CS FOR SENATE JOINT RESOLUTION NO. 3(JUD) Proposing an amendment to the Constitution of the State of Alaska relating to an appropriation limit and a spending limit. This was the sixth hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that this legislation would result in a Constitutional spending limit. Amendment #4: This amendment deletes language in the committee substitute, Version 23-LS0296\B on page one, line two as follows. , and to deposits into the budget reserve fund In addition, this amendment deletes all language on page two, line 30 through page three, line four of the Version "B" committee substitute. The language being deleted reads as follows. Sec. 2. Article IX, sec. 17 (c), Constitution of the State of Alaska, is amended to read: (d) The [IF AN APPROPRIATION IS MADE FROM THE BUDGET RESERVE FUND, UNTIL THE AMOUNT APPROPRIATED IS REPAID, THE] amount of money in the general fund available for appropriation at the end of each [SUCCEEDING] fiscal year shall be deposited in the budget reserve fund. The legislature shall implement this subsection by law. New Text Underlined [DELETED TEXT BRACKETED} Furthermore, the amendment deletes language on page three, lines nine through eleven of the committee substitute, version "B" as follows. …The 2004 amendment relating to deposits to the budget reserve fund (art. IX, sec. 17(d) first applies at the end of the fiscal year 2005 and applies thereafter. Senator Dyson, the bill's sponsor, moved to adopt Amendment #4. He stated that this amendment is being offered in response to a question from Senator Hoffman regarding whether this legislation violates the single subject rule, by specifying "in this Constitutional amendment legislation" where the money would be deposited. Co-Chair Wilken objected for further clarification. Senator Dyson explained that this amendment would delete language that specified, "where any excess monies above the limit would be deposited." As a result, he continued, the original Constitutional language that specifies that excess funds would be deposited into an interest bearing account would be retained. The original language, he continued, provides the Legislature with the flexibility to deposit those funds wherever they decided, to include the Constitutional Budget Reserve (CBR) and the Statutory Budget Reserve. LUCKY SCHULTZ, Staff to Senator Fred Dyson, noted that this amendment would eliminate the section in the Version "B" committee substitute that referenced the deposit of funds into the CBR. He shared that in order to avoid violating the single rule order, "the decision was made to not encumber the resolution" with this CBR issue. Co-Chair Wilken understood therefore that the affect of the amendment would be to remove the requirement that any excess funds must be deposited into the CBR. Continuing, he stated that the removal of this language would provide the Legislature the option of depositing funds either into the CBR or the budget reserve. Mr. Shultz summarized that were this amendment adopted, the original CBR language would be unchanged. Furthermore, he stated, the requirement that any draw from the CBR fund must be repaid, would continue. Co-Chair Wilken removed his objection. There being no further objection, Amendment 4 was ADOPTED. Amendment #3: This amendment inserts "and except as provided in (d) and (e) of this section" after "section" in Section 1, Section 16 on page one, line six of the Version "B" committee substitute. Furthermore, this amendment deletes all material in Version "B", Section 16, subsection (d) on page two, lines 23-29 and replaces it with the following. (d) An appropriation that exceeds the appropriation limit under this section may be made for any public purpose identified in a declaration of emergency that is issued by the governor as prescribed by law. (e) If the governor declares that an extraordinary circumstance exists, upon the affirmative vote of at least two-thirds of the members of each house, this legislature may adopt an appropriation that exceeds the appropriation limit under this section to address the extraordinary circumstance. The declaration shall identify the specific extraordinary circumstance, specify the amount of each appropriation the governor requests, and identify the time period during which expenditures under each appropriation will be made. Senator Dyson moved to adopt Amendment #3, and objected for explanation. Mr. Shultz explained that during previous Committee hearings on this bill, there was disagreement as to whether extraordinary circumstances and emergencies "should be lumped together." Upon further review, he continued, the determination was that the Governor should be able to declare an emergency "as he does now without the necessity of having to convene the Legislature" in order to acquire a two-thirds approval. Therefore, he continued, this amendment would serve to separate the extraordinary circumstance language from the emergency language and thereby allow the Governor to declare an emergency, as currently allowed under law. Furthermore, he stated, the extraordinary circumstances language has been retained in that the Governor could declare an extraordinary circumstances with the requirement that its appropriation must be approved by a two-thirds vote of the Legislature. This action, he declared, would provide the Governor and the Legislature "with broad latitude" to address whatever extraordinary circumstance might develop. Co-Chair Green asked whether the Committee would be addressing, for the record, the definition of what would be recognized as an extraordinary circumstance. Mr. Shultz stated that rather than identifying what would constitute an extraordinary circumstance in this legislation, the sponsor desires to allow the Governor and the Legislature to make that determination "at the time." Co-Chair Green voiced objection to the amendment. Co-Chair Green removed her objection. Co-Chair Wilken acknowledged that there is concern about the definition of extraordinary circumstance. Co-Chair Green reminded the Committee that, approximately four years prior, there had been "terrible difficulty" in arriving at the definition of an emergency and the declaration of an emergency. Therefore, she expressed her "concern that the term extraordinary circumstances could be expanded to mean anything." She requested that, before the Committee includes this language in any Statute, further legal analysis be conducted, as there could be a variety of interpretations. She asked whether other states' experiences in this field could be provided. Mr. Shultz noted that the State of Connecticut, which has similar legislation in their Constitution, segregates emergencies and extraordinary circumstances. Continuing, he identified the limitations or "sidebars" that Connecticut has placed on extraordinary circumstances, are limited to specifying that "repayment of bonds, loans, or other forms of indebtedness" would not be allowed under that definition. Senator Dyson voiced that the amendment's language should be included in the Legislation