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Wielechowski v. State

Supreme Court of Alaska

August 25, 2017

BILL WIELECHOWSKI, RICK HALFORD, and CLEM TILLION, Appellants,
v.
STATE OF ALASKA and ALASKA PERMANENT FUND CORPORATION, Appellees.

         Appeal from the Superior Court No. 3AN-16-08940 CI of the State of Alaska, Third Judicial District, Anchorage, William F. Morse, Judge.

          Bill Wielechowski, pro se, Anchorage, and Sonja N. Kawasaki, Fairbanks, for Appellants.

          Kathryn R. Vogel, Margaret Paton-Walsh, and Bill Milks, Assistant Attorneys General, Anchorage, and Jahna Lindemuth, Attorney General, Juneau, for Appellees. Jack B. McGee, Law Office of Jack B. McGee, Juneau, for Amici Curiae Greg Capita, Jack Gitchell, and Vicki Van Fleet.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.

          OPINION

          WINFREE, Justice.

         I. INTRODUCTION

         This appeal provides another opportunity to remind Alaskans that, of the three branches of our state government, we are entrusted with the "constitutionally mandated duty to ensure compliance with the provisions of the Alaska Constitution."[1]This sometimes requires us to answer constitutional questions surrounded by political disagreement.[2] Today we address a constitutional question arising from a political dispute about the legislatively enacted Alaska Permanent Fund dividend program.

         In the course of the 2016 budgetary process, in accordance with a statutorily prescribed formula in place for over three decades, the legislature appropriated a sum of money for dividend distributions. But the governor then vetoed about half of the appropriation, and the legislature did not override the veto. One current and two former legislators later sued to effectively set aside the governor's veto. The thrust of their argument was that the 1976 constitutional amendment creating the Alaska Permanent Fund gave the legislature constitutional authority to pass laws dedicating use of Permanent Fund income without need for annual appropriations and, therefore, not subject to annual gubernatorial veto. The legislators argued that the longstanding dividend program was a law exempt from the anti-dedication clause.

         The superior court ruled against the legislators, concluding that even if the 1976 constitutional amendment gave the legislature dedication powers over Permanent Fund income, the legislature's actual use of the income remained subject to normal appropriation and veto budgetary processes. The legislators appeal, making the same arguments to us that they made to the superior court and emphasizing what they contend is the sound public policy behind Alaska's nearly 40-year-old dividend program.

         The narrow question before us is whether the 1976 amendment to the Alaska Constitution exempted the legislature's use of Permanent Fund income from the Constitution's anti-dedication clause. The answer cannot be found by weighing the merits of the dividend program or by examining the statutory dividend formula. The answer is found only in the language of the Alaska Constitution. And, as we explain below, the answer is no - the 1976 amendment did not exempt the legislature's use of Permanent Fund income from the Constitution's anti-dedication clause. Although the superior court did not reach this question, the court's ultimate conclusion nonetheless is correct: The legislature's use of Permanent Fund income is subject to normal appropriation and veto budgetary processes. We affirm the superior court's decision on this alternative ground.

         II. FACTS AND PROCEEDINGS

         A. Facts

         In 1976 voters approved an amendment to the Alaska Constitution creating the Alaska Permanent Fund (Permanent Fund) and dedicating to it certain state revenues.[3] To permit the revenue dedication, article IX, section 7 - an anti-dedication clause providing that "[t]he proceeds of any state tax or license shall not be dedicated to any special purpose" - was modified to add an exception "as provided in section 15 of this article."[4] And article IX, section 15 was added, as follows:

At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.[5]

         The new section's last sentence-regarding Permanent Fund income - is the primary focus of this decision.

         A constitutional amendment was required to create and dedicate revenues to the new Permanent Fund because Alaska's constitutional convention delegates, the original framers of the Alaska Constitution, believed that "the dedication of revenues" was "a fiscal evil, "[6] largely because it failed "to preserve control of and responsibility for state spending in the legislature and the governor."[7] The 1976 amendment's framers and voters chose to make an exception to this general prohibition by dedicating constitutionally enumerated revenues to the principal of the new Permanent Fund. The twin goals behind this exception to the anti-dedication clause were: (1) saving for the future and (2) preventing wasteful spending of the oil and mineral revenue then expected to "flood" the state.[8]

         The Permanent Fund's principal is a dedicated fund that cannot be accessed without further amending the Alaska Constitution.[9] The principal is devoted to "income-producing investments" now managed by the Alaska Permanent Fund Corporation (APFC).[10] It appears that before 1982 a percentage of Permanent Fund income was deposited into the general fund, with some money set aside for a dividend program;[11]since 1982 Permanent Fund income has been deposited in what now is known as the earnings reserve account (earnings reserve), a separate Permanent Fund account managed by APFC.[12]

