Legislature(1995 - 1996)

01/22/1996 01:30 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ 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.  Senators Taylor, Green, Adams, and Ellis were             
 present.  The first order of business was SJR 30.                             
 SENATOR RIEGER, prime sponsor of SJR 30, gave the following                   
 overview of the measure.  The purpose of the constitutional                   
 amendment which created the budget reserve fund was to help                   
 stabilize state revenue and was passed at a time when the                     
 Legislature was anticipating major legal settlements, commonly                
 referred to as potential windfalls.  The fund was created in                  
 response to concern that if all of the money was available at once            
 for spending, the temptation and pressure for expending it would be           
 irresistible.  The budget reserve fund was designed to hold all of            
 the one-time settlements and to be used when there were shortfalls,           
 in order to stabilize state spending.  It was not designed as a               
 spending limit, but was crafted so that the money would be                    
 initially separated from the general fund but could be spent with             
 a simple majority vote as long as it did not serve to increase                
 spending over prior years.  To use that money, in any form, as part           
 of a plan which increased spending over the prior years, would take           
 an extraordinary majority, or 3/4, vote.  The amendment was                   
 misdrafted in that excessive attention was concentrated on                    
 reference to funds available for appropriation as the standard by             
 which to meet one or more tests, rather than the use of a standard            
 testing the actual level of spending.  The references to "funds               
 available for appropriation" were eventually litigated with the               
 outcome being that no spending plan can be passed by a simple                 
 majority, if there are any funds available from previous years.               
 Those funds are placed on the table first and used in that year's             
 calculations of spending, and are subject to the "sweep."                     
 SENATOR RIEGER explained the "sweep" process.  Once draws have been           
 made from the constitutional budget reserve, at the end of the                
 year, either funds must be made available for an appropriation to             
 repay the budget reserve fund, or a 3/4 vote to avoid doing so must           
 occur.   The litigation centered around which funds were available            
 for appropriation.  The general fund was available for                        
 appropriation, but funds such as the Alaska Marine Highway Fund, in           
 which the money is collected in one year but is not spent until the           
 following year for operations, were in question.  Other funds with            
 similar structures are the Alaska Debt Retirement Fund, the Four              
 Dam Pool Transfer Fund, some of the Mental Health Trust monies, the           
 Railbelt Energy Fund, and others.  The Divisions of Legislative               
 Finance and Legislative Audit have compiled a list of such funds,             
 which essentially must be depleted unless the 3/4 vote occurs to              
 prevent them from being depleted.                                             
 Number 089                                                                    
 SENATOR TAYLOR asked if the Science and Technology Foundation is on           
 the list.  SENATOR RIEGER replied the Science and Technology                  
 Endowment Fund was determined to be in question by legislative                
 auditors.  Because its determination was in question, it was not              
 used to determine the calculations of what was swept and then                 
 unswept.  The Power Cost Equalization Fund was treated in the same            
 way.  He added in practice it has made no difference, since there             
 has always been a 3/4 vote and it has never been tested.                      
 Number 100                                                                    
 SENATOR RIEGER explained the purpose of SJR 30 is to refocus the              
 wording of the amendment on spending from year to year, rather than           
 on funds available from year to year.  Second, SJR 30 removes the             
 sweep provision.  When it was created, there was no practical way             
 of foreseeing that there would ever be a way to avoid the need for            
 a 3/4 vote to prevent a sweep from fiscal year 1996 forward,                  
 because there have already been several hundred million dollars               
 drawn from the budget reserve fund that have not been repaid.                 
 Number 127                                                                    
 SENATOR ADAMS asked if, with passage of SJR 30, one had an equal              
 amount of unrestricted general funds and the constitutional budget            
 reserve funds, an equal amount on an annual basis, then a simple              
 majority vote would be required, rather than the 3/4 vote.  SENATOR           
 RIEGER believed Senator Adams' interpretation to be correct.                  
 SENATOR ADAMS commented that the minority would then not play a               
 part in the priorities needed in the state.  He added if SJR 30               
 were enacted, the 12 Republicans could focus on their priorities,             
 while the 8 Democrats would have no say.  SENATOR RIEGER replied              
 that prior to the passage of the constitutional budget reserve, it            
 was always technically possible for any majority to pass a budget             
 with no consideration given to the concerns of the minority, but in           
 practice it is more complex than that.  SENATOR ADAMS disagreed and           
 expressed concern that SJR 30 would eliminate minority party                  
 participation in budget priorities in both houses.                            
