Legislature(2021 - 2022)ANCH LIO DENALI Rm
09/01/2021 01:00 PM House JUDICIARY
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| HJR7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
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| += | HJR 7 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
Anchorage, Alaska
September 1, 2021
1:02 p.m.
MEMBERS PRESENT
Representative Matt Claman, Chair
Representative Liz Snyder, Vice Chair
Representative Harriet Drummond
Representative Jonathan Kreiss-Tomkins
Representative Christopher Kurka
Representative Sarah Vance
MEMBERS ABSENT
Representative David Eastman
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 7
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund, appropriations from the
permanent fund, and the permanent fund dividend.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 7
SHORT TITLE: CONST. AM: PERM FUND & PFDS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) STA, JUD, FIN
04/20/21 (H) STA AT 3:00 PM GRUENBERG 120
04/20/21 (H) Heard & Held
04/20/21 (H) MINUTE(STA)
05/04/21 (H) STA AT 3:00 PM GRUENBERG 120
05/04/21 (H) Heard & Held
05/04/21 (H) MINUTE(STA)
05/06/21 (H) STA AT 3:00 PM GRUENBERG 120
05/06/21 (H) Moved CSHJR 7(STA) Out of Committee
05/06/21 (H) MINUTE(STA)
05/10/21 (H) STA RPT CS(STA) 4DNP 2NR 1AM
05/10/21 (H) DNP: CLAMAN, EASTMAN, VANCE, TARR
05/10/21 (H) NR: STORY, KREISS-TOMKINS
05/10/21 (H) AM: KAUFMAN
05/14/21 (H) FIRST SPECIAL SESSION BILL
05/14/21 (S) FIRST SPECIAL SESSION BILL
05/24/21 (H) JUD AT 1:00 PM GRUENBERG 120
05/24/21 (H) Heard & Held
05/24/21 (H) MINUTE(JUD)
05/26/21 (H) JUD AT 1:00 PM GRUENBERG 120
05/26/21 (H) Heard & Held
05/26/21 (H) MINUTE(JUD)
06/02/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
06/02/21 (H) Heard & Held
06/02/21 (H) MINUTE(JUD)
06/04/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
06/04/21 (H) Heard & Held
06/04/21 (H) MINUTE(JUD)
06/09/21 (H) JUD AT 3:00 PM ANCH LIO DENALI Rm
06/09/21 (H) Heard & Held
06/09/21 (H) MINUTE(JUD)
08/16/21 (H) THIRD SPECIAL SESSION BILL
08/31/21 (H) DISCHARGE FROM JUD FLD Y18 N22
08/31/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
08/31/21 (H) -- Delayed to 9/1/21 at 1:00 pm --
09/01/21 (H) JUD AT 1:00 PM ANCH LIO DENALI Rm
WITNESS REGISTER
CORY MILLS, Deputy Attorney General
Office of the Attorney General
Civil Division
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 7.
NEIL STEININGER, Director
Office of Management & Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
HJR 7.
MEGAN WALLACE, Director
Legislative Legal Services
Legislative Affairs
Juneau, Alaska
POSITION STATEMENT: Responded to questions during the hearing
on HJR 7.
ACTION NARRATIVE
1:02:39 PM
CHAIR MATT CLAMAN called the House Judiciary Standing Committee
meeting to order at 12:40 p.m. Representatives Kurka (via
teleconference), Vance (via teleconference), Kreiss-Tomkins (via
teleconference), Drummond (via teleconference), Snyder (via
teleconference), and Claman were present at the call to order.
HJR 7-CONST. AM: PERM FUND & PFDS
1:04:00 PM
CHAIR CLAMAN announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 7, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund, appropriations from the permanent fund, and the
permanent fund dividend. [Before the committee was CSHJR
7(STA).]
