Legislature(1993 - 1994)
02/01/1993 01:00 PM House JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE
February 1, 1993
1:00 p.m.
MEMBERS PRESENT
Rep. Brian Porter, Chairman
Rep. Jeannette James, Vice Chair
Rep. Gail Phillips
Rep. Pete Kott, arrived later
Rep. Joe Green
Rep. Jim Nordlund, arrived later
Rep. Cliff Davidson
MEMBERS ABSENT
None
COMMITTEE CALENDAR
*HB 90: "An Act making corrective amendments to the Alaska
Statutes as recommended by the revisor of
statutes; and providing for an effective date."
MOVED OUT OF COMMITTEE
*HB 58: "An Act relating to the budget reserve fund
established under art. IX, sec. 17, Constitution
of the State of Alaska."
HEARD AND HELD OVER
(*First public hearing.)
WITNESS REGISTER
DAVID R. DIERDORFF
Revisor of Statutes
Legal Services Division
Legislative Affairs Agency
Goldstein Building, Room 405
Juneau, Alaska 99801
Phone: 465-2450
Position Statement: Described HB 90 and answered committee
questions
REP. RON LARSON
Alaska State Legislature
Capitol Building, Room 502
Juneau, Alaska 99801-1182
Phone: 465-3878
Position Statement: Discussed HB 58
REP. KAY BROWN
Alaska State Legislature
Capitol Building, Room 517
Juneau, Alaska 99801-1182
Phone: 465-4998
Position Statement: Discussed HB 58
COMMISSIONER DARREL REXWINKEL
Department of Revenue
P. O. Box 110400
Juneau, Alaska 99811-0400
Phone: 465-2300
Position Statement: Explained HB 58
JIM BALDWIN
Assistant Attorney General
Department of Law
P. O. Box 110300
Juneau, Alaska 99811-0300
Phone: 465-3600
Position Statement: Explained HB 58
PREVIOUS ACTION
BILL: HB 90
SHORT TITLE: 1993 REVISOR'S BILL
BILL VERSION:
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE COUNCIL
TITLE: "An Act making corrective amendments to the Alaska
Statutes as recommended by the revisor of statutes; and
providing for an effective date."
JRN-DATE JRN-PG ACTION
01/25/93 153 (H) READ THE FIRST TIME/REFERRAL(S)
01/25/93 153 (H) JUDICIARY, FINANCE
02/01/93 (H) JUD AT 01:00 PM CAPITOL 120
BILL: HB 58
SHORT TITLE: ADMINISTRATION OF BUDGET RESERVE FUND
BILL VERSION:
SPONSOR(S): FINANCE
TITLE: "An Act relating to the budget reserve fund
established under art. IX, sec. 17, Constitution of the
State of Alaska."
JRN-DATE JRN-PG ACTION
01/15/93 71 (H) READ THE FIRST TIME/REFERRAL(S)
01/15/93 71 (H) JUDICIARY, FINANCE
02/01/93 (H) JUD AT 01:00 PM CAPITOL 120
ACTION NARRATIVE
TAPE 93-4, SIDE A
Number 000
CHAIRMAN PORTER called the House Judiciary Committee meeting
to order at 1:09 p.m. on February 1, 1993. A quorum was
present. He noted that the first item on the agenda was the
three bills which the Alaska Court System had requested that
the committee introduce on its behalf. He said that it was
his intention to introduce the three bills and debate their
merits when they were officially referred to the Judiciary
Committee.
Number 032
REP. DAVIDSON mentioned that he had requested a report from
the Legislative Research Agency addressing how other states
handled the introduction of bills by the court system. He
added that it appeared that no other states allowed their
court systems to introduce bills directly. He said he had
received a preliminary report from Legislative Research, but
was awaiting a more comprehensive study. He added that
while he was not against the proposition at the time, he was
also not fully in support.
Number 058
CHAIRMAN PORTER acknowledged the arrival of Rep. Jim
Nordlund, Rep. Pete Kott, and Rep. Kay Brown. He told Rep.
Davidson that he would proceed to introduce the three court
system bills as committee bills, with the understanding that
no action would be taken on the one bill until Rep. Davidson
had received a comprehensive report from the Legislative
Research Agency.
HB 90: 1993 REVISOR'S BILL
Number 081
CHAIRMAN PORTER turned the committee's attention to HB 90,
an act making corrective amendments to the Alaska Statutes.
He called David Dierdorff to the witness table.
Number 091
DAVID DIERDORFF, REVISOR OF STATUTES, LEGAL SERVICES
DIVISION, LEGISLATIVE AFFAIRS AGENCY, noted that HB 90 was
one of an annual string of revisor's bills. He noted that
this particular bill was the shortest and least
controversial revisor's bill ever. He said that the purpose
of these bills was to keep the statutes as clean as possible
by annually amending errors found in them. He explained
that his office had the authority to correct the smallest
errors without the approval of the legislature. However,
more substantial amendments must have legislative approval.
He mentioned two land survey changes that were included in
HB 90, one relating to Kachemak Bay and the other to
Alexander Creek.
MR. DIERDORFF noted that HB 89 was also a revisor's bill,
but a different type than HB 90, in that it made more
substantive changes than those made in HB 90. He said that
HB 89 was now in the House Community and Regional Affairs
Committee, but would later be referred to the Judiciary
Committee.
MR. DIERDORFF stated that he had asked one of the
departments to try to solve a problem with Title 47, but
that amendment was not yet ready to be included in HB 90.
However, he hoped that the change could be included before
the bill was passed by the legislature. He noted that the
Department of Law reviewed all revisor's bills before they
were introduced and had no problem with the content of
HB 90.
Number 191
REP. DAVIDSON said that Mr. Dierdorff's work made him think
of the importance of committee minutes. He asked if Mr.
Dierdorff used committee minutes as a source for his
revisor's bills, and in that light, whether he felt that the
minutes ought to be detailed or not.
