Legislature(1993 - 1994)
04/13/1994 08:45 AM MIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 505 APPROP: BRF TO GEN.FUND; EDUCATION AID Co-chair Pearce directed that CSHB 505 (Fin)(brf fld)(efd fld) be brought on for discussion and noted that appropriation from the constitutional budget reserve fund for education failed as well as the effective date. Legislation passed by the House thus contains only an appropriation to the constitutional budget reserve. Co- chair Pearce next directed attention to a draft SCS CSHB 505 (Fin) (8-GH2045\M, 4/13/94, Cook/Utermohle). She noted the title change and advised that an accompanying title change Resolution was prepared for introduction on the floor of the Senate. Co-chairman Frank MOVED for adoption of the "M" version work draft. No objection having been raised, SCS CSHB 505 (Fin) was ADOPTED. Co-chair Frank directed attention to the sectional analysis prepared by Legal Services and explained that the Senate Finance version of the bill: Sec. 1 - Incorporates the Governor's findings and intent language. Sec. 2 - Includes a $932,762,996 appropriation from the general fund to the constitutional budget reserve fund per the judgment in Hickel v. Halford. That total is reduced from $945 million. Sec. 3 - Includes a $73,245,478 appropriation from the general fund to the constitutional budget reserve fund per the order in Cowper v. Hickel. Sec. 4 - Appropriates from the general fund to the constitutional budget reserve fund the interest that would have been earned on totals set forth in Secs. 2 and 3. End: SFC-94, #60,Side 1 Begin: SFC-94, #60, Side 2 Sec. 5 - Appropriates $696,527,188 from the general fund for full funding of education, all normal items of K- 12support including pupil transportation and supplemental funding for single site schools. Sec. 6 - Appropriates $103,345,264 from the general fund to the Alaska debt retirement fund for full funding of debt service. Sec. 7 - Incorporates the original approach of the Governor's bill which split the $945 million appropriation. Sec. 7 splits the $932 million appropriation into a $416,600,000 appropriation from the constitutional budget reserve fund (the amount intended to be spent by the legislature last session) and a $516,162,996 appropriation from the fund to cover a shortfall in the general fund caused by the drop in oil prices. Sec. 8 - Appropriates from the constitutional budget reserve fund the interest appropriated in Sec. 4. Sec. 9 - Makes a contingent appropriation from the budget reserve fund to the general fund, if necessary, to balance the FY 94 budget and make it whole. That amount is estimated at $323 million at the present time. Sec. 10 - States that appropriations from the constitutional budget reserve are made under Sec. 17(c) of the constitution and require a three-quarter vote. Sec. 11 - Makes appropriations in Secs. 2 through 4 retroactive to July 1, 1993, the beginning of the fiscal year. Sec. 12 - Makes appropriations in Secs. 2 through 6 contingent upon appropriations from the budget reserve fund (Secs. 7 through 9). That ensures that certain sections cannot be dropped or vetoed out of the bill. Sec. 13 - Contains an immediate effective date. Senator Kerttula asked if the proposed bill would meet the constitutional test. JIM BALDWIN, Assistant Attorney General, Dept. of Law, said that the legislation follows the approach suggested in the Governor's bill: that the appropriations be made in accordance with a three-quarter vote of both houses of the legislature. That avoids the uncertainties of litigation. Mr. Baldwin stressed that his comments do not indicate discontinuance of support for the validity of HB 58 (ADMINISTRATION OF BUDGET RESERVE FUND) which, if applied, would make a certain balance of the budget reserve fund expendable without the necessity of a three-quarters vote. If the legislature passes the proposed bill on a three-quarters vote, the current basis for challenge would be avoided. Senator Kerttula asked if the bill is in good form and meets concerns raised by the Office of the Attorney General and others. Mr. Baldwin responded affirmatively, advising that he reviewed the bill at the request of Senator Frank and found it to be in correct technical form. It does not present any new issues. Senator Rieger referenced the revised, higher dollar amount set forth in an April 13, 1994, memo and voiced his understanding that transfer in and out of a greater amount would not change the overall spending plan. Mr. Stastny concurred. Senator Rieger next raised questions resulting from language relating to repayment of the constitutional budget reserve. Mr. Stastny concurred that the additional $76 million flowing from the general fund to the constitutional budget reserve and back out would increase the amount that would have to be repaid. Senator Rieger next inquired concerning the detailed judicial ruling, asking if it contained anything unexpected. Mr. Baldwin responded affirmatively. He then explained that while the issue of repayment was not argued before Judge Reese, the court mentioned that provision of the bill. The Dept. of Law felt it was noncontroversial in that it merely restated constitutional provisions. Under those provisions the surplus carried forward at the end of the fiscal year is the source of money to be used for the repayment obligation. The judge provided a more expansive interpretation by saying that any surplus in the general fund would be the source for repayment. Senator Rieger asked if the permanent fund earnings reserve would be part of the surplus. Mr. Baldwin said that the judge interprets the earnings reserve as being on the front end--as being available in general--even though it is not in the general fund. Mr. Baldwin further advised that his reading of the ruling indicates that any separate account or any separate funds established by law within the general fund would have to be counted toward the surplus. That differs from what the Dept. of Administration, division of finance, shows as the surplus carryforward on the annual report. In subsequent discussion, Mr. Baldwin said that the judge did not specifically mention AHFC or AIDEA. Specific reference is made to the railbelt intertie fund and the earnings reserve account. General reference is then made to other accounts that the legislature could expend upon a majority vote "and the only impediment to the expenditure of the funds being a lack of political will to do so." Mr. Baldwin voiced his belief that in making his decision, Judge Reese "moved towards are position--towards the HB 58 position." Plaintiffs argued that all funds accessible to the legislature should be counted as available. That would be very broad. The legislature appropriates from many funding sources. The judge did not count revolving loan funds, trust or custodial receipts, federal funds, and a list of other funds proffered by the plaintiff. The dispute has now narrowed to "some of the reserve funds that are established by law and the earnings reserve account." Senator Rieger voiced need to craft additional "pieces of the package" to provide fiscal stability for the state. Senator Kelly directed attention to Page 6, Sec. 6, and noted the $103 million appropriation from the general fund to the Alaska debt retirement fund. He then noted an upcoming election in Anchorage and raised questions concerning whether the foregoing appropriation would fund the state obligation to municipalities for 70% school debt reimbursement. Will all municipal debt incurred under the new program would be funded? Co-chair Frank voiced his understanding that it would. Mr. Stastny said that the bill would provide full funding of "everything that we're obligated to at this point." Co-chair Frank MOVED for passage of SCS CSHB 505 (Fin) and requested unanimous consent. No objection having been raised, SCS CSHB 505 (Fin) was REPORTED OUT of committee. All members signed the committee report with a "do pass" recommendation with the exception of Senator Rieger who signed "Do not pass except as part of a more comprehensive package." Co-chair Pearce advised that the necessary resolution relating to the title change would accompany the bill. ADJOURNMENT The meeting was adjourned at approximately 11:25 a.m.