in order to allow the State to address things "that are unforeseen at the present time:" to include "major construction projects" that might be in the State's future that might require the State to expand its infrastructure, train craftsmen, and to expand the State's ability "to supervise and regulate major projects." He stated that this amendment was carefully drafted to separate the terms emergency and extraordinary circumstances, in order for an emergency to be declared as currently allowed, and in order to provide the Governor with the ability to exceed the spending limit for an extraordinary circumstances, provided the Legislature supports it with a two- thirds vote. Co-Chair Wilken stated that this language suggests that the extraordinary circumstance determination must begin with the Governor. He asked whether the Legislature could initiate it, and in that case, how would the situation be coordinated with the Governor, who may or may not support the Legislature's position. Senator Bunde voiced the desire that both the Legislature and the Governor could initiate the extraordinary circumstance action and that both must agree before it advances. He reminded the Committee of the unforeseen disruption caused by the Good Friday earthquake in 1969 that required $900 million to address. Therefore, he stated, substantial flexibility must be maintained in order to continue the balance of power between the Governor and the Legislature. Co-Chair Wilken stated that such things as earthquakes and oil spill disasters are not the concern being raised, as, he continued, the concern arises "more from things that are probably less important to the people but more important to the politics that could get out of hand here." Senator B. Stevens voiced agreement with the concept of providing a mechanism for the Legislature to initiate extraordinary circumstance action, and he declared that the Governor's ability to veto Legislative action would provide the tool to agree or disagree with that action. Therefore, he stated, the Governor's ability to veto or support the Legislative initiative and the Legislature's ability to approve or disapprove by way of the two-thirds vote requirement would provide the balance of power. Senator Dyson asked that thought be given to the mechanism through which the Legislature could initiate extraordinary circumstance action. CHERYL FRASCA, Director, Office of Management and Budget, Office of the Governor, observed that the Legislature would be able to indicate their wishes regarding a Governor's extraordinary circumstance initiative by their lack of or support by a two-thirds vote. Senator Dyson asked Ms. Frasca her opinion in regards to whether the Legislature should be able to declare an extraordinary circumstance. Ms. Frasca responded that she would check with the Department of Law; as she noted, an issue could result were the Legislature's declaration in the form of a resolution, as the Governor is not permitted to veto a resolution. Senator Dyson understood therefore, that while Senator B. Stevens would be correct in that the Legislature could initiate a resolution declaring an extraordinary circumstance and appropriate funds in support of that resolution, the Governor could veto the appropriation. Senator Dyson moved to withdraw Amendment #3. There being no objection, Amendment #3 was WITHDRAWN from consideration. AT EASE 9:41 AM / 9:44 AM Amendment #5: This amendment, drafted to Version "B" deletes the word "Reconsideration" in Section 30, page three, line seven and replaces it with "Repeal." In addition, Amendment #5 deletes "and applies thereafter" in Section 30, page three, line nine. Furthermore, Amendment #5 deletes all material in Section 30 (b) on page three, lines 12- 17 and replaces it with "(b) Section 16 of Article IX (appropriation limit) is repealed on July 1, 2009." Senator Dyson explained that this amendment is offered for review purposes only as it would result, if adopted, in "a significant policy change." Co-Chair Wilken reiterated that this amendment is for review purposes and that it might be formally offered at a later time. Senator Dyson concurred. He explained that this amendment would provide a termination date for this legislation, "four years out," unless the Legislature provides for another Constitutional amendment on a State election ballot. He stated that this approach would provide a four-year window to observe how the legislation performs. He noted that the citizens of the State would be provided the ability to support the legislation, or a modified version of the legislation at that time were the Legislature to support its being offered for continuation. Senator Dyson opined that a spending limit would be supported by those voters who might not understand some of the issues that might be negatively affected in the future by a unforeseen situation. Continuing, he noted that in four years time, there might be a need to modify the spending limit legislation, and he noted that as the resolution is now written, it would be automatically placed on the ballot, without the requirement for modification. He declared that spending caps are popular with the voting public. The decision regarding whether the legislation might require some modification before it is again placed on the ballot should be, he attested, a policy call made in this Committee. Amendment #6: This amendment, drafted to Version "B," deletes the word "Reconsideration" in Section 30 on page three, line seven and replaces it with "Repeal." In addition, Amendment #6 deletes "and applies thereafter" in Section 30, page three, line nine. Furthermore, Amendment #6 deletes all material in Section 30 (b) on page three, lines 12-17 and replaces it with the following language. (b) On July 1, 20009, Section 16 of Article IX (appropriation limit) is repealed and readopted as it read on January 1, 2003. Senator Dyson stated that Amendment #6 is presented for Committee review, in the same manner as Amendment #5. This amendment, he continued, would repeal the legislation but would reinstitute the spending cap that was put into effect in approximately 1982, which he stated, some argue to have been ineffective. He stated that this language would leave the Legislature with nothing and require that "one-third of the budget be expended on capital." Senator Dyson asked the Members to review these amendments and the subsequent policy calls they might present. Senator Dyson stated that the Legislative Finance Division would be forthcoming with an additional amendment, as they have determined that language in the bill pertaining to an "average in the formula" does not do what was intended. Ms. Frasca also noted that there would be another Legislative Finance amendment that would address a duplication in services issue. Senator Dyson commented that he is "frustrated by the process but absolutely delighted by the product" that is being developed. He noted that similar legislation with "similar conclusions" is being addressed in the House of Representatives. The bill was HELD in Committee.