Number 200
MR. DIERDORFF said that committee minutes were helpful in
ascertaining legislative intent, but he said that he had
rarely had to go that far back in the record to find out
what he needed to know. He noted that committee minutes
were helpful to people involved in litigation and needed to
research the finer points of the law. The revisor's bill,
he added, dealt with grosser points and more obvious errors.
The only time he dealt with intent was when he was faced
with conflicting statutes. Then he researched the intent of
the most recent enactment to see if a statute was
inadvertently not repealed or amended.
Number 230
REP. DAVIDSON asked Mr. Dierdorff if he relied on committee
reports, which themselves relied on committee minutes.
Number 235
MR. DIERDORFF indicated that Rep. Davidson's comment was
correct. He noted that his initial source was the Legal
Services Division's own internal working files to see how a
bill grew. Those files, he said, were invaluable in the
creation of HB 89.
Number 249
REP. NORDLUND asked Mr. Dierdorff if sections 8 and 9 of
HB 90 related to changes in federal law, or if they were
merely corrections of improper citations.
Number 258
MR. DIERDORFF indicated that federal law had changed, not
substantively, but just in terms of where it could be
located in the federal statutes.
Number 268
REP. NORDLUND reiterated Mr. Dierdorff's point that no
content change had been made.
Number 271
REP. PHILLIPS referred to changes in legal descriptions made
in sections 6 and 7 of HB 90. She asked, if they were found
later to have substantially affected someone (for example, a
property owner), would Mr. Dierdorff inform the legislature
or not?
Number 282
MR. DIERDORFF said that the state owned all of the property
referenced in sections 6 and 7 of HB 90.
Number 289
REP. PHILLIPS asked what he would do if the change were to
affect private property.
Number 295
MR. DIERDORFF responded that in that case, he doubted that a
department would come to him and request the change. He
commented that in this case, the change was merely the
correction of an error in the legal description of the land.
Number 300
REP. GREEN asked Mr. Dierdorff about citation changes made
in section 3 of HB 90.
Number 316
MR. DIERDORFF said that this was called a "spanned
reference," as it spanned from one part of the law to
another. He noted that section 3 made a very minor
housekeeping change. Normally, he added, these types of
changes were made by the Legal Services Division and never
brought before the legislature. However, because the law in
question pertained to penalties, it became part of the
revisor's bill.
Number 369
REP. GREEN asked if the land referenced in section 14 had
undergone any title change which might present a problem.
Number 376
MR. DIERDORFF said that to his knowledge no such problem
existed. He described a letter from the land classification
officer who had requested the change. The legal description
in the statutes was incorrect, he said. The land in
question was state-owned land. Section 14 should not affect
anyone, the state or private landowners.
MR. DIERDORFF added that it was likely that the survey had
not been completed and verified at the time the law was
enacted. He noted that the type of correction found in
Section 14 was made in almost every annual revisor's bill
and was necessitated by constant updating of land surveys.
Number 405
REP. GREEN asked if the intent of new language in section 12
was to exclude certain relationships between a legislator
and a private individual, including one of landlords and
tenants.
Number 423
MR. DIERDORFF said that a landlord/tenant relationship would
have to be reported by both a legislator and a public member
of the Legislative Ethics Committee. He commented that the
change in section 12 only pertained to the relationship
between a public member of the Ethics Committee and a
supervisor who was not a legislator. He noted that the
section of law was most relevant to the legislator/
legislative employee relationship, or a relationship between
a lobbyist and either a legislator or a legislative
employee.
MR. DIERDORFF added that if a legislative staff member were
involved in a business deal with a legislator, people should
know about it. However, the relationship between a public
member of the Ethics Committee and her or his supervisor in
the private sector need not be disclosed. But if a
legislator had supervisory control over a public member of
the Ethics Committee, that must be reported, he said. In
summary, Mr. Dierdorff indicated that the only exclusion
made in section 12 was that the five public members of the
Ethics Committee did not have to report relationships that
they might have with their supervisors.
CHAIRMAN PORTER noted the exception of a public member of
the Ethics Committee who was supervised by a legislator.
Number 454
MR. DIERDORFF said that Chairman Porter was correct, but
such a person would likely not be appointed to the Ethics
Committee in the first place.
Number 460
MR. DIERDORFF asked if the committee had received a fiscal
note for HB 90.
CHAIRMAN PORTER said that the committee had received the
fiscal note.
MR. DIERDORFF indicated that he thought the speaker's office
would likely waive HB 90 from its Finance Committee referral
and send the bill straight from the Judiciary Committee to
the Rules Committee.
Number 467
CHAIRMAN PORTER asked how the committee wished to proceed.
Number 468
REP. NORDLUND moved to pass HB 90 out of committee with
individual recommendations.
Number 469
CHAIRMAN PORTER, hearing no objections, approved the motion
to move the bill out of committee with individual
recommendations.
HB 58: ADMINISTRATION OF BUDGET RESERVE FUND
Number 476
CHAIRMAN PORTER stated that the next agenda item was HB 58,
and that four people had signed up to testify on that bill
thus far. He called Rep. Ron Larson to address the
committee first.
Number 480
REP. RON LARSON said that there was a need for a
clarification regarding the constitutional budget reserve
fund. When a bill became law, it was open for
interpretation, he noted, and that interpretation did not
always correspond with legislative intent. He stated that
HB 58 sought to clarify the legislative intent behind a
recent constitutional amendment adopted by the voters.
REP. LARSON commented that approximately one year ago, when
money was put into the constitutional budget reserve fund
and later removed, the matter came up before the Legislative
Budget and Audit Committee, which Rep. Larson chaired at
that time. A subcommittee chaired by Rep. Kay Brown was
formed to address the matter of what monies should properly
be deposited into the fund. The subcommittee was asked to
create a proposed bill clarifying several points, including
the status of revenues collected as a result of informal
conferences, and how money should be repaid to the
constitutional budget reserve fund and what monies could be
used for that repayment.