CHAIR CLAMAN paraphrased the introductory paragraph of a
memorandum ("memo") [included in the committee packet] dated
8/31/21, with a subject of "Topics and Questions for House
Judiciary Committee Meeting on September 1, 2021," which he had
sent to those invited to testify. The paragraph read as follows
[original punctuation provided]:
Proposed constitutional amendments addressing
financial issues raise questions about funds that are
subject to the "sweep" provisions in Article IX,
Section 17. The leading case applying those provisions
is Hickel v. Cowper, 847 P.2d 922 (Alaska 1994). Most
recently, the Superior Court in Alaska Federation of
Natives v. Dunleavy ruled that the Power Cost
Equalization Fund ("PCE") was not "in the general
fund" and was not sweepable under Article IX, Section
17. These two cases lead to a number of questions.
CHAIR CLAMAN opined that the two court cases bear on the
consideration of HJR 7, thus he said he invited a representative
from the Department of Law and from Legislative Legal Services
to answer the questions in the memo.
1:06:03 PM
CORY MILLS, Deputy Attorney General, Office of the Attorney
General, Civil Division, Department of Law, addressed the
aforementioned list of questions. The first question:
1. Are there cases other than Hickel v. Cowper and AFN
v. Dunleavy that address whether particular funds are
subject to sweep?
MS. MILLS said she was unaware of any such cases. She said
Hickel v. Cowper is the one [Alaska] Supreme Court case to
interpret the phrase "available for appropriation." She said
that was actually more in regard to subsection (b) - the
constitutional amendment, not the sweep - but the court said
that "available for appropriation" should be "interpreted the
same for both of those provisions." She continued:
It did not address what is in the general fund for
purposes of the sweep. And that's AFN v. Dunleavy
superior court case. The state has chosen not to
appeal that case, and so, it is binding as to the PCE
but otherwise not binding on other courts.
MS. MILLS addressed the second question:
2. Has Judge Garton's decision in AFN v. Dunleavy
changed how the Department of Law analyzes whether or
not a fund is sweepable? How?
MS. MILLS said she thinks DOL's approach to the superior court
decision is to look at the PCE and the facts surrounding it and
[to ask] whether there are other similarly situated funds that
DOL otherwise considered sweepable but should no longer be
considered sweepable because they are so similar to the PCE.
She said the PCE is unique; it is the only fund that is on the
sweep list that exists within the public corporation but is
otherwise available for appropriation. She stated that because
of its unique nature, DOL did not find any other funds that "fit
that exact fact pattern." She said that "the Hickel decision"
is the binding precedent so far since it is a supreme court case
on issues regarding the sweep.
1:08:47 PM
MS. MILLS addressed the third question:
3. The administration did not appeal AFN v. Dunleavy.
What is the precedent of the superior court decision
and how will it affect other Alaska courts considering
whether funds are subject to sweep? Is the court's
discussion on page 12, footnotes 76 and 77, binding on
future courts?
MS. MILLS said AFN v. Dunleavy was a superior court case;
therefore, it is not binding, and opinion will not be published.
Its only impact relates to the PCE; the court ordered that the
PCE not be swept. In accordance with that legal mandate by the
superior court, the administration is not "sweeping PCE." She
said anything else in that decision is "persuasive only." If
another case is brought, another court does not have to follow
the superior court reasoning or decision. She said the Alaska
Supreme Court is in no way bound by a superior court decision.
MS. MILLS, regarding the dicta in footnotes 76 and 77, explained
that on page 12 the court says there are other funds that the
legislature has determined are separate funds and cites statutes
that refer to "separate funds". She said it appears the court
was trying to show how the legislature has acted in regard to
funds, because there is no fund that is "precisely similar" to
the PCE endowment fund. That said, Ms. Mills remarked that
there is no evidence that the court looked at the legislative
history and was interpreting those statutes to determine whether
the funds were in the general fund (GF) or not; "it was simply
citations to footnotes for purposes of illustrating different
ways in which the legislature has explained funds within the
law." Without any analysis by the court or legal mandate, she
said, there is nothing binding about those footnotes, and DOL
continues to use Hickel v. Cowper as the main case by which to
interpret the sweep provision.
MS. MILLS moved on to the forth question:
4. Please explain the difference, if any, between the
general fund and the state treasury.
MS. MILLS indicated the answer may vary depending on which
statute is read, because the terms are not used consistently.
She named some terms: fund, account, general funds, and
treasury. She said it is not clear when the legislature enacted
all the statutes whether they had different meanings in mind,
and to figure that out would require delving into legislative
history to determine the intent of the legislature when it used
those terms. For example, in some places, "treasury" and
"general fund" seemed to indicate the same thing, while in other
circumstances they do not.
