SENATE BILL NO. 72 "An Act making and amending appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." ANNALEE MCCONNELL, Director, Office of Management and Budget was invited to join the committee. She said that Commissioner Poe would conduct the explanation of the Office of Management and Budget handout. BOB POE, Commissioner, Department of Administration was invited to join the committee. He explained the Projected Daily Cash Sufficiency Balances handout sheet. (Handout attached to original file.) ROSS KINNEY, Deputy Commissioner, Department of Revenue was invited to join the committee. He explained royalty payments from the Department of Natural Resources, tax receipts, payroll and university payments. Commissioner Poe, with reference to the handout, continued explaining that by the end of March we were above zero. The first part of April we were still also above zero. However, when payments around the tenth of April become due they go up. By the end of April they go below zero and the end of May they are barely covering costs. The schedule shows that they never really recover above zero after that. This was referred to as "checkbook accounting". Therefore, after the 25th of March they should not be writing any more checks. Co-chair Parnell asked about a possible identity plan. Mr. Kinney said this was the only consideration of the general fund and it was a temporary situation. Monies could be borrowed from other sub funds pending commitment from this body. It would be like issuing a revenue anticipation note. However, he noted that they were concerned about what to pick and choose. Commissioner Poe explained the sub funds. He cited oil revenues for an example. Co-chair Parnell was not suggesting that they go below zero and then use sub accounts. This would just be used as a contingency plan. According to Commissioner Poe, however, this did not mean that the State was out of money. Co-chair Parnell asked if there were any other charts or graphs that Commissioner Poe might want to present to the committee. The Commissioner responded that he had concluded his testimony unless there were further questions by the committee members. Co-chair Parnell thanked Commissioner Poe and Mr. Kinney for their presentation. Co-chair Parnell then asked Ms. McConnell to remain at the table for any questions the members may have. Ms. McConnell explained that the language used was the same as in previous years. Mr. Kinney referred to $132 million dollars and how it was to be used. Ms. McConnell explained what was corrected with what funds from that amount. Senator P. Kelly asked about the availability of funds. Commissioner Poe responded. Co-chair Parnell asked the number necessary to meet the appropriations of FY 99. Ms. McConnell said approximately $1.2 CBR, total, was needed. Co-chair Parnell asked for an exact figure? Ms. McConnell said different numbers were being heard because of different oil returns on a daily or weekly basis. It was impossible to predict the requirement to meet the expenditures the Legislature set aside. Co-chair Parnell asked where we were presently. Mr. Kinney replied that oil had dropped below $10/barrel. The price had averaged $12.75/barrel up until now. He advised that the number is continuously subject to change, however, and at present it is not looking positive. Senator Torgerson asked Mr. Kinney to explain the contingency plan, which authorized them to borrow money. Mr. Kinney said by statute this authorization was granted to the Commissioner. The problem they were facing was that there was no money coming in at a later date to pay this money back. A substantial draw was expected to be taken from the CBR to meet the need. They will also need an appropriation for interest. Ms. McConnell further said that the reason for setting up the CBR the reason was due to this volatility. The closer we get to the end of the fiscal year, agencies need to adjust their monies. This tended to create an untenable situation. Mr. Kinney said it would take about ninety days to procure a packet to go to the market for a loan. In response to a query from Senator Parnell, he said that without the possibility of payback it would be useless to prepare this packet for the loan. Senator Torgerson asked if they would be required to come back if they borrowed money to get authorization from the Legislature? Mr. Kinney said the Commissioner could only borrow if he had the funds to repay the interest necessary plus the amount. Money would have to be paid back by the end of the year. Otherwise it would have to be paid back on a long-term basis. Senator P. Kelly asked if they structured how government could be financed differently would this be of help or an incursion of the situation. Mr. Kinney explained that there was plenty of money available, however blocks are drawn around them and they need a super-majority vote to get around this. For instance, he said the Department of Education did not really need to go out to borrow monies. Ms. McConnell referred to the State income tax issue. She explained the revenue anticipation. Sufficient money could be received within a few months. She said, however, that the present situation was different. They would not be facing the same issue as to what they need if this situation was structured correctly. Commissioner Poe also responded. There were other bonds the State had issued recently and they have gotten high ratings. It is known that the State does have money. Co-chair Parnell asked when the next forecast would come in from Dr. Logsdon. Mr. Kinney said possibly in March. Ms. McConnell also concurred saying that by approximately the first of April the forecast would be ready. Co-chair Parnell thanked Ms. McConnell, Commissioner Poe and Mr. Kinney. He HELD SB 72 in committee. He then called SB 83 and asked Ms. McConnell to remain at the table to assist the committee members.