SENATE JOINT RESOLUTION NO. 14 Proposing an amendment to the Constitution of the State of Alaska relating to appropriations from the budget reserve fund. CO-CHAIR HOFFMAN, SPONSOR, explained that he introduced the bill in order to change the constitutional requirements to extract funds from the budget reserve (CBR) account from three-fourths to two-thirds of the members of each house of the legislature. Prior legislators have been reluctant to pay back the $5.2 billion in the budget reserve because of the high standard to extract funds. It has been said that as a result of the three-fourths vote, there have been votes that required additional appropriations in capital projects or operating projects. He maintained that was never the original intent of the constitutional amendment. Co-Chair Hoffman recalled when the concept of raising the standard was first brought up in the House. He pointed out the current financial position in Alaska, where there are several billions of dollars as potential savings. Co-Chair Hoffman emphasized that the proper procedure would be to repay the constitutional budget reserve and return to the original intent of the constitution. He thought there could be a simple majority, but that there should be a higher standard. 9:57:56 AM Senator Dyson asked about the committee's intention regarding the bill. Co-Chair Stedman replied that the intent was to pass it out of committee today. Senator Dyson requested that SJR 14 be held in committee for a few more days. Co-Chair Hoffman said he had no problem with that. 9:58:55 AM Co-Chair Hoffman related that there is an article from the Juneau Empire stating support for the bill (copy on file.) He referred to Senator Wilken's support for the ideas found in bill. Senator Elton calculated that under a two-thirds requirement it would take 14 votes in the Senate to access the CBR and 27 in the House, which is only a change of one less in the Senate and three less in the House. Co-Chair Hoffman agreed that the problem has been in the House. Three votes difference in the House lowers the bar quite a bit. 10:00:21 AM Co-Chair Hoffman MOVED to ADOPT Amendment 1, labeled 25- LS1350\A.1, Cook, 1/25/08: Page 1, line 1: Delete "an amendment" Insert "amendments" Page 1, line 2: Delete "appropriations from" Page 1, following line 7: Insert a new resolution section to read: * Sec. 2. Article IX, sec. 17(d), Constitution of the State of Alaska is amended to read: (d) 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. For  purposes of this subsection, each amount deposited into  the fund under (a) of this section shall be treated as  a repayment of money appropriated from the fund. If the  amount deposited under (a) of this section exceeds the  amount due in repayment, the excess amount shall be  treated as a credit to be applied as a repayment of  money appropriated from the fund in the future. The legislature shall implement this subsection by law." Renumber the following resolution section accordingly. Co-Chair Stedman OBJECTED for discussion purposes. Co-Chair Stedman explained that Amendment 1 moves the legislature away from the day-to-day, year-to-year management of the CBR. When remunerations from settlements are available, the monies go into the CBR as an offset of what is owed. Most likely there will be sizeable adjustments any time there is an audit request going out on PPT. Such a payment would offset what is owed and lower the debt. The state owes the CBR roughly $5 billion and has about a $3 billion balance. There is a high probability that a large sum of that balance could be paid back this year. Over the next several years the CBR could easily approach $8 billion to $10 billion. Co-Chair Stedman wanted the legislature to recognize that when claims were made for taxes or settlements, they would be returned to the CBR. There will need to be future discussions regarding what size the CBR should be. 10:04:02 AM Senator Elton quoted from the amendment, "for purposes of this subsection, each amount deposited into the fund". He asked if income earned by the fund is a deposit or if it only refers to revenues from the sources stated in the constitution. Co-Chair Stedman replied that it would not include realized or unrealized earnings. It is targeting settlements such as those from oil taxation, which could be very sizeable. 10:05:04 AM Senator Dyson thought the amendment did not quite get where the sponsor wants to go. It makes assumptions about optimal levels. Senator Dyson reported that he requested a recommendation of what the ideal level for the CBR is and he never received an answer. He applauded the intent of the amendment. He guessed that there was a formula that would guide the state. He stated support for having a high bar for removing money when the balance is below the recommended level and a lower bar when there is plenty of money. He wondered what other large enterprises use as a guiding formula for their rainy day accounts. Part of the discussion should involve expert advice. 10:07:45 AM Co-Chair Stedman thought that it would be very difficult to find a comparison to the state with its very large wealth. He did not think there was an exact model to use for comparison. 10:09:10 AM Co-Chair Stedman WITHDREW his OBJECTION to Amendment 1. There being NO OBJECTION, Amendment 1 was adopted. Co-Chair Stedman concluded that the intent of the amendment is to move from crisis management to planning for the future. At-ease: 10:09:48 AM Resume: 10:10:41 AM Co-Chair Stedman referred the committee to a copy of Article 09, Section (a), of the Constitution of the State of Alaska. He suggested members read it because it applies to the amendment and to Senator Elton's question regarding deposits to the fund.