REP. LARSON noted that HB 58 dealt with some complicated
procedures. He asked to bring Rep. Kay Brown to the table
to outline provisions of the bill. He stated that the House
Finance Committee had introduced HB 58 as a result of
concerns raised by the Legislative Budget and Audit
Committee.
Number 543
CHAIRMAN PORTER thanked Rep. Larson for his comments and
then called Rep. Kay Brown to the witness table.
Number 546
REP. KAY BROWN said that she was a former member of the
Legislative Budget and Audit Committee, and a current member
of the House Finance Committee. She stated that she saw two
major policy issues addressed in HB 58.
REP. BROWN said the first major policy issue centered around
what money should go into the constitutional budget reserve
fund. Specifically, what was meant by the term
"administrative proceeding" in the constitutional amendment?
REP. BROWN said that the second large issue was, under what
conditions could money in the constitutional budget reserve
fund be spent? Specifically, what did the term "available
for appropriation" mean in the constitutional amendment?
REP. BROWN described to the committee members the history of
the constitutional amendment that created the budget reserve
fund. In the 1990 legislative session, the constitutional
amendment was proposed. The legislature's intent at the
time was to capture "windfall" revenues resulting from long
standing oil and gas royalty and tax litigation. The intent
was to keep those litigation dollars from coming into the
general fund in a "lumpy" way, causing wild variations in
state revenues. The concern was that depositing these large
lump sums into the general fund would undermine efforts to
control state spending.
Number 545
REP. BROWN stated that at that time, there was a fiscal
policy subcommittee, of which she was a member. The
subcommittee also included Rep. Swackhammer and (now) Sen.
Rieger. One of the subcommittee's recommendations was that
a mechanism was needed to capture the windfalls, but to
leave them in an accessible location so that they could be
used to fill out gaps during years of lower revenues.
REP. BROWN said that in addition to the disputes in
litigation, there were a lot of disputed back tax claims
being handled by the Department of Revenue. Gov. Cowper's
budget chief, Mary Halloran, coined the term "administrative
proceeding" to describe the procedures under which the
ongoing disputes were being handled. That language ended up
being enacted into law. At that time, she noted, back taxes
at the Department of Revenue exceeded $3 billion.
REP. BROWN said that in November 1990 the question of
establishing the constitutional budget reserve fund was
approved by the voters. In January 1992 a draft opinion by
the attorney general's office said that its interpretation
of "administrative proceeding" included only those tax cases
that were in the formal adjudication stage.
REP. BROWN explained that at the Department of Revenue, a
tax bill was sent to the taxpayer. If the taxpayer agreed
with the bill, it was paid and deposited into the general
fund. If the taxpayer did not agree with the bill, several
scenarios were possible. If the taxpayer did nothing, the
department could initiate litigation against the taxpayer.
Or, the taxpayer could ask for either an informal or a
formal conference. The attorney general's opinion said that
only the proceeds from the settlement of those cases that
were in the formal stage would be deposited into the
constitutional budget reserve fund. Money from the
settlement of other cases would go into the general fund.
REP. BROWN said that the legislative intent had been to
capture all of the back taxes pending at the Department of
Revenue. In April 1992 a more formal opinion was issued by
the Department of Law, reiterating that only settlement
monies from those cases in the formal adjudication stage
could go into the constitutional budget reserve fund. Money
was transferred out of the constitutional budget reserve
fund based on the Department of Law's opinion, she noted.
REP. BROWN said that during the first special session in
1992, the House unanimously passed a letter of intent saying
that all money should remain in the budget reserve fund
unless appropriated, and also stating that the House
intended to initiate court proceedings to contest the
attorney general's opinion.
REP. BROWN stated that shortly after the first special
session adjourned, she and Rep. Larson and others decided to
try to work with the administration to find a compromise,
instead of going to court. They got the administration to
agree that during the interim they would segregate any money
that came in and was in dispute between the legislature and
the administration as to whether it should go into the
general fund or the budget reserve fund.
REP. BROWN said that a special account for this money was
established within the general fund. The account now held
over $100 million, she added. The legislature had asked the
Department of Revenue for an accounting of all the back tax
money that had come in: the exact amount of money in the
special account; where it came from; and what other money
came in but was not put into the special account.
REP. BROWN said that during the 1992 interim, the
Legislative Budget and Audit subcommittee worked on the
language for HB 58. She acknowledged the work of John
Lindback from her staff, and Assistant Attorney General Jim
Baldwin in drafting the bill. She expressed an opinion that
if litigated, the legislature would win on the issue of the
definition of "administrative proceeding." But, she said,
she felt it was more constructive to try to find another
solution that would result in the legislature meeting its
original goal of placing all of the back taxes into the
budget reserve fund.
REP. BROWN explained that the bill proposed that if the
dispute had been in informal conference status for longer
than six months, then the money would go into the
constitutional budget reserve fund. Any settlement that
resulted from the informal conference procedure prior to
that time would go into the general fund. If a dispute was
the subject of a formal hearing, then the settlement money
would go into the constitutional budget reserve fund. If a
taxpayer simply did not pay taxes to the Department of
Revenue, money received from the resulting litigation would
go into the budget reserve fund.
Number 575
REP. BROWN said that HB 58 also addressed future taxes that
would be affected by the resolution of an administrative
proceeding, but had not yet been received. So, she said, if
a settlement laid out conditions that would affect future
monies coming in, the bill provided that those monies would
go into the general fund. This provision was proposed by
the administration, she noted.
REP. BROWN said that HB 58 also defined the phrase "money
available for appropriation." The phrase specifically did
not include the permanent fund, the earnings reserve
account, or money previously appropriated for an expenditure
or to a special fund or account established by law.