1:13:44 PM
MS. MILLS prefaced the fifth question to mention that aside from
the PCE and any funds as can be categorized as PCE - and none
were found by DOL - the sweep analysis has not changed;
therefore, "the list that the Office of Management & Budget has
continues to remain the same in terms of what's subject to the
sweep and what's not." The fifth question:
5. Please advise whether the following funds are
subject to sweep and why or why not:
a. The Permanent Fund Earnings Reserve Account
(Art. IX, Sec. 17)
b. Funds such as the school construction grant
fund (AS 14.11.005) that are expressly created "in the
general fund"
c. Funds such as the curriculum improvement and
best practices fund (AS 14.07.182) that are
"established," but not "in the general fund"
d. Funds such as the in-state natural gas
pipeline fund (AS 31.25.100) that are established in a
state corporation
e. Funds such as the disaster relief fund (AS
26.23.300) that are established "in the Office of the
Governor"
f. Funds such as the power cost equalization
endowment fund (AS 42.45.070) that are established "as
established as a separate fund" of a state entity,
such as the Alaska Energy Authority
g. Funds such as the (statutory) budget reserve
fund (AS 37.05.540(a)) or the Servicemembers' Group
Life Insurance premium fund (AS 26.05.263) that are
established as a separate fund "in the state
treasury."
MS. MILLS said the Permanent Fund Earnings Reserve Account was
specifically pointed out in Hickel v. Cowper as not subject to
the sweep because it exists in the permanent fund, not the
general fund. She said the school construction grant fund has
never been subject to the sweep because it can be spent without
an appropriation, thus failing "the second part of the test."
She explained that the test is whether a fund is both in the
general fund and available for appropriation, and this is based
on the Hickel v. Cowper analysis. She said the school
construction grant fund is in the general fund but "was already
not on the sweep list for another reason." Ms. Mills said the
curriculum improvement and best practices fund "doesn't mention
where it's at; it just establishes the fund." She said DOL does
not read any meaning into that; "it has to go somewhere." The
fact that it does not say general fund does not change DOL's
analysis. That said, she commented that the fund has never had
any money in it, so it has not been swept. Furthermore, she
offered her understanding that it could be spent without
appropriation, so it would not be on the sweep list to begin
with.
MS. MILLS said the instate natural gas pipeline fund was
established in a state corporation. She offered her
understanding that all funds in corporations can be spent
without appropriation, thus are not available for appropriation
under the Hickel v. Cowper analysis, so this fund is not on the
sweep list. She added, "But it otherwise would be similar to
PCE in that it exists in a state corporation and therefore
wouldn't be swept for the second reason, as well." Ms. Mills
said the disaster relief fund was established in the Office of
the Governor and, since it can be spent without appropriation
and cannot be swept, DOL has not done any further analysis.
MS. MILLS said the PCE endowment fund was the subject of the AFN
v. Dunleavy decision and is not subject to the sweep, and the
administration has ensured that that money is available. She
said the statutory budget reserve (SBR) fund has always been
viewed by both the legislative and executive branches as
available for appropriation and in the general fund, thus
subject to the sweep, and it remains on the sweep list. The
service members group life insurance premium fund is another
that can be spent without appropriation, so DOL has not done an
analysis because it fails one part of the two-part test already,
so it is not sweepable.
1:18:15 PM
MS. MILLS turned to the sixth and final question, which was:
6. HB 3003, recently approved by the House,
appropriates dividend funds from the (statutory)
budget reserve to pay the Permanent Fund dividend.
What is the administration's current position with
respect to an appropriation from (statutory) budget
reserve (AS 37.05.540(a))?
a. If the SBR funds are subject to sweep, when
does the sweep occur?
b. If the governor contends the SBR funds are
subject to sweep and the legislature contends that
they are not, what options are available to the
legislature to resolve any dispute?
MS. MILLS reiterated that the SBR has historically been found to
be sweepable, and DOL does not think the AFN v. Dunleavy
decision in any way binds the state to a new interpretation.
She continued as follows:
It also isn't a ... similarly situated fund; it's not
in a corporation; it says it's in the state treasury.
As I stated before, exactly what that means and in
what context - we'd have to go back and look at the
legislative history, but it's also evident that both
sides have always considered it sweepable, which we
think points to the fact that everyone believed it was
in the general fund.
