SENATE BILL NO. 56 An Act relating to the budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska. Co-chair Pearce directed that SB 56 be brought on for discussion, referenced a draft CSSB 56 (Fin) (work draft 8- LS0453\U, Cook, 4/25/94), advised that the draft had been approved by Senator Phillips, and noted that Jim Baldwin worked with Legislative Legal Services to develop language that reflects the state's position. Co-chair Frank MOVED for adoption of CSSB 56 (Fin), "U" version, and requested unanimous consent. No objection having been raised, CSSB 56 (Fin) was ADOPTED. JIM BALDWIN, Assistant Attorney General, Dept. of Law, and JERRY BURNETT, aide to Senator Randy Phillips, came before committee. Mr. Burnett explained that the Finance draft repeals "the section from HB 58 and reenacts it with new numbers." Mr. Baldwin said that the bill was constructed to protect against the fact that a court may find the interpretation in HB 58 to be valid but not severable from other provisions. If passed, CSSB 56 (Fin) would clearly state the legislature's intent that it be separately enacted from HB 58 provisions found to be unconstitutional. In response to a question from Co-chair Frank, Mr. Baldwin said that language within the Finance draft is "fairly equivalent" to that within Amendment No. 1 for SJR 52. He acknowledged that language within CSSB 56 (Fin) does not answer "the succeeding fiscal year question." The bill merely defines the source of funding but does not solve the timing issue. Under art. IX, sec. 17(d) of the state Constitution, repayment to the constitutional budget reserve fund is to be made from the balance of the succeeding fiscal year. Under a literal interpretation, that means that repayment of 1994 withdrawals would be made from the remaining balance at the end of 1995. Mr. Baldwin noted that need to withdraw moneys from the budget reserve fund would indicate there would be no balance at the end of that fiscal year. Language thus speaks to the succeeding year when there possibly could be a balance. The state has argued that Judge Reese should be reversed on that point. Directing attention to language within CSSB 56 (Fin), Mr. Baldwin noted the definition of "unreserved, undesignated general fund balance" and the fact that transfer is to be made on or before December 16 of the following fiscal year. The bill requires that once the state has determined it has a surplus, payment be made by December 16 of the year following the year in which the surplus was determined. Co- chair Frank presented a scenario whereby the legislature withdrew moneys from the reserve to balance FY 94. The price of oil subsequently increased, and there is a balance of unrestricted revenues at the end of FY 94. He then voiced his understanding that bill language would "not necessarily sweep it in until FY 95 was finished, and we saw whether or not we had a balance after FY 95." Both Mr. Burnett and Mr. Baldwin acknowledged that that was the intent. Mr. Baldwin voiced his understanding that the amendment contemplates waiting "for another fiscal year to see if there was going to be a surplus." The amendment thus means that "If there is any outstanding obligation to the budget reserve fund, you're going to have to use that surplus to repay it." Both Co-chair Frank and Mr. Baldwin acknowledged that while the amendment might mean as above stated, that is not necessarily what it says. The amendment simply says, "When you have a surplus, you compute it and pay it by a certain date." Co-chair Frank asked if it is within legislative power to implement language to resolve the question. Mr. Baldwin responded affirmatively. The Co- chair than suggested that the issue be resolved at this time. End, SFC-94, #72, Side 1 Begin, SFC-94, #72, Side 2 Mr. Baldwin advised that he would develop language to accomplish that end. Co-chair Frank asked that the language cover situations where there are remaining balances in the fiscal year during which a withdrawal is made as well as succeeding fiscal years. He suggested that it would most likely "take years and years to pay back the budget reserve fund." Mr. Baldwin concurred. Co-chair Frank directed that CSSB 56 (Fin) be HELD in committee pending development of the new language.