussion in the overall context of fiscal planning. SENATOR TAYLOR indicated he was unaware of the subtle distinctions between the Rose plan and the Long Range Financial Planning Commission's plan. MR. PIERCE indicated the Rose plan would take the unrealized gains from the Permanent Fund (a little over $2 billion), deposit those gains into the CBR, and use both the interest from the earnings of the CBR, and the excess earnings off the Permanent Fund not used for inflation-proofing or dividends, for general fund spending to supplement oil revenues. That concept might require different access to the CBR than what is proposed in SJR 30. Number 200 SENATOR ADAMS asked if the original purpose of the permanent fund was to use the interest earned from the corpus to fund state government, and whether the Rose plan would set up a similar fund. MR. PIERCE replied that essentially a second permanent fund would be created. SENATOR TAYLOR inquired whether a supermajority would be required, under the Rose plan, to access those funds even though less money might be spent on the overall budget than the previous year. MR. PIERCE stated Mr. Rose suggested a constitutional amendment would be necessary to address the CBR but was not specific about how it would work. SENATOR TAYLOR asked where the current interest income from the CBR is being placed, and who is responsible for the investment and workings of the CBR. MR. PIERCE reported the interest is reinvested into the CBR which is invested by the Department of Revenue. OMB has projected a 6 1/4 percent rate of return on those funds, which is about 1 percent lower than the Permanent Fund. SENATOR TAYLOR questioned the lower rate of return. MR. PIERCE stated the CBR is invested in shorter term instruments, and there are more liquid assets. Number 236 SENATOR TAYLOR asked why interest income from the CBR is not used as ordinary income to the general fund. SENATOR RIEGER read Section A of the original constitutional amendment, " Money in the budget reserve fund shall be invested so as to yield competitive market rates to the fund. Income of the fund shall be retained in the fund." SENATOR TAYLOR questioned whether the interest income would remain in the CBR under SJR 30. SENATOR RIEGER replied it would, however he would welcome discussion on that policy. Number 261 SENATOR MILLER moved SJR 30 out of committee with individual recommendations. There being no objection, the motion carried.
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