MS. MILLS said that means that funds that were in the SBR that
were not previously validly committed when the clock turned from
one fiscal year to the next were swept. So, there basically is
not money in that fund from which to do any new, additional
appropriation. She said under law, the funds are swept into the
constitutional budget reserve (CBR) at 11:59 p.m. on June 30 of
any given fiscal year. Then they are swept back out in a
reverse sweep at midnight or 12:01 a.m. [July 1 of any given
fiscal year].
MS. MILLS, addressing the last portion of the sixth question,
offered suggestions as to what could be done if the governor
contends that SBR funds are subject to a sweep, but the
legislature thinks not. She said she thinks legislation
clarifying where the SBR is and making it more similar to the
PCE endowment fund and AFN v. Dunleavy decision would provide
clarity. Otherwise, she suggested, the two branches could have
further discussion on what the terms in the constitution mean.
1:21:16 PM
CHAIR CLAMAN asked whether DOL has a list of all funds in
sweepable and "nonsweepable" categories that it could provide to
the committee.
MS. MILLS deferred to Neil Steininger.
1:22:18 PM
NEIL STEININGER, Director, Office of Management & Budget, Office
of the Governor, said the Office of Management & Budget could
provide the list.
1:22:47 PM
REPRESENTATIVE VANCE asked whether the administration has a
position on whether the PCE fund should continue to be in "the
constitutional amendment proposal" in light of the recent court
case.
MS. MILLS answered that she could not speak to that issue. She
said she had not heard that there are "plans to ... change that
proposal at this point," but offered to have someone "who is
leading that bill" get back to the committee.
REPRESENTATIVE VANCE asked whether Ms. Mills could speak to any
legal effects, in light of the case, if the PCE is not included
in the constitutional provision as proposed under HJR 7.
MS. MILLS responded that even though the fund is "not sweepable
at the moment," it is fully available for appropriation;
therefore, it can be used for multiple purposes by the
legislature. She continued:
Placing the money that's in the endowment fund into
the permanent fund and creating some sort of
constitutional protection would make it so that you
couldn't ... ever take the whole fund or appropriate
the whole fund in any way. So, that's ... the one, I
guess, legal status difference that I'd point out.
REPRESENTATIVE VANCE, regarding the use of the percent of market
value (POMV) for PCE in Alaska, asked:
If the legislature wanted to use that portion of the
fund to invest in energy infrastructure in rural
Alaska, would it be permissible under the current
language or is it exclusively for the PCE subsidy
program?
MS. MILLS explained that she would need to consult with the lead
attorney on the constitutional amendment and get back to
Representative Vance with an answer.
1:25:51 PM
CHAIR CLAMAN asked whether the legislature, under the current
structure, could use PCE endowment funds to build an electric
infrastructure in rural Alaska.
MS. MILLS answered there is nothing that would prohibit using
money from the PCE endowment fund to pay for that project.
1:26:35 PM
REPRESENTATIVE KURKA cited the first two sentences of Article 9,
Section 13, of the Constitution of the State of Alaska, which
read:
No money shall be withdrawn from the treasury except
in accordance with appropriations made by law. No
obligation for the payment of money shall be incurred
except as authorized by law.
REPRESENTATIVE KURKA said he could see having various laws on
the books outlying payments for programs or various expenses,
but remarked that the money still cannot be taken out unless it
is appropriated. He said he is having difficulty understanding
how the state is paying for things that have not been
appropriated.
MS. MILLS responded that there are two types of appropriations
that the legislature does in the budget bill. There are
appropriations into funds that then need to be further
appropriated, such as the PCE fund. Then there is appropriation
into a fund that has automatic spending authority; a prime
example is the permanent fund dividend. Ms. Mills stated, "...
The funds I listed ..., the money can then be spent
automatically by the agency per a statute. There are other
funds where you appropriate in, but there's another
appropriation that's necessary before the money can actually be
spent from the treasury."
REPRESENTATIVE KURKA said it sounded like Ms. Mills was saying
there can be multi-year appropriations instead of an annual
basis.
MS. MILLS explained that the legislature has control of only the
funds within its purview within a given year; that money could
still be expended for years in the future. A good example are
the public corporation funds. She said the legislature can
spend only the money that is in front of it in any given year;
it cannot spend "another legislature's money." She said that is
the position of DOL that is currently being litigated in the
forward appropriation case.