         In 1980 the legislature decided to use Permanent Fund income to pay each eligible Alaskan a dividend based on length of residency.[13] But the United States Supreme Court ruled that this dividend plan violated federal constitutional equal protection rights, [14] and so the first Permanent Fund dividends of $1, 000 each were not distributed until 1982.[15]

         The general structure for Permanent Fund dividends is largely the same today as it is was 35 years ago; dividends are paid to eligible Alaska residents following a statutorily structured three-step formula. First, APFC calculates the "[i]ncome available for distribution, " defined as 21 % of the net income of both the Permanent Fund and the earnings reserve "for the last five fiscal years."[16] Second, 50% of the "income available for distribution" is transferred by APFC from the earnings reserve to a dividend fund, a separate state treasury account administered by the Department of Revenue (DOR).[17] Finally, DOR "determine[s] the value of each permanent fund dividend for that year by" dividing the amount available in the dividend fund by "the number of individuals eligible to receive a dividend payment."[18]

         But since the dividend program's inception there has been uncertainty in the executive and legislative branches about the limits of the statement in the second sentence of article IX, section 15 that Permanent Fund income "shall be deposited in the general fund unless otherwise provided by law."[19] Specifically, the uncertainty has concerned whether, in conjunction with the 1976 exemption to the article IX, section 7 anti-dedication clause, that phrase permits considering the dividend's statutory scheme a constitutionally permissible dedication of revenues not requiring annual legislative appropriations[20] for transfers from the earnings reserve to the dividend fund.[21] The legislature has made an appropriation for the transfer from the APFC earnings reserve to the DOR dividend fund every year since 1982, apparently to avoid potential conflicts with the Alaska Constitution's anti-dedication clause.

         In May 2016 the legislature passed an appropriation bill that included an estimated $ 1.3 62 billion transfer from APFC's earnings reserve to DOR's dividend fund, consistent with prior practice and the statutory formula.[22] But in June Governor Bill Walker exercised his line-item veto power and reduced the estimated $1, 362 billion transfer to $695.65 million.[23] The legislature met in July but did not vote to override the governor's veto.[24] This resulted in 2016 Permanent Fund dividend payments of $ 1, 022 to eligible Alaskans, about half of what had been expected under the legislature's appropriation.

         B. Proceedings

         A current state senator, Bill Wielechowski, and two former state legislators, Rick Halford and Clem Tillion (collectively Wielechowski), brought suit against the State of Alaska and APFC (collectively the State). Relying on the second sentence of the Permanent Fund clause, Wielechowski sought a declaration that the dividend program statutes contain a constitutionally permissible revenue dedication "automatically" transferring prescribed revenues from the earnings reserve to the dividend fund without need for legislative appropriation and not subject to the governor's veto. The State opposed, arguing that the 1976 constitutional amendment created an anti-dedication clause exemption only for revenues going into the Permanent Fund and not for revenues going out of the Permanent Fund. The State alternatively argued that even if the Alaska Constitution permits legislative dedication of Permanent Fund income, the statutory transfer from the earnings reserve to the dividend fund still must meet constitutional appropriation and veto requirements.

         After expedited proceedings the superior court ruled that the earnings reserve revenue transfer to the dividend fund requires an appropriation and must survive a gubernatorial veto. The court did not decide whether the revenue transfer would be a "permissible dedication" under the Alaska Constitution. Emphasizing the governor's strong veto control over spending provided by the Alaska Constitution, the court stated "[i]t is unlikely that the proponents of the [P]ermanent [F]und would intend so drastic a change in the governor's role over the budget by such a vague vehicle" as the concluding sentence of the 1976 constitutional amendment creating the Permanent Fund. The court determined that "[w]hat makes the least sense is that the proponents of the permanent fund clause would exempt the income of the [P]ermanent [F]und from the threat of a gubernatorial veto without expressly stating that intention."

         Wielechowski appeals. Three other "long-time Alaska residents who each filed for a 2016 Permanent Fund [d]ividend" filed an amicus brief supporting Wielechowski.