REP. BROWN called the members' attention to an amendment,
which said that if the amount available for appropriation
for a fiscal year was less than the amount appropriated
during the previous fiscal year, an appropriation could be
made from the budget reserve fund. The amendment said that
the permanent fund earnings reserve was not considered
"available for appropriation." Nor were any other special
accounts or funds, including the Railbelt Energy Fund,
AIDEA, AHFC, the Science and Technology fund, etc.
REP. BROWN indicated that she believed that HB 58 and the
amendment represented good policy for the state and would
serve the state's needs well over the years, as the state
gets into the situation of needing to access money in the
constitutional budget reserve fund. The amendment provided
a mechanism whereby money could be appropriated from the
constitutional budget reserve fund to get back to the
previous year's level of revenues, with a majority vote.
REP. BROWN noted that the amendment also provided that for
any public purpose, 3/4 of the legislature could vote to
take money from the reserve. This, she said, was viewed as
a "disaster clause" to be used if some overriding reason
existed that necessitated dipping into the budget reserve
fund.
REP. BROWN called the members' attention to a legal opinion
issued by Tam Cook of the Legal Services Division.
Returning to the text of HB 58, REP. BROWN said that the
bill addressed the repayment of money to the constitutional
budget reserve fund. A transfer of the amount of money
available on June 30 would occur by November 15.
REP. BROWN said that interest was covered by the language in
the amendment. She also mentioned that some people were
concerned that oil companies would have the ability to
choose an informal versus a formal adjudication process, and
effectively be able to decide into which fund the proceeds
of their settlement agreement would go. She pointed out
that that was the case now, whether or not HB 58 passed.
REP. BROWN stated that the six-month period was put into the
bill to allow for resolving accounting errors or other
legitimate differences of opinion that might come up
regarding a taxpayer's liability.
Number 756
REP. PHILLIPS asked Rep. Brown to repeat what she had said
about interest.
Number 758
REP. BROWN called Rep. Phillips' attention to Article IX,
Section 17 of the Alaska Constitution, and said that it was
her belief that the language in that section included
interest, although it was not specifically listed.
Number 767
REP. PHILLIPS said she agreed with Rep. Brown that interest
was included, although not specifically set forth.
Number 770
REP. BROWN stated that an attorney said it was not necessary
to specifically mention interest. She said that she thought
that the legislative intent was clear that it wanted the
interest to be covered.
Number 775
REP. PHILLIPS said that it would be prudent to make that
intention clear.
Number 777
CHAIRMAN PORTER commented that he agreed with Rep. Phillips
that the word "interest" should be added to the language of
HB 58.
Number 786
REP. PHILLIPS asked if "past due taxes and penalties" would
refer to the Alyeska settlement from the previous year
relating to the oil spill.
Number 790
REP. BROWN said that settlement was not covered, due to
language in the constitutional amendment itself.
TAPE 93-4, SIDE B
Number 000
REP. NORDLUND asked why the dividing line between settlement
money going into the general fund versus settlement money
going into the reserve fund was six months.
Number 014
REP. BROWN indicated that a line had to be drawn somewhere.
If no line was drawn, she said, then settlements stemming
from disputes over simple miscalculations of taxes by the
Department of Revenue could also find their way into the
budget reserve fund. The legislature wanted to acknowledge
that small errors that did not result in huge, protracted
disputes existed. The intent was not to capture so much of
the income stream that the state was deprived of its
ongoing, projected revenue stream in the state's normal
course of business. The intent was to capture settlement
monies from long standing tax disputes that amounted to more
than $3 billion. The intent was not to capture every tax
dollar that was 30 days past due, she added.
Number 054
REP. NORDLUND stated that the amount of money that could be
constitutionally dedicated to a fund was being proposed to
be changed statutorily. He asked how this could be
accomplished through a change in statute, rather than going
back into the constitution.
Number 068
REP. BROWN responded that the language in the constitution
said "administrative proceeding." Through statute, they
were attempting to define that term. She said that she
understood that it was proper for the legislature to enact
statutes that further defined and clarified the language in
a constitutional amendment. She added that many legislators
felt that the April 1992 attorney general's opinion
completely misconstrued the intent of the legislature.
Number 098
CHAIRMAN PORTER asked Rep. Brown if both the formal and
informal adjudication processes were covered under the
Administrative Procedures Act.
Number 107
REP. BROWN indicated that both were set out in the Alaska
Administrative Code, in regulations adopted by the
Department of Revenue. She said that Department of Revenue
officials could more specifically answer his question.
Number 112
CHAIRMAN PORTER said that if the informal and formal
adjudication processes were under the same procedure, the
argument to divide in the middle would be even more
spacious. He asked Rep. Brown if any thought had been given
to drawing the line at a dollar amount instead of after a
given amount of time.
Number 135
REP. BROWN stated that she did not recall whether or not
that had been discussed. She suggested that Assistant
Attorney General Jim Baldwin could elaborate on that point.
Number 146
REP. JAMES commented that it made sense, from an accounting
perspective, to do this instead of allowing windfalls to
come into the general fund whenever they were received.
Windfalls would not be desirable in certain years, she
added. She said that it might be a good idea to draw the
line in a different way than the arbitrary six month line.
Number 175
REP. BROWN said that taxpayers had 60 days in which to pay
their tax bill. If the tax was not paid at that time,
taxpayers had to choose whether they wanted to go through an
informal or a formal administrative proceeding. She said
that this 60-day period would be another logical place at
which to draw the line. Her initial proposal was to draw
the line earlier than at six months, and her understanding
was that the administration wanted the line to be drawn at a
period longer than six months.
Number 196
REP. JAMES said that shortening the time might give the
administration some incentive to speed up the collection
process so they could have the money in the general fund.
Number 212
REP. BROWN noted that now the period was between 60 days and
six months was when the administration could work out
collection of the taxes.
Number 213
CHAIRMAN PORTER thanked Rep. Brown for addressing the
committee. He then called Department of Revenue
Commissioner Rexwinkel to the witness table.