MS. MILLS, in response to a follow-up question, clarified the
two-part test from Hickel v. Cowper to determine what is
considered available for appropriation under the CBR both for
purposes of subsection (b), which determines when a majority
vote is needed versus a three-quarter vote, and for purposes of
the sweep where the same language is used. She said the court
described "available for appropriation" as follows:
Instead we consider it appropriate, as well as
consistent with both the language of the amendment and
the intent of the framers, to focus on the legal
status of the various funds implicated in relationship
to the legislative power of appropriation. The amount
available for appropriation must include all funds
over which the legislature has retained the power to
appropriate.
MS. MILLS said when talking about what's available for
appropriation for purposes of the CBR, that's the test the court
has lined out.
1:34:36 PM
CHAIR CLAMAN, regarding the PCE, offered his understanding that
the court ruled that that endowment is not in the GF, which was
the basis of Judge Garton's ruling, and wasn't subject to sweep
because it wasn't in the GF, but it's still available for
appropriation. So, even though the legislature has put that
money into the PCE, and there are provisions that allow for the
expenditure of those funds, the legislature could appropriate
that money in a variety of different ways, but it still is not
subject to sweep. He asked if he got that right.
MS. MILLS said she believed so. She said Hickel v. Cowper dealt
only with the term "available for appropriation". She said
subsection (b) of the CBR amendment does not refer to the GF;
"it just says ... you're comparing what's available for
appropriation to what was actually ... spent or budgeted the
previous year." She said subsection (d) is where the term
"general fund" is introduced. She went over, once again, the
information about the two-part test for determining whether
monies are sweepable. She said as Chair Claman points out, the
PCE endowment fund was found by the Hickel v. Cowper court to be
available for appropriation; the question the court grappled
with is whether it is in the GF, since it is designated as in
the Alaska Energy Authority (AEA). The court determined that
because it was in the AEA, it was not in the GF but rather in
the corporation.
1:37:32 PM
MEGAN WALLACE, Director, Legislative Legal Services, Legislative
Affairs Agency, said she would address just some of the
questions provided, since she and Ms. Mills do not disagree on
others. She began with question 4, which asks the difference
between the general fund and the state treasury. She echoed Ms.
Mills' response that that is a complicated question to answer.
She said that in the AFN v. Dunleavy case, the Department of Law
took the position that all funds, except for constitutional
funds - the permanent fund and the CBR - are in the general
fund. The plaintiff argued there was a broader definition and
that the legislature had the power to establish separate funds
outside of the GF but would still be considered within the
state's treasury and, thus, still be bound by the constitutional
requirement that money could not be expended from the state
treasury absent appropriation.
MS. WALLACE said in AFN v. Dunleavy, the court looked through
legislative history of the CBR amendment and found that the
legislature was not prohibited from establishing funds outside
the general fund, for example, by the dedicated funds clause.
She noted that the opinion in AFN v. Dunleavy has not been
appealed; it is an unpublished superior court opinion, which at
most will have persuasive value if a separate court were to
consider similar issues in terms of determining specifically
which funds are in the GF versus in the state treasury, which
would have an impact on potential future analysis as to what
funds can be swept.
MS. WALLACE stated that while Hickel v. Cowper is an Alaska
Supreme Court case that does analyze Article IV, Section 17, the
case did not specifically do any analysis on the issue of
determining which funds were in the GF versus the legislature's
power to set up a fund separate from the GF but still within the
state treasury. Ms. Wallace concurred with Ms. Mills that when
determining whether or not something is subject to the sweep,
the analysis is a two-part test to determine whether it is
available for appropriation and is in the general fund. She
said the only case that specifically analyzes that second issue
is the recent AFN v. Dunleavy case. Ms. Wallace said the
impact, from her position, and in terms of the advice that she
gives to the legislature, is that while it's only a superior
court decision and not binding on future courts should the issue
arise, it should be instructive in terms of at least evaluating
how future courts might come out on the issue. She said it is
always possible that a court could reach a different conclusion,
but indicated that it is also possible that the decision could
be persuasive to future courts in analyzing these issues. She
continued:
To the extent that there is new interpretation about
what it means to be in the general fund versus in the
state treasury - funds that had not been subject to
that analysis - we may have to go back and analyze
them in terms of whether or not, if those funds were
looked at, whether a court would reach a conclusion
different ... [from] what has been a historical
interpretation. And an example of that is ... this
statutory budget reserve fund. When Hickel v. Cowper
was litigated back in the '90s, the parties agreed or
stipulated that the statutory budget reserve fund was
available for appropriation. And that was the main
issue that was being litigated in Hickel v. Cowper.
