HB 38-APPROPRIATION LIMIT; GOV BUDGET  HJR 2-CONST. AM: APPROP LIMIT  2:03:39 PM CHAIR VANCE announced that the final order of business would be HOUSE BILL NO. 38, "An Act relating to an appropriation limit; relating to the budget responsibilities of the governor; and providing for an effective date" and HOUSE JOINT RESOLUTION NO. 2, Proposing amendments to the Constitution of the State of Alaska relating to an appropriation limit. 2:03:56 PM The committee took an at-ease from 2:03 p.m. to 2:07 p.m. 2:07:04 PM CHAIR VANCE asked the bill sponsor to highlight key differences between HB 38 and HJR 2. 2:07:40 PM REPRESENTATIVE WILL STAPP, Alaska State Legislature, prime sponsor of HB 38, indicated that the main structural difference between the two proposals was the percentages, adding that the statutory limit was set at 11.5 percent. Further, conditional language was included in HB 38, which tied it to HJR 2, effectively making it so one could not properly function without the other. 2:08:58 PM REPRESENTATIVE EASTMAN asked the bill sponsor to contrast the constitutional limit against the statutory limit of 11.5 percent. REPRESENTATIVE STAPP responded that the constitutional limit, as proposed, was 14 percent. REPRESENTATIVE EASTMAN asked why the statutory limit was set at 11.5 percent, as opposed to keeping it consistent with the constitutional limit of 14 percent. REPRESENTATIVE STAPP deferred to his staff, Mr. Aoto. 2:09:32 PM BERNARD AOTO, Staff, Representative Will Stapp, Alaska State Legislature, said the 11.5 percent was calculated based on spending habits as exhibited by the legislature in the late 1970s prior to the oil boom of the 1980s and the constitutional cap, as provided in 1983. REPRESENTATIVE EASTMAN asked whether the governor's [FY 24] budget proposal would fall underneath the statutory limit proposed in HB 38. MR. AOTO stated that the governor's proposed budget would breach the statutory limit. He added that the legislature would have the ability breach the statutory limit, as long as appropriations remained underneath the constitutional limit. He noted that neither HB 38 nor HJR 2 would impact the FY 24 budget, as both were intertwined, and the constitutional provision required a vote of the people to go into effect. REPRESENTATIVE EASTMAN considered a scenario in which HB 38 passed the legislature sooner than HJR 2. He sought to confirm that the statutory limit would not go into effect until the constitutional provision was enacted. MR. AOTO answered yes. 2:11:35 PM REPRESENTATIVE GROH asked whether the statutory limit included exceptions related to the Alaska Mental Health Trust Authority (AMHTA). MR. AOTO acknowledged that the exceptions differed between HJR 2 and HB 38; however, he shared his belief that the exceptions "were supposed to match." He remarked, "the mental health funds, as an exception in one, are meant to keep it in line with the other." REPRESENTATIVE GROH requested a more extensive explanation. 2:12:49 PM REPRESENTATIVE GRAY inquired about the vote threshold required to surpass the statutory spending cap. MR. AOTO shared his understanding that a two-thirds vote of the legislative body was needed to override the statutory limit. He reiterated that because HB 38 was tied to the constitutional limit provided in HJR 2, the statutory limit would not be effective until the constitutional provision was voted on by Alaskans and subsequently enacted. REPRESENTATIVE GRAY questioned why the statutory limit was tied to the constitutional limit. MR. AOTO stated that the constitutional limit served as an enforcement mechanism, as the legislature had the ability to override the statutory spending limit with a two-thirds vote. REPRESENTATIVE GRAY expressed confusion as to the vote threshold required to surpass the proposed statutory spending limit. MR. AOTO deferred to Ms. Marx. 2:16:10 PM REPRESENTATIVE STAPP asked Representative Gray to rephrase the question. REPRESENTATIVE GRAY inquired about the vote count required to surpass the statutory limit. Additionally, he asked whether the constitutional limit could be surpassed with a vote of the legislature. MR. AOTO shared his understanding that the constitutional [limit] could not be surpassed by the legislature. REPRESENTATIVE