Number 221
DARREL REXWINKEL, COMMISSIONER OF THE DEPARTMENT OF REVENUE,
addressed the committee members on HB 58. He said SB 56 was
a companion measure in the Senate. He noted that tax
returns to the state were filed by the taxpayer on a
voluntary basis. After a tax return was filed, the
Department of Revenue performed a desk audit. If the
Department determined that obtaining additional tax proceeds
was possible, a physical audit was performed. Every oil and
gas producer was put through a physical audit, he noted.
Many times after the audit was performed, he continued, an
assessment of additional taxes was made.
COMM. REXWINKEL commented on the complexity of oil and gas
taxation. After an assessment was made, he said, a taxpayer
had 60 days in which to appeal that assessment and to
request a formal or an informal conference. He noted that
the informal conference stage was an important one, where
information missed by field auditors could be uncovered and
discussed. Often, he said, taxpayers would settle during
the informal conference stage. Other times, however, the
informal conference was followed by a formal conference and
litigation.
Number 300
COMM. REXWINKEL noted the complexity of the issues and the
high dollar amounts involved in this process. He mentioned
the confusion over the term "administrative proceeding." He
noted that the attorney general's opinion indicated that a
formal hearing triggered an administrative proceeding. An
informal hearing was really an extension of the audit
process. He stated the Department of Revenue had requested
an opinion on the constitutional budget reserve, effective
for all receipts received after July 1, 1990. When the
department received the attorney general's opinion, they
wanted to go back and review the payments that had been
received. This, however, was a difficult process due to the
involvement of three different departments: Natural
Resources, Revenue, and Administration.
Number 332
COMM. REXWINKEL said that during this investigation it was
found that the Department of Natural Resources had put some
money into the constitutional budget reserve fund, while the
Department of Revenue had put money collected in the same
settlement into the general fund. This money had to do with
the TAPS tariff, which, he noted, was determined by the
Alaska Public Utilities Commission. It was not, in his
view, the result of an "administrative proceeding." That
situation was later straightened out, he noted.
Number 345
COMM. REXWINKEL mentioned the accounting of funds which Rep.
Brown had mentioned previously. He noted that it had been
done already, but he felt that it needed to be reworked. At
this time, he noted, there was about $640 million in the
constitutional budget reserve fund, most of which came from
royalty settlements. "Administrative settlements" were
payments received after the notice of assessment had been
issued but before a formal hearing was requested, he said.
There was about $210 million worth of administrative
settlement proceeds now, he added. The issue of where these
administrative settlement amounts would go was an important
one, he stated. He agreed with the attorney general's
opinion on what constituted an administrative proceeding and
therefore what went into the constitutional budget reserve
fund. He noted that the opinion was not based on money, but
on legal cases.
COMM. REXWINKEL mentioned that Department of Revenue
projections showed that cash flow would "go negative" in
June 1994 if general fund revenues, statutory budget reserve
fund revenues, and unexpended amounts in the Mental Health
Trust Income Account were combined, according to low case
revenue projections. He noted that if the administrative
settlement revenues were taken out, cash flow would go
negative, using low case revenue scenarios, in October 1993.
Number 399
CHAIRMAN PORTER asked if the October 1993 estimate took into
account the $210 million in administrative settlements.
Number 400
COMM. REXWINKEL said that it did. He noted that the
committee's desire to add the word "interest" in HB 58 was a
good idea. He spoke about the difference between when a
formal hearing was requested and when it actually began, and
said that the language in HB 58 should be tinkered with to
address that difference. He noted that HB 58 did not
address the issue of refunds. He also noted that the
informal conference process was really a finalization of the
audit and nothing more. The formal hearing process was what
triggered a formal, adjudicative proceeding, he said.
Number 446
REP. JAMES asked Commissioner Rexwinkel if the audit process
were a normal administrative process of the Department and
not a special administrative proceeding. She asked about
percentages of these audits which resulted in additional
assessments to oil companies.
Number 460
COMM. REXWINKEL said that production tax receipts had
averaged about ten percent over the last few years, based on
assessments.
Number 472
CHAIRMAN PORTER asked Rep. James to clarify her question.
Number 476
REP. JAMES said that she had wanted to know what percentage
of audits resulted in increased tax assessments.
Number 482
COMM. REXWINKEL indicated that nearly every audit resulted
in an increased assessment.
Number 483
REP. JAMES said that she was trying to determine whether
this was a common administrative procedure to increase an
assessment through an audit. She noted that although a
taxpayer might voluntarily file a return, he or she would
not volunteer to be assessed.
Number 488
COMM. REXWINKEL said that his department assessed additional
taxes. He added that the reason that there was such a huge
amount of back taxes outstanding was because they were
looking into the old windfall profits and ceiling prices and
other old issues. Today, he noted, taxpayers were paying on
spot prices, so no big, new assessments were being created.
They did not consider this to be a "windfall situation," he
added, but just a simple instance of routine tax collection.
Number 507
REP. PHILLIPS asked about the incident to which the
commissioner had referred earlier in which the Department of
Revenue and the Department of Natural Resources had
disagreed about what fund a certain $60 million should go
into.
Number 516
COMM. REXWINKEL responded that the money had gone into the
general fund. He noted that he never said it was $60
million. He said that Rep. Larson had spoken about $60
million coming out of the constitutional budget reserve fund
and Rep. Brown mentioned $60 million in some context. He
said that there was more money involved in the TAPS issue.
He noted that some money had been taken out of the general
fund and moved into the constitutional budget reserve fund.
An audit had shown the "misapplication" of some receipts.
He noted that the audit was not yet complete.
Number 540
CHAIRMAN PORTER asked if transfers had been already made due
to the auditing process.
COMM. REXWINKEL replied that transfers had been made both
ways, both from the general fund to the constitutional
budget reserve fund, and from the reserve fund to the
general fund.
