SPONSOR SUBSTITUTE FOR SENATE BILL NO. 35 "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; making 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." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken noted this legislation, sponsored by the Senate Rules Committee at the request of the Governor, proposes the FY 04 operating budget and was first heard in the Senate Finance Committee on April 14, 2003. He noted the distribution to members of a proposed committee substitute, Version "U". Senator Hoffman distributed a legal opinion issued by Tamara Cook, Director of the Division of Legal and Research Services, dated March 3, 2004, relating to the principles of the Public Meetings Act, specifically to adequate notice of hearings on legislation. Senator Hoffman commented to the importance to the public to know which legislation would be heard in a committee. He understood that a bill could be brought before a committee without advance notice if that bill had been previously noticed for a hearing; however, he remarked it is unreasonable to expect the public to adequately track each bill that has had a previous hearing. Senator Hoffman was unaware that this bill would be brought up until late the previous night and cited the last paragraph of the aforementioned memorandum as follows. The Select Committee on Legislative Ethics is charged with determining how the legislative ethics statutes, including AS 24.60.037, apply to certain fact situations. (AS 24.60.160) I, frankly, have no idea whether any subject matter notice of a meeting is required under AS 24.60.037 or, if it is, whether the notice provided in the situation you describe is inadequate for purposes of adhering to open meetings principles. In any case, advice I might give is not binding on the Select Committee. (AS 24.60.158) Senator Hoffman stated that as a layperson, he was unsure that consideration of this bill would meet the requirements of the Open Meetings Act, so he therefore requested a determination by the Select Committee on Legislative Ethics. He therefore requested that no action be taken on this legislation until adequate notice has been provided. Co-Chair Green moved to adopt CS SB 35, 23-GS1002\U, as a working document. Co-Chair Wilken objected for an explanation. Co-Chair Green explained this committee substitute provides an increase to the education foundation funding formula. AT EASE 9:28 AM / 9:28 AM DEB DAVIDSON, Staff to Co-Chair Green, detailed that the committee substitute appropriates funds for K-12 education and the University of Alaska in the amount requested by Governor Murkowski in his proposed FY 04 budget. She furthered that Section 3 of the committee substitute contains standard language to transfer funds from the Constitutional Budget Reserve (CBR) fund. Section 4, she concluded, provides language stipulating that contingent upon approval of access to the CBR with a three-quarter-majority vote of both bodies of the legislation; an additional appropriation could be made to K-12 education and the University of Alaska. Senator Bunde asked the amount of funding for FY 04 requested by the Governor. Ms. Davidson replied that the allocations provided in Sections 1 and 2 for K-12 education and the University of Alaska are the amounts requested by the governor based on the current foundation funding formula. Senator Bunde identified the $82 million referenced earlier and asked if $5.8 million was the intended appropriation for the University of Alaska. Ms. Davidson affirmed. Senator Bunde asked the reason for this amount. Co-Chair Green responded this funding is intended to offset increased University expenditures for the Public Employees Retirement System (PERS) and the Teachers Retirement System (TRS). Senator Bunde asked if the PERS/TRS cost to the University is $5.8 million. Co-Chair Green answered the cost is higher, and that this appropriation would provide a portion of the necessary funds. Senator Bunde commented that this appropriation would not fund the entire amount, despite the challenge to raise the remaining funds necessary. Co-Chair Green replied that certain employees of the University might not be included in the PERS/TRS programs, and instead hold federally funded or grant funded positions. Senator Hoffman requested an explanation of Section 4 of the proposed committee substitute. Ms. Davidson explained that the provision of Section 4 is contingent upon the approval of this bill by a three-quarter vote of the legislature. She furthered that the amount of money appropriated in this section occurs only upon legislative approval to access funds from the CBR. Senator Hoffman asked if only $82 million would be withdrawn from the CBR. Ms. Davidson could not say the exact amount that would be appropriated from the CBR. She noted that the CBR draw would be the difference in the total amount appropriated in the FY 05 budget and the amount of revenues received. She stated that if the difference is larger than $82 million, the full amount might be withdrawn from the CBR, but if the budget gap were smaller, less would be required from the CBR. Senator Hoffman reiterated his comments in support of the committee substitute to SB 1, but cautioned against spending from the State's savings account before having a complete understanding of the total financial position. He stated that spending from the general fund is better policy. He noted that the legislature would be addressing the operating budget over the next few months and recommended that decisions on this matter be delayed for a few days for further review. Senator Olson remarked that the matter in which this committee substitute is presented is uncommon. He pointed out that Section 5 provides that authority to withdraw funds for the increased education appropriation from the CBR would be retroactive to July 1, 2003. He noted this would affect two budget cycles, although the time period to consider this action is limited. Co-Chair Wilken affirmed. Senator Olson found this "highly unusual". Co-Chair Wilken removed his objection and the committee substitute was ADOPTED. Co-Chair Green remarked that the public is "fully aware" of the dynamics of funding budgets each year. She expressed intent to pass a budget that "fully funds [education] very early". She disputed Senator Hoffman's comments regarding spending from the State's savings account first. She cited Ms. Davidson's testimony that