And so, there was no real dispute that the fund was
available for appropriation. But I'm not aware of any
specific analysis that has occurred really examining
that fund and analyzing whether or not it's in the
general fund or whether the legislature exercised its
lawmaking power and established that fund as a special
fund separate from the general fund.
1:46:58 PM
MS. WALLACE said her office had not had time to look at the
legislative history and conduct a full analysis of all the
funds; however, she restated her understanding that she and Ms.
Mills are consistent in understanding what the test is: Is it
available for appropriation? Is it in the GF? She continued:
If a fund can be expended without further
appropriation, meaning the legislature has already
appropriated money once into that fund ... and by law
that money can be spent without having to enact a
further appropriation, then those funds, under Hickel
v. Cowper, are not sweepable.
The earnings reserve account, which was on the list,
... was specifically addressed by Hickel v. Cowper,
and the Alaska Supreme Court noted that even though
that fund was available for appropriation, it was not
in the general fund, and therefore not subject to the
sweep.
1:48:57 PM
CHAIR CLAMAN, directing attention to question 6, asked for Ms.
Wallace's perspective on whether SBR funds are subject to sweep
in light of the AFN v. Dunleavy case.
MS. WALLACE responded that when the court was analyzing whether
the PCE fund was in the general fund, it specifically noted that
the legislature has previously expressly created many funds in
the general fund. The court also noted that the legislature has
created separate funds. In footnote 77, the court "evidences
separate funds that the legislature has established," and one of
them is the SBR, which is found in AS 37.05.540(a). She
indicated that in any further litigation there could be another
opinion from the Alaska Superior Court or Alaska Supreme Court
holding that the SBR is "another fund that's outside the general
fund and therefore not subject to the sweep." She said based on
"the position that was just described" [by Ms. Mills], it sounds
like DOL's administration "has not reconsidered the
'sweepability' of that fund in light of this decision, and
therefore, to the extent that there's disagreement about what
the AFN case really means with respect to the SBR," she thinks
there is the potential for litigation, particularly if the
disagreement is about how much money from the SBR is available
to the legislature for appropriation going forward.
1:53:43 PM
REPRESENTATIVE KREISS-TOMKINS asked Ms. Wallace about
formalities of legal precedent and whether the question could be
forced to get a concrete precedent on the record so that Alaska
would not be subjected to this uncertainty and, if so, what
recourse exists through the legal system to do so.
MS. WALLACE answered that the only mechanism for this issue to
be decided by the Alaska Supreme Court would be for one of the
parties involved to appeal Judge Garton's decision, but that did
not happen. She said the Alaska Supreme Court does not issue
revisory opinions. Ms. Wallace said if there is further dispute
about the sweepability of the SBR or any other fund, she could
almost guarantee the Garton opinion would be cited; however, the
issue would have to be separately litigated, so the AFN v.
Dunleavy case would not be considered binding evidence. In
response to a follow-up question, she said either party can
appeal a decision.
1:59:24 PM
REPRESENTATIVE KREISS-TOMKINS asked Ms. Mills if she could speak
in more concrete terms as to why the administration did not
appeal to the Alaska Supreme Court given that the Alaska
Superior Court disagreed with the administration's legal
interpretation of the sweep.
MS. MILLS replied that the decision to not appeal a decision has
multiple facets. She said PCE is a unique fund, and everyone
was in agreement about getting the payments made, so it was not
a decision that the administration felt like appealing.
2:00:46 PM
CHAIR CLAMAN asked whether, specific to the PCE, it was Ms.
Mills' opinion that the court's decision would be binding on the
administration 10 years from now.
MS. MILLS answered that unless there is intervening supreme
court precedent that would reverse or overturn that position, it
is an injunction on the state that lasts.