Number 543
REP. PHILLIPS asked if there were currently $210 million in
the administrative settlement account.
COMM. REXWINKEL said that there was approximately that
amount in the administrative settlement account, and
approximately $625 to $640 million in the constitutional
budget reserve account.
Number 556
CHAIRMAN PORTER asked about the approximately $3 billion
still in dispute.
COMM. REXWINKEL said that, including interest and penalties,
the amount was higher than that.
Number 560
CHAIRMAN PORTER asked how much of that amount would go into
the budget reserve fund instead of into the administrative
settlement account.
Number 564
COMM. REXWINKEL said that at this time, most of that money
was not in the formal hearing process, but still in the
informal hearing process. He estimated that probably less
than one-fourth of the money would go into the budget
reserve fund. He noted that some of these matters went back
as far as 1978 and were very difficult to settle.
Number 577
CHAIRMAN PORTER stated that under the present situation,
$2.5 billion could potentially come into the general fund.
Number 583
COMM. REXWINKEL said that was possible.
CHAIRMAN PORTER asked if Commissioner Rexwinkel would call
that a "windfall."
COMM. REXWINKEL said that he would not refer to it as a
windfall, but rather a collection of taxes due the state.
He said that he did not view the collection of a debt as a
windfall.
Number 593
CHAIRMAN PORTER asked why there was sometimes a delay of two
years between the request for a formal hearing and the date
that hearing began.
Number 597
COMM. REXWINKEL said that he did not know how long these
hearings were delayed. He added that formal hearings were
very expensive undertakings.
Number 602
CHAIRMAN PORTER asked if he had misunderstood about the
delay of up to two years in initiating a formal hearing.
Number 603
COMM. REXWINKEL said there was often a long period of time
between the request for a formal hearing and the initiation
of that hearing. Once a formal hearing was complete, he
added, the department needed to do additional work to
finalize the process. He likened the formal hearing process
to a trial, where much of the work was done before and after
the actual "trial" occurred.
Number 619
CHAIRMAN PORTER asked if the approximately $210 million in
the administrative settlement account was to be expended in
fiscal year 1994.
Number 624
COMM. REXWINKEL noted that the account that Chairman Porter
was referring to was a sub-account of the general fund. The
purpose of that sub-account was not to hold it in reserve,
but simply to keep track of it in case adjustments needed to
be made later.
Number 635
REP. PHILLIPS asked if the department were pretty sure that
the administrative settlement money was general fund money,
or if there were a possibility that it would end up in the
constitutional budget reserve fund.
Number 639
COMM. REXWINKEL replied that his department was reviewing
the settlements which had come in since July 1, 1990, to
make sure that the receipts were deposited into the correct
fund. Out of the $210 million, he noted, about $150 million
was thought to have been collected after the six-month
period.
Number 651
CHAIRMAN PORTER asked about the additional taxes assessed by
the Department of Revenue as a result of audits, and the
impact of HB 58 on where those additional tax revenues would
go.
Number 660
COMM. REXWINKEL said that three-quarters of the back taxes
owed were production taxes and one-fourth were income taxes.
He commented that, currently, the amount of additional
assessments were very little, due to changes in the way that
taxes were calculated.
Number 700
CHAIRMAN PORTER ascertained that committee members had no
further questions for Commissioner Rexwinkel. He thanked
the commissioner for appearing before the committee.
TAPE 93-5, SIDE A
Number 000
JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
addressed the committee next. He thanked Rep. Brown for
introducing HB 58. He said that he and Attorney General
Charlie Cole stood behind the opinion they issued last year.
He explained how that opinion was formed.
MR. BALDWIN explained that the constitutional amendment was
drafted, to a great extent, on the floor of the House of
Representatives. Substantial consideration was given to a
bill that had been adopted by the House Finance Committee,
but that bill was combined with another measure on the House
floor to create the constitutional amendment. Consequently,
he noted, there was not a comprehensive set of minutes
relating to the amendment with which to determine intent.
He said that determining intent for a constitutional
amendment was different than determining intent for a
statute. Because constitutional amendments appeared on the
ballot, the intent of the voters and the intent of the
drafters of the amendment must all be taken into
consideration.
Number 100
MR. BALDWIN stated that the Department of Law attempted to
consider the intent of the legislature and the voters when
the opinion was drafted. Statements made by the drafters of
the amendment now, after adoption of the amendment, would
not be considered relevant by a court, which would look at
pre-enactment statements of intent. He said the Department
of Law had attempted to clarify the intent of the amendment
through a legal opinion. Another way to clarify an
amendment was for the legislature to pass further
legislation. The courts would use a new statute as evidence
of an attempt to clarify an ambiguous provision.
MR. BALDWIN noted that by passing clarifying legislation,
the legislature would be acting more like a court than like
a legislative body. The legislature's opinion would be
weighed just like a judge's opinion or the attorney
general's opinion.
Number 130
MR. BALDWIN said that the Department of Law saw no rationale
for HB 58's imposition of an arbitrary six-month time limit.
They saw it as an unacceptable compromise. He said other
provisions of HB 58 were very helpful. As for the six-month
time limit, he urged the committee to stick with the
structure set out in the attorney general's opinion - that
"administrative proceeding" did not begin until a formal
conference was requested. He said that he agreed with Rep.
Brown that one deadline was the same as another deadline in
terms of strategy when dealing with taxpayers. However, he
noted that setting out a particular time period, at which
revenues would cease to enter one pool of money and begin to
enter another, would give a strategic advantage to the
"other side."
MR. BALDWIN stated that he felt it was unwise to have a set
date in time at which funds would be channeled into a
particular pot of money. He noted that usually what
triggered a request for a formal conference was a hard and
fast determination of dollar and time costs. He added that
the Department of Law never based decisions on where the
money would go, but just worked toward getting those dollars
in the first place. They did not want to have to look at
where the money would be going.
