Press Release
Superior Court Rejects Legislative Auditor’s Position Regarding Deposits to the Constitutional Budget Reserve Fund
April 28, 2023
(Anchorage, AK) – Today, a Superior Court Judge ruled that additional State oil tax revenues and royalties that result from tariff reductions should not be deposited into the Constitutional Budget Reserve Fund as the Legislative Auditor believed, but instead belong in the General Fund as Attorneys General have advised.
The ruling affects where more than a billion dollars of State revenue should be deposited in the treasury. The Constitutional Budget Reserve Amendment directs that money “received…as a result of the termination, through settlement or otherwise, of an administrative proceeding or of litigation…involving…royalties…or involving taxes imposed on mineral income, production, or property, shall be deposited in the budget reserve fund.”
The Legislative Budget and Audit Committee and the Legislative Auditor had argued that the word “involving”—as used in Article IX, § 17(a) of the Alaska Constitution—is essentially synonymous with the word “affecting.” But Anchorage Superior Court Judge Andrew Guidi wrote that “The Court is unpersuaded.”
The Court declared that FERC (Federal Energy Regulatory Commission) tariff disputes are not proceedings “involving” royalties and taxes within the meaning of Article IX of the constitution.
“Simply knowing the answer in a case like this, whichever way it turns out, gives the executive branch comfort about how to correctly understand the Constitution’s directives. Nevertheless, it is gratifying that the Court agreed with the analysis and advice given by Attorneys General over the last several administrations. I am glad that advice was vindicated,” said Alaska Attorney General Treg Taylor.
The CBRF is a fund that serves as an emergency savings account with constitutionally mandated limitations on the Legislature’s ability to access the money.
The decision lays out the distinction between involving and affecting and writes “If the drafters had intended to capture all proceedings “affecting” royalties and taxes, they could have used that word instead. If they had intended to capture additional revenues from litigation or administrative proceedings involving tariff rates, they could have included tariffs in the terms of the amendment. But they did neither of these things. The most natural reading of the phrase “an administrative proceeding or [] litigation involving . . . royalties . . . or taxes” is that the administrative proceeding or litigation is actually about liability for the royalties or taxes, i.e., a tax or royalty dispute.”
For more information contact Chief Assistant Attorney General Margaret Paton-Walsh at Margaret.Paton-Walsh@alaska.gov and Senior Assistant Attorney General Kate Demarest at Kate.Demarest@alaska.gov
This lawsuit arose after the Legislative Budget and Audit Committee sued the Governor over the interpretation over the CBR provision in the Constitution.
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Department Media Contacts: Communications Director Patty Sullivan at patty.sullivan@alaska.gov or (907) 269-6368. Information Officer Sam Curtis at sam.curtis@alaska.gov or (907) 269-6269.