SENATE BILL NO. 347 "An Act relating to the increase of an appropriation item based on additional federal or other program receipts." DAN SPENCER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET (OMB), OFFICE OF THE GOVERNOR, explained that SB 347 would change the "45 day rule" to a six month rule depending on the Legislative Budget and Audit Committee (LBA) approving the program. According to current statute, from the time that OMB sends an appropriation to LBA, there is 45 days for the Committee to review it for expenditures. Mr. Spencer emphasized that the current system works well. Mr. Spencer made reference to historical cases in which that created a problem. 1. Sitka Airport; 2. Department of Fish & Game test fisheries receipts; 3. Alaska Seafood Marketing Institute (ASMI) expenditures; 4. Payment of low taxes; and the 5. Homer spit timing issue. Mr. Spencer referenced the memo from Mike Greany, Legislative Fiscal Analyst, in regards to the Legislature becoming involved with the option to change the RPL "45 Day Rule". He noted that the memo states that by moving a bill midway through the Legislative Session, would give the Legislature the authority to "disappropriate". Mr. Spencer reiterated that the legislation would not be advantageous to the State. Representative Martin interjected that the legislation would provide a safety value for the Legislature to have better control of the total expenditures throughout any year. Mr. Spencer pointed out that there are no general fund program receipts, as the Legislature has restricted it to federal receipts, designated receipts and EVOCS receipts. Last year in Conference Committee, the EVOCS receipts were inadvertently left out of the House version and were then added back in the Senate version to accommodate the situation. The Administration has stressed that nothing contrary to the Legislature's intent is occuring. Representative Martin spoke to the controversy with the EVOC receipts in which $50 to $100 million dollars existed outside the Legislative Session for the Legislative Budget and Audit Committee to spend. He pointed out that with passage of the proposed legislation, LBA would be required to come before the full legislature in order to fill funding needs. Mr. Spencer stated that the debate preceded the approval of the appropriation. The Legislature knew that the appropriation was happening with regards to the EVOC concern. Representative J. Davies added that an agreement was made between the federal government, the Legislature and the Administration regarding how the Legislature should be involved and the Legislature agreed that the legislative involvement should be through the LBA Committee. Representative J. Davies agreed that some of those appropriations have been controversial, but that the process should not be discarded. Representative J. Davies commented that LBA deals with less than 200 situations per year, and that less than 1% go through the proposed process. He pointed out that the process does work and that LBA's oversight has caused the Administration to change course on a routine basis. Representative G. Davis agreed that there did not appear to be a problem with LBA unauthorized spending. He added that if there were a problem, who ever created it would end up paying if it were unacceptable to the Legislature. (Tape Change HFC 98-156, Side 2). JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, recounted the history of Section AS 37.07.080(h). This section comes from a dispute that Governor Hammond had with the Legislature over how to handle the spending of anticipated federal receipts and other custodial and trust receipts which the Governor believed was not part of the State Treasury. In 1975, the Legislature passed a statute which required LBA approval for interim-type spending decisions. A long discussion began between the Governor and the Legislature which culminated in a lawsuit, Kelley versus Hammond. That case went before Judge Stewart to address the issues in dispute: 1. Whether federal receipts had to be appropriated or not; 2. Whether the Legislature could delegate certain lawmaking powers to the LBA Committee; and 3. Transfer between appropriations. Mr. Baldwin continued, a stalemate was reached in the Supreme Court. The Administration won on the ability to delegate to the LBA Committee lawmaking powers to approve budget revisions and the ability to approve transfers to appropriations. The Legislature responded by taking away the power to make appropriations. The Administration did not accept a role for the LBA Committee to approve budget revisions during the interim or the approval of unanticipated federal or other custodial trust receipts. At that time, the Governor and the Legislature agreed that there must be a way to work out the problem. The Governor agreed to wait while the Legislature passed a constitutional amendment. The resolution was turned down by a vote of the people. The resolution would have allowed the Legislature to give lawmaking powers to the LBA Committee to exercise during the interim. At that time the Legislature became dissatisfied having no role for the LBA Committee, and discussions continued as to whether the case should be appealed. That decision resulted in the statute currently before the Committee. SB 347 was HELD in Committee for further consideration.