MR. BALDWIN said that a very valuable provision of HB 58
could be found on page 2, lines 3-7. He stated that this
provision clarified what future settlements or outcomes of
litigation would not go into the constitutional budget
reserve fund.
Number 210
MR. BALDWIN then called the committee members' attention to
page 2, lines 8-13, of HB 58. He noted his concern over the
wording on line 12. He felt that the language could be very
broadly interpreted. He said this particular provision of
HB 58 sought to clarify that the trigger for use of the
budget reserve funds would come before the state had
exhausted every conceivable pot of money it held. However,
he noted that he still felt that the language in the bill
was imprecise and open to interpretation.
Number 293
MR. BALDWIN noted another concern that he had with HB 58,
located on page 2, lines 16-21. He said the amendment held
that money taken out of the budget reserve fund and used for
government operations had to be replaced the following year.
He said HB 58 provided for that replacement through a device
known as a "transfer." He noted that this amounted to the
legislature giving Commissioner Rexwinkel the power to
select money and put it into the budget reserve fund without
going through the appropriation process. He said he was
uncomfortable with this provision because the legislature
wielded the power of appropriation. He stated that this
provision could deprive future legislatures of the power to
appropriate funds to the budget reserve fund.
Number 343
REP. NORDLUND asked if Mr. Baldwin would agree that a lot of
ambiguity existed in the constitution in terms of what an
administrative proceeding was. He added that HB 58
attempted to provide some definition. He noted that he was
not sold on the arbitrary six-month dividing line. He asked
if Mr. Baldwin had a counter-proposal to offer.
Number 355
MR. BALDWIN stated that he did not have a counter-proposal.
He indicated that Attorney General Cole was more skeptical
than he about the legislature's ability to clarify a
constitutional provision. He cited language in the
constitution and said that the Department of Law's view was
that the language referred to litigation and situations
similar to litigation. He reiterated Commissioner
Rexwinkel's view that the informal conference stage
consisted solely of wrapping up audit issues and defining
further issues. He noted that the Department of Law, in its
legal opinion, was attempting to preserve the legislature's
powers and harmonize those powers with the provisions in the
constitutional amendment. He said the legislature had the
sole power to appropriate funds, and the amendment deprived
the legislature of some of that power.
Number 397
REP. NORDLUND stated that he appreciated the Department of
Law's attempts to preserve the legislature's powers, but he
felt that this would continue to be a problem and ought to
be solved through legislation.
Number 400
MR. BALDWIN indicated that he agreed with Rep. Nordlund. He
added that, out of the four points about HB 58 discussed, he
felt that two of them were excellent, one of them needed
more work, and he did not agree with the fourth point. He
noted his willingness to work with the legislature on a
compromise.
CHAIRMAN PORTER commented that, as a voter, he had been
under the impression that the bulk of the money that was
still in dispute would go into the budget reserve fund
instead of into the general fund. Under the Department of
Law's interpretation, however, it seemed like the bulk of
the disputed funds would end up back in the general fund.
In his opinion, that violated the intent of the
constitutional amendment.
Number 424
MR. BALDWIN said that the legal opinion did not look at the
money, but rather at the text of the amendment. They did
not look at the issue of whether or not the state would have
general fund dollars or less-accessible budget reserve fund
dollars. He stated that he stood behind the legal opinion,
but added that the amendment itself was ambiguous and open
to interpretation.
Number 464
CHAIRMAN PORTER asked if there would have been a different
result if numbers had been addressed, instead of days, when
determining the cut-off point for funds.
Number 475
MR. BALDWIN said that if this had been addressed in the body
of the amendment itself, that would have been better, but it
was difficult to speculate. He said that the court system
said that the legislature's interpretations in the form of
statutes would be given great weight if they were not
clearly erroneous. He cautioned the committee to not
radically depart from the wording of the constitutional
amendment. He felt that the definition of terms used in the
amendment would be a more defensible action.
Number 489
CHAIRMAN PORTER asked if the formal and informal conference
procedures were internal Department of Revenue policy, or
part of the Administrative Procedures Act.
MR. BALDWIN said that those tax procedures were not covered
by the general Administrative Procedures Act.
CHAIRMAN PORTER asked Mr. Baldwin if he would characterize
the informal and formal conference process as being part of
the same procedure.
Number 505
MR. BALDWIN commented that they were two separate processes.
The informal conference procedure was more or less a wrap-up
of the audit process, he noted. Once the taxpayer crossed
the line into the formal process, he said, rights became an
issue and were adjudicated.
Number 520
REP. JAMES asked what "administrative proceeding" would mean
if money were not involved.
Number 538
MR. BALDWIN said that in their opinion, they sought to
define "administrative proceeding," starting with the
dictionary. The definitions that they gleaned told them
that proceeding meant something similar to litigation. He
said that to answer Rep. James' question, he would need her
to provide more information.
Number 555
REP. JAMES said that she was referring to any complaint that
a person would have against an agency. She cited an example
of a member of the public having a dispute with a clerical
worker in a state agency, and the matter perhaps being
referred to a supervisor, and later to the commissioner of
the department. Where in that process, she asked, would Mr.
Baldwin call it an "administrative proceeding?"
Number 582
MR. BALDWIN said that he could not give her a legal answer
to her question. He noted that there were many different
administrative procedures in state law, including the
Administrative Procedures Act. Often, departments had their
own procedures, however. He said that the legal opinion was
tailored to the procedures used by the Department of
Revenue.
Number 600
REP. JAMES said that she was trying to address what the
general public would consider an administrative proceeding.
Number 604
CHAIRMAN PORTER determined that the committee had no further
questions for Mr. Baldwin. He noted that he felt it would
be premature to take a vote. He invited Rep. Brown and Rep.
Larson to address the committee again.