revenue in relation to expenses is considered first. She informed that currently the amount of revenue generated is strong and if it continues to increase, further discussion of an "ominous draw" from the CBR would not be an issue. She noted that economists and revenue forecasts predict continued revenue increases, which would provide adequate funds to fully fund the education increase. She spoke to the need to "hold down" special interest requests that would impact the CBR. She stressed that if funds were withdrawn from the CBR they should be for education expenses. She stated this is the reason for the provisions in the committee substitute. She expected that school districts would be appreciative of this legislation after many years of requests. She suggested that if some Committee members require additional time to consider this proposal, they have not been listening to the needs of districts for several years. Senator B. Stevens supported modification of SB 1 and he supported an appropriation bill that provides for the funding increase for K- 12 education. He remarked that this concept "puts forward" the priority of the twenty-third legislature, which is Kindergarten through University of Alaska education. He was willing to commit up to 42 percent of the budget "up front" to education to allow educators to "know their budget" and to eliminate the question of whether adequate funding is available for the increased base student allocation. He accessed that adequate funding would be available in the State budget to fund this increase in FY 05 and future years. He pointed out that multiple funding sources are available to the legislature to appropriate. He reiterated that increased funding for education is "priority number one" and once addressed would allow consideration of other matters. Senator Hoffman "wholeheartedly" agreed, funding education makes good public policy; however, he stressed that general funds should be used. He questioned a proposal to utilize CBR funds when general funds were available. He suggested that if increased education funding is the number one priority, then it should be funded from the general fund with only a simply majority vote of the legislature, rather than from the CBR, which requires a three- quarter majority vote of the legislature to authorize. He announced he would likely vote in favor of this bill, but against the motion relating to the effective date. He indicated he would then reconsider the proposal after the bill passed the House of Representatives and was before the Senate again. Senator Hoffman recalled the initial legislation that established the CBR account, noting he served as chair of the House Finance Committee when it was debated and was therefore informed on the subject. He stressed the intent that the CBR be utilized as a savings account only after all aspects of the budget are considered, including public safety and health care appropriations. Senator Olson also supported increased funding for education but found the proposal to appropriate from CBR objectionable. He acknowledged that the public might be aware of the budgetary process, but pointed out that not permitting public testimony on the matter prevents the legislature from being fully aware of the situation. Senator Bunde relayed discussions he has had with school board representatives in which he learned that districts are required to issue "pink slips" to staff and employees if adequate funding for positions is in question. He stressed the benefit of providing assurance of this funding as soon as possible. Senator Bunde continued that the oil and revenue forecasts predicting the future of the CBR have always been incorrect. He doubted that an annual budget would not require funding from the CBR, and therefore argued that the issue of granting access to withdraw funds from the CBR is irrelevant. Senator B. Stevens pointed out this legislation does not specify an amount that would be withdrawn from the CBR, but rather provides for a withdrawal of the amount necessary. Co-Chair Green offered a motion to report CS SB 35, 23-GS1002\U from Committee with individual recommendations. Senator Hoffman objected and spoke to the Public Meetings Act. He charged that adequate public notice was not provided and asked why action could not be delayed until the following Monday. Co-Chair Wilken noted the original version of SB 35 was the proposed FY 04 operating budget, and that this committee substitute is a simple appropriation that does not require several days to understand. He stressed the importance to expedite the legislation and assured that opportunity would be available to further consider the legislation. Senator Dyson commented that he prefers a significant amount of time to consider matters, but was satisfied that the education funding increase is near the amount the Governor has proposed for education funding and therefore did not require additional time to review the legislation. He added that he considers amendments offered on the Senate floor to be questionable in their adherence to the public notice provisions of the Public Meetings Act, given that Senators are provided no time to consider the implications. He surmised that the offering of this committee substitute is not a unique practice. SFC 04 # 30, Side B 09:50 AM Co-Chair Wilken asked if Senator Dyson was speaking to the motion to report the bill from Committee. Senator Dyson replied that he was speaking to the objection to the motion. He informed that he tried to attend and participate in a Minority Caucus meeting that had been publicly noticed, but was asked to leave. Co-Chair Wilken directed the Members to cease commenting on the Open Meetings Act. Co-Chair Green told of "endless" correspondence relaying "pleas" from many organizations representing education and children. She remarked that this legislation represents the requests and would allow districts to plan their budget year. Senator Hoffman removed his objection citing his earlier comments. Senator Olson pointed out that Section 3 of the bill does not specify the amount that would be withdrawn from the CBR and expressed his apprehension of "signing a blank check". Co-Chair Wilken commented this Committee has "heard the school bell; it's been rung." He continued," This legislation is the way that we can answer the call. There was no objection and CS SB 35 (FIN) MOVED from Committee. AT EASE 9:53 AM / 9:55 AM