CHAIR CLAMAN asked, "So, it's not just binding on this
administration; it would be binding on future administrations
unless the supreme court issued an opinion that would give a
basis to say that [Judge] Garton's analysis is flawed?"
MS. MILLS replied, "Yes, I believe that's correct."
2:02:04 PM
REPRESENTATIVE KURKA, regarding the authority to create funds
outside the GF, offered his understanding of the Constitution of
the State of Alaska that there is an intent to expressly
prohibit dedicated funds. He said it seems like [the
legislature] has been "playing a game to try to get around that
and to violate the intent of the constitution." He asked if the
constitution clearly delineates the legislature's authority to
create separate funds outside of the GF.
MS. MILLS said she thinks Representative Kurka was annunciating
DOL's position in the lawsuit, which was that when voters voted
on the GF, they did not think it was different from the Alaska
Energy Authority funds or any other funds. Instead of saying
that the term "general fund" had a specific meaning, the judge
found that the legislature can determine what the GF is and
determine "which funds are the general fund versus which funds
are not." She highlighted that that was not the state's
position. In terms of whether there is a place in the
constitution that allows the legislature to create separate
funds, she said, "I don't think the constitution ever
contemplated that, especially as it originally stood before the
constitution budget reserve." At that point, she said, the
constitution addressed expenditures in the treasury in general
terms. She continued:
But then you get the legislative authority in Article
2, which allows you to pass legislation, and you can
pass legislation that ensures different pots of money
go different places so that ... for accounting
purposes you know what's going on. But you still
can't dedicate those funds, and that's Article 9,
Section ... [7] that doesn't allow dedicated funds.
And so, ... you have funds, but they can't be
dedicated to specific purposes; they can still be
appropriated by the legislature, except for a few
exceptions.
CHAIR CLAMAN told Representative Kurka that Judge Garton noted
that the term "general fund" does not appear in the constitution
until 1986, when it appears in Article 9, Section 15,
establishing the permanent fund.
2:06:29 PM
REPRESENTATIVE CLAMAN asked Ms. Mills what her perspective was
regarding whether the permanent fund is part of the treasury.
MS. MILLS responded she does not think there is a clear answer.
She explained she thinks the treasury would be viewed as "the
big treasury," but there are arguments that the treasury "sits
in one place" and the permanent fund of the constitutional fund
"sits in another." Arguments on the PCE were regarding what the
GF is, for purposes of the sweep in interpreting the CBR. She
reiterated that [DOL's] thought was that the public did not know
about "all these little funds" and instead thought the GF is
that from which the legislature can appropriate; therefore,
"it's that universe of things that is in the general fund,
except for ... your constitutionally created funds."
REPRESENTATIVE CLAMAN summarized that there could be an argument
made that "treasury" refers to "every dollar that is ... owned
by the state," and he offered his understanding that Ms. Mills
was not certain "where that is from a legal analysis."
MS. MILLS said she would agree with that. Then she pointed out
that there is question concerning how "treasury" is used from
statute to statute.
REPRESENTATIVE CLAMAN asked whether there was reference to a
general fund prior to 1976.
MS. MILLS answered she does not know.
REPRESENTATIVE CLAMAN asked whether, if statute were passed now
to provide clarity, it would affect the sweepability "for right
now" or if disagreement would require going to court.
MS. MILLS said she thinks it would be accurate to say it would
not affect things now, because "you have to look at what the
statute was when the sweep occurred, not what a new statute
says." There are still many questions about the CBR, including
cases regarding appropriation availability and what goes into
the CBR. She said, "There are many surrounding questions that
ultimately the supreme court would have to ... weigh in on to
get a definitive answer."
REPRESENTATIVE CLAMAN asked if Ms. Mills would view the question
on the SBR as more to do with whether it is in the GF as opposed
to whether it is available for appropriation.
MS. MILLS confirmed that is absolutely the fundamental question
for the SBR.
REPRESENTATIVE CLAMAN summarized, "So, the availability for
appropriation is really not a particularly challenging issue on
that fund; it's more whether it's in the general fund or not."
MS. MILLS answered that is correct.
2:12:44 PM
MS. MILLS recalled that Representative Vance had asked about the
governor's constitutional amendment and the PCE and whether the
position had changed on that, and she reported she had just
received confirmation that the governor had not changed his
position on that and still wants to see the PCE
constitutionalized in order to protect the endowment and ensure
an annual payment.