Number 612
REP. LARSON mentioned a letter that he had received from the
administration which stated:
"As a follow-up to our meeting this morning, the
Administration has agreed that the administrative
settlements which the Attorney General previously identified
as erroneously deposited in the constitutional budget
reserve fund will be placed in a separate account."
REP. LARSON added that the letter also stated that the
action was taken with the following understanding:
"The Administration will access these funds should the
Commissioner of Revenue determine it is necessary to do so
because the cash available in the general fund is
insufficient to meet the state's obligations."
and (2) "The Legislative Budget and Audit Committee and
Administration will work on legislation during the interim
for introduction next session which will clarify
implementation of the constitutional amendment."
REP. LARSON said he assumed from the letter that the money
in dispute was in a separate account. He said he would like
to know if that were true or not. He would also like to
know that, if it were not in a separate account, when there
had been insufficient funds to meet the state's needs,
therefore requiring that the money be taken out.
Number 634
CHAIRMAN PORTER said that if he recalled correctly, the
commissioner of Revenue said that the money referred to in
the amendment was separately accounted for. He added that
the commissioner had indicated that the $210 million was
scheduled, to a certain extent, to be spent in fiscal year
1994. He added that the statutory reserve amount at the end
of fiscal year 1993 was $27 million. If the $210 million
was a part of that total, he noted, it had been depleted by
a considerable amount.
Number 649
REP. LARSON said that they were dealing with a moving
target. He stated that on August 27, 1992, the Legislative
Finance Division showed adjustments to fiscal year 1992
revenues as $140.6 million, which included a $61 million
reversal of deposits in the constitutional budget reserve
fund. On December 3, 1992, the constitutional budget
reserve fund had $620.5 million, which included the
adjustments by the Department of Revenue in line with the
attorney general's opinion.
Number 661
REP. BROWN said that, in response to her request for an
accounting of how much money was in the settlement account,
on December 2, 1992, she was told that there was $103+
million in the account as of October 31, 1992. That amount
included the $94.3 million in the account plus $8.9 million
in interest. She added that she was now very confused to
learn today that the amount had grown to $210 million. She
reiterated the need for a good accounting of what is going
on with the money.
REP. BROWN said she agreed with Commissioner Rexwinkel's
comments about the language at the top of page 2 in HB 58.
She said she recommended that the word "begun" on line 2 be
changed to "been requested" so that the request was the
triggering point.
REP. BROWN indicated that she felt that the legislature's
intent was clear with regard to the term "administrative
proceeding." She stated that she was shocked when the
attorney general's opinion came out, and she had asked for
Tam Cook's opinion on the attorney general's interpretation.
She said that she would provide that opinion to the
committee. She said Ms. Cook's opinion differed from that
of the attorney general. She noted that the term
"administrative proceeding" was already in Title 43 of the
Alaska statutes.
Number 720
REP. BROWN stated that her understanding was that HB 58
would not affect the current budget, nor the monies in the
administrative settlement fund. She noted that HB 58 was
not retroactive. She said she understood that the
legislature could, if it wished to, do something about the
money which was now in the general fund. However, she saw
that as a separate issue.
CHAIRMAN PORTER asked Rep. Larson if he thought HB 58 could
be amended so as to allow for the resolution of differences
between the legislature and the administration.
REP. LARSON replied that he thought it was possible.
Number 749
MR. BALDWIN said that he did not have the authority to
compromise on the issue of where the dividing line stood.
He suggested that the sponsor discuss the issue with the
attorney general. He said the legislature had the authority
to further define the constitutional amendment. He said he
could not promise that the policy issue could be resolved,
however.
Number 761
CHAIRMAN PORTER said that it appeared, from a letter from
Shelby Stastny of the Office of Management and Budget, that
the original intent was to try to work out an agreement
between the administration and the legislature as to how to
interpret the constitutional amendment. He suggested that
the committee delay action on HB 58 until Rep. Larson and
his designee(s) participated in negotiations with the
attorney general to try to come up with acceptable language.
Number 780
REP. LARSON indicated that he, Mr. Baldwin, Attorney General
Cole, and a member of the Judiciary Committee could discuss
language for HB 58.
Number 785
CHAIRMAN PORTER said that either he or Vice Chair James
would serve on that "subcommittee." He invited any other
Judiciary Committee members who wanted to participate in the
negotiations as well. Without objection, he told Rep.
Larson to set up a meeting on the issue. He added that he
would reschedule HB 58 when the subcommittee came up with
acceptable language.
REP. NORDLUND asked that the subcommittee clarify whether or
not HB 58 was retroactive.
REP. BROWN noted that if the bill were to be retroactive,
that would have to be specifically spelled out in the
language of the bill.
Number 811
REP. DAVIDSON asked if Rep. Brown and Rep. Larson preferred
that HB 58 be retroactive.
Number 812
REP. LARSON said that his preference was to not make the
bill retroactive.
Number 821
CHAIRMAN PORTER thanked Rep. Brown and Rep. Larson for
appearing before the committee. He called the committee
members' attention to three additional bills which the court
system was asking the Judiciary Committee to introduce on
its behalf. He asked committee members to look over the
bills and said they would discuss their introduction the
following week. He stated that he and Senator Taylor
intended to appoint a joint subcommittee to address the
recommendations of the Sentencing Commission.
Number 847
REP. NORDLUND commented that there might already be bills
introduced that could be amended to incorporate some of the
Sentencing Commission recommendations.
Number 858
REP. PORTER indicated that he had hoped to have Terry Cramer
of the Legal Services Division brief the committee on the
new ethics law prior to holding hearings on the public
members of the Ethics committee, but her absence indicated
that she had not yet finished briefing members of the Senate
Judiciary Committee. He added that he would try to contact
her and pass on any specific, important points that she
might have to the members via memorandum.
ADJOURNMENT
CHAIRMAN PORTER adjourned the meeting at 3:22 p.m.
| Document Name | Date/Time | Subjects |
|---|