         III. STANDARD OF REVIEW

         "We review summary judgment rulings de novo and may affirm summary judgment on any basis appearing in the record."[25] "Questions of constitutional and statutory interpretation, including the constitutionality of a statute, are questions of law to which we apply our independent judgment. We adopt the 'rule of law that is most persuasive in light of precedent, reason, and policy.' "[26]

         IV. DISCUSSION

         A. The Alaska Constitution Does Not Exempt Permanent Fund Income From The Constraints Of The Anti-Dedication Clause.

         1. Framework for interpreting the Alaska Constitution

         We provided a framework for interpreting the Alaska Constitution in Hickel v. Cowper.[27] "Our analysis of a constitutional provision begins with, and remains grounded in, the words of the provision itself. We are not vested with the authority to add missing terms or hypothesize differently worded provisions... to reach a particular result."[28] We instead "look to the plain meaning and purpose of the provision and the intent of the framers."[29]

         "Because of our concern for interpreting the constitution as the people ratified it, we generally are reluctant to construe abstrusely any constitutional term that has a plain ordinary meaning."[30] "Constitutional provisions should be given a reasonable and practical interpretation in accordance with common sense."[31] "[A]bsent some signs that the term at issue has acquired a peculiar meaning by statutory definition or judicial construction, we defer to the meaning the people themselves probably placed on the provision"[32] without "add[ing] 'missing terms' to the Constitution or . . . interpreting] existing constitutional language more broadly than intended by . . . the voters."[33]"Legislative history and the historical context, including events preceding ratification, help define the constitution."[34]

         2. The anti-dedication clause

         Prior to the 1976 constitutional amendment the anti-dedication clause stated: "The proceeds of any state tax or license shall not be dedicated to any special purpose"[35] Although a plain reading of "state tax or license" might have suggested otherwise, a contemporaneous attorney general opinion gave the 1976 legislature good reason to believe that "state tax or license" meant all state revenue.[36] And in 1982 we confirmed in State v. Alex that the anti-dedication clause "prohibits the dedication of any source of revenue."[37]

         We first explained in Alex how convention delegates considered "the dedication of revenues" to be "a fiscal evil."[38] We later expressed in Sonneman v. Hickel "that the reason for the prohibition [on dedications] is to preserve control of and responsibility for state spending in the legislature and the governor."[39] "Without earmarked funds, the constitutional framers believed that the legislature would be required to decide funding priorities annually on the merits of the various proposals presented."[40] And we explained more recently in State v. Ketchikan Gateway Borough that the anti-dedication clause helps "govern the legislature's and the governor's 'joint responsibility ... to determine the State's spending priorities on an annual basis.' "[41]

         We repeat our prior statements, and those from the constitutional convention, to emphasize the significance of the anti-dedication clause to the state's budgetary framework. No party suggests that Permanent Fund income is not state revenue.[42] Our starting point must therefore be that the anti-dedication clause prohibits the dedication of Permanent Fund income unless the 1976 constitutional amendment exempted not only the dedication of enumerated revenues into the Permanent Fund, but also - as Wielechowski argues - the legislature's potential future, unspecified dedication of revenues out of the Permanent Fund.

         3. Wielechowski's arguments

         Wielechowski contends that the 1976 constitutional amendment creating and dedicating revenues to the Permanent Fund also created legislative authority to dedicate Permanent Fund income. He first contends that the entire article IX, section 15 clause, including the second sentence, is explicitly exempt from the anti-dedication clause of article IX, section 7.[43] He then relies on the second sentence's language that "income from the [P]ermanent [F]und shall be deposited in the general fund unless otherwise provided by law."[44] He argues that the legislature is constitutionally permitted to dedicate Permanent Fund income to the dividend fund by statute, because that would be "provided by law."

         Wielechowski contends that the framers of the 1976 constitutional amendment intended to provide future legislatures "maximum flexibility" in using the Permanent Fund's income, including the dedication of earnings.[45] Wielechowski also contends that the ballot language[46] and newspaper articles emphasizing future legislative flexibility bolster his position.[47] The State disagrees, arguing that the plain language of article IX, section 15 dedicates only specific revenues into the Permanent Fund principal, and that no history concerning either the purpose of the amendment's framers or the information provided to the voters shows an intent to allow the legislature to dedicate Permanent Fund income.

         We agree with the State. We conclude that the 1976 constitutional amendment does not allow the dedication of Permanent Fund income. We reach this conclusion based on the plain language of the anti-dedication and Permanent Fund clauses of the Alaska Constitution; contrary to Wielechowski's arguments, our review of the record concerning the framers' intent and voters' understanding only bolsters our conclusion. We address the latter two issues first solely for historical perspective before addressing the plain language analysis.

         a. Framers' intent

         A permanent fund was proposed by then-Governor Jay Hammond to save for future generations a percentage of revenue generated from nonrenewable resources;[48] he also sought to curb wasteful government spending of expected increased revenues.[49] In the letter transmitting his proposal, Governor Hammond explained:

I have introduced this resolution proposing a constitutional amendment because I believe strongly that the revenues from our non-renewable resources belong to future generations of Alaskans as well as ourselves. A permanent fund as I have proposed will set aside a modest portion of the proceeds from the exploitation of our non-renewable resources for investment in our future while leaving sufficient