2:13:39 PM
REPRESENTATIVE VANCE thanked Ms. Mills for the clarifying
information, which she said would be helpful in decision-making.
2:14:28 PM
MS. WALLACE, regarding options available to the legislature,
remarked:
Even though ... we are lawyers ..., we always hesitate
to jump right to the recommendation to solve this
issue by litigation because of the risk involved, but
while litigation is always an option to kind of
understand what the answer to this potential issue is,
another option that is available to the legislature is
to reverse the sweep and to reconstitute the statutory
budget reserve fund so that those funds do remain
available to the legislature to appropriate. So, ...
reversing the sweep, finding additional funds to make
up for any funds that were appropriated in HB 3003,
are all additional options, aside from litigation,
that the legislature has to pursue.
2:16:03 PM
CHAIR CLAMAN asked whether the opportunity for the legislature
to reverse sweep had not already passed because the money is
already in the CBR, which would require a three-quarter vote to
move it.
MS. WALLACE responded that the reverse sweep has always been an
appropriation out of the CBR fund back to the funds from which
the monies originated. She said it would continue to be "just
an appropriation" under Article 9, Section 17, from the CBR back
to the original sub-fund; the legislature would just be enacting
a separate appropriation. She said she assumed that would occur
retroactively to July 1, which would allow any appropriations
for the remainder of the fiscal year "to be funded out of those
balances." She continued:
A little bit of that ... appears to be a nonissue
based on the administration's separate announcement of
the manner or mechanism in which it's going to carry
out the sweep this year, meaning that it's going to
deem the FY 22 appropriations not available for
appropriation, so those funds will not be swept. But
... if the administration sweeps the money from the
SBR to the CBR, the legislature may withdraw that and
appropriate it from the CBR back to the ... statutory
budget reserve fund with a three-quarter vote, and
once it does that, there will be money in that to fund
future appropriations. So, if they did that
simultaneously and then used the funds for the
dividend, that would be an option available for the
legislature.
CHAIR CLAMAN proffered that that is different from the
Washington, Wyoming, Alaska, Montana, Idaho (WWAMI) funds,
because the administration's position on WWAMI funds were that
because the legislature had made an appropriation on the funds
before the end of the fiscal year, they were no longer available
for appropriation.
MS. WALLACE responded that is correct. She said the funds that
the House was looking to appropriate from the SBR were funds
that remained after the FY 22 appropriations in HB 69 were
accounted for. [The House] was only looking to appropriate the
balance, so to speak, of the SBR, and so while the House has
appropriated those funds in HB 3003, the position from the
administration is that those funds are not available because
they've been swept into the CBR.
MS. WALLACE, in response to a follow-up remark by Chair Claman,
confirmed that [at the time HB 3003] was being considered,
Legislative Legal Service's advice to [the House Finance
Committee] had been that "the funds were likely available based
on the AFN v. Dunleavy litigation and decision, based on the
analysis that we've already gone over in this hearing, but with
the caution that that was a superior court decision and that
there was some risk of using those funds because it wasn't
binding precedent on future courts."
2:22:00 PM
REPRESENTATIVE SNYDER expressed thanks for the helpful
discussion and emphasized that the last 5 or 10 minutes had been
enlightening.
2:22:24 PM
CHAIR CLAMAN announced that CSHJR 7(STA) was held over.
2:22:33 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:22 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 7 Additional Document - Topics and Questions for House Judiciary Committee Meeting on September 1, 2021.pdf |
HJUD 9/1/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - Alaska Constitution Article IX, Section 17 (Distributed by the HJUD Committee) 9.1.2021.pdf |
HJUD 9/1/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - Letter from Governor Dunleavy (Distributed by HJUD Committee) 8.25.2021.pdf |
HJUD 9/1/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - Order on Summary Judgment 3AN-21-06737CI (Distributed by HJUD Committee) 8.11.2021.pdf |
HJUD 9/1/2021 1:00:00 PM |
HJR 7 |
| HJR 7 Additional Document - Letter from OMB re Funds Available in the SBR (Distributed by HJUD Committee) 8.31.2021.pdf |
HJUD 9/1/2021 1:00:00 PM |
HJR 7 |