Proposing amendments to the Constitution of the State of Alaska repealing provisions relating to the constitutional budget reserve fund and providing that the balance in the fund be deposited into the budget reserve fund established by statute.

During the 1980's there was an enormous backlog of oil tax disputes, equaling billions and billions of dollars. These disputes were partially a result of our inexperience in establishing workable tax policies, and the complicated calculations required. Collection of these tax settlements was anticipated as a result of litigation or negotiation. These large amounts of collected funds were seen as windfalls and, since the Legislature might be tempted to rapidly spend them, the Constitutional Budget Reserve (CBR) fund was devised to collect these funds and make them difficult to access. This fund did several things:

1. Funds would be available to fill the gap between the amount available for appropriation in a given year which is less than the previous year's budget, with a majority vote.
2. Any other use of the fund would require a three-quarters vote.
3. All money that is used is considered borrowed and must be paid back.
4. Any money available for appropriation at June 30, fiscal year end, will be automatically swept into the CBR to pay back any money borrowed.

The constitutional amendment authorizing the CBR passed the voters in 1990. I voted for it. It was a good idea. However, a ballot measure hastily and not carefully crafted left implementation of the fund deposits or withdrawals questionable in the minds of the Administration and the Legislature. Disputes arose over what specific tax settlements should be deposited in this account, as well as what specific pots of money would be available for appropriation. The big question was how the earnings from the permanent fund factored in to these decisions.

A 1993 judicial decision provided the guidelines.

The courts ruled that the balance in the earnings reserve of the permanent fund is counted when determining whether or not income is less than the previous year's budget - with that figure determining how much could be spent with a majority vote. But, when it comes time to figure "the sweep" to repay the CBR, the earnings reserve of the permanent fund can not be counted. That really means any borrowing from the CBR always requires a three-quarters vote.

Every year, the three-quarters vote requirement has caused much dissent and struggle when the Legislature tries to pass a budget, and in many cases has resulted in more spending rather than less. The purpose of the CBR was to protect these windfalls from the legislature's appetite for spending, but just the opposite result has actually occurred.

Today, we don't need the CBR. All of the anticipated tax windfalls have been collected, except for a predictable $106 million per year reflecting the ordinary course of doing business. During the life of the CBR, we have borrowed almost half the money. There is a balance of $3.8 million, and we have spent about $3.4 million.

The CBR has out-lived its purpose. We need to repeal it. It complicates our budget process and stymies our efforts to create a long-term spending plan. It interferes with valid budget negotiations between the majority and the minority.

When the CBR is repealed, just where these funds should be deposited is a decision open for discussion in the committee process. I believe it should be placed where it will earn the most interest AND be reasonably available.