 Number 152                                                                    
 SENATOR ADAMS noted Section 2 repeals the payback provision.  He              
 asked how much money is owed to the constitutional budget reserve             
 at present.  SENATOR RIEGER did not have the dollar amount                    
 available.  He explained that the section being repealed requires             
 that if appropriations are made from the budget reserve fund, the             
 amount available for appropriation shall be deposited in the budget           
 reserve fund until it is repaid in its entirety.  This requires the           
 "sweep" every June 30, which effects the general fund and other               
 funds not originally determined to be in the general fund.                    
 Number 179                                                                    
 BRAD PIERCE, senior policy analyst with the Office of Management              
 and Budget, stated the Administration generally supports SJR 30.              
 Regardless of the short term political considerations, it follows             
 the intent of the original constitutional amendment.  The                     
 Administration also supports repeal of the "sweep" provision.                 
 SENATOR ADAMS asked Mr. Pierce what the amount of money borrowed              
 from the constitutional budget reserve is.  MR. PIERCE offered to             
 provide that information at a later time.                                     
 Number 200                                                                    
 NEIL SLOTNICK, assistant attorney general, offered to answer                  
 questions, as he participated in much of the litigation involving             
 the constitutional budget reserve, and in the attempts of the                 
 Legislature to enact definitions implementing the original                    
 amendment.  He pointed out that SJR 30 deletes the term "in the               
 previous calendar year" which would effectively allow the                     
 Legislature to change the amount in the calculus by passing                   
 supplemental appropriations.  This language was originally included           
 to prevent the Legislature from manipulating the previous year's              
 budget by raising that amount with supplementals.  Additionally, he           
 explained that by focusing on unrestricted revenue, and defining              
 unrestricted revenue to mean all monies received by the state                 
 during a fiscal year, any possible general fund carry forward is              
 ignored in the calculus as to whether a 3/4 vote would be                     
 Number 231                                                                    
 SENATOR TAYLOR asked for further explanation of whether those funds           
 would still be unrestricted merely because the year had passed.  He           
 noted frequently revenue is not even calculated within the year in            
 which it was due.  That calculation often runs 3 to 4 months into             
 the next fiscal year before the amount of the carry forward, as of            
 July 1, is known.  MR. SLOTNICK replied that he was focussing on              
 unrestricted revenue, meaning all money received by the state                 
 during a fiscal year.  SENATOR TAYLOR stated it was received during           
 the year even though the amount was undetermined.  MR. SLOTNICK               
 responded if it was a budget surplus left over from the previous              
 year, it would not be considered received during that year.                   
 Number 250                                                                    
 MR. SLOTNICK commented the Department of Law would appreciate a               
 thorough legislative history of this issue since there was not a              
 great deal of legislative history available when this issue was               
 SENATOR ADAMS asked if Mr. Slotnick was saying that from the total            
 of the unrestricted general fund and the constitutional budget                
 reserve, the carry forward money would be subtracted.  MR. SLOTNICK           
 stated the carry forward might not be unrestricted.  He clarified             
 his interpretation of the language in SJR 30 to mean that the                 
 unrestricted carry forward would not be subtracted.  That money               
 would not be part of the calculus.  One would be comparing what was           
 available unrestricted revenue in one year against what was                   
 appropriated out of unrestricted revenue and the constitutional               
 budget reserve for the previous year.  If there was a decrease in             
 revenue, you could then appropriate out of the constitutional                 
 budget reserve by a simple majority without looking at any surplus            
 that might have carried forward from the previous year.                       
 Number 264                                                                    
 SENATOR RIEGER stated that Mr. Slotnick's testimony describes the             
 original cause of the problem.  Mr. Slotnick is speaking about an             
 undesignated carry forward sitting in the general fund.  In trying            
 to access those funds, the Legislature inadvertently caught carry             
 forwards which were designated, but in a literal reading, were not            
 designated enough to make them unavailable, such as the Marine                
 Highway Fund.  To categorize each fund would be too complex.                  
 Number 279                                                                    
 SENATOR TAYLOR discussed the need to review SJR 30 further and                
 announced the measure will be scheduled again next week.  There               
 being no further business before the committee, the meeting was               
 adjourned at 1:50 p.m.                                                        

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