GRAY remarked: Correct me if I'm wrong, if we just had the statutory 11.5 percent we would just need 21 votes to override, but if we put the constitutional amendment in place, there's language that states that we would need two-thirds to override that 11.5 percent. We can't go above 14 percent but we could go above 11.5 percent with a two-thirds vote; however, without that constitutional amendment, we could override that 11.5 percent with 21 [votes]. REPRESENTATIVE GRAY asked whether that was correct. REPRESENTATIVE STAPP clarified that Representative Gray's summation was not entirely accurate. He reminded the committee that if HJR 2 did not pass, the statutory limit would cease to exist due to the conditional language in the bill. CHAIR VANCE asked Ms. Marx to speak to the vote thresholds required to surpass a statutory spending limit and a constitutional spending limit. 2:18:54 PM MARIE MARX, Attorney, Legislative Legal Services, LAA, clarified that the legislature could not exceed the constitutional limit, as the state constitution was binding on all the people of Alaska, including the legislature. CHAIR VANCE inquired about the repercussions for exceeding the constitutional limit. MS. MARX speculated that the action would be subject to litigation and resolved through the courts. CHAIR VANCE asked whether there had been instances of historical action against the legislature for similar scenarios. MS. MARX did not know that answer with regard to the appropriation limit. She referenced the 2020 lawsuit pertaining to the RPL process [Eric Forrer v. State of Alaska], in which a citizen asserted that using RPLs to allocate certain federal funds was unconstitutional and could only be done with an act of the legislature. She added that there were other recent instances, in addition to the aforementioned case, of citizens suing the legislature for unconstitutional actions. 2:21:53 PM REPRESENTATIVE CARPENTER asked how the courts had responded in the past to the violation of an appropriation statute. MS. MARX stated that the statutory limit was not binding in regard to legislative spending. She stressed that, per the state constitution, the legislature had the absolute power of appropriation, which could not be limited by statutory authority. She reiterated that constitutionally, the legislature was not bound by statutory appropriation limits. REPRESENTATIVE CARPENTER inferred that the courts would likely rule in the legislature's favor if a citizen were to sue the state for violating the statutory appropriation limit. 2:24:21 PM REPRESENTATIVE EASTMAN inquired about the two-thirds vote that Mr. Aoto had referenced earlier. He questioned the mechanism by which the legislature could violate statute with a two-thirds vote. MR. AOTO stated that he had misspoken. 2:24:49 PM REPRESENTATIVE GROH pointed out that there was a provision in HJR 2 that allowed for an affirmative vote of two-thirds of each legislative body to appropriate an additional amount for capitol improvements. He asked whether that had been the point of confusion. MR. AOTO remarked, "In all honesty, the entire line of questioning was very confusing." 2:25:37 PM REPRESENTATIVE EASTMAN shared his understanding that unless the legislature could come up with an affirmative two-thirds vote of both bodies to pass a constitutional amendment, any spending limit would not be enforced by the courts against the legislature. Effectively, the legislature could spend as much as it wanted, he surmised. He asked whether that was correct. REPRESENTATIVE STAPP remarked, "All the more reason to have a constitutional spending limit to have some sort of restraint on individuals." MR. AOTO confirmed that Representative Eastman's summation was accurate. He pointed out that the legislature had breached the existing statutory spending limit several times in recent years; however, the current constitutional limit had not been surpassed. REPRESENTATIVE EASTMAN pointed out that it would be extremely difficult to breach the existing constitutional spending limit. 2:27:23 PM CHAIR VANCE opened public testimony on HB 38; after ascertaining that no one wished to testify online or in person, she closed public testimony. She announced that HB 38 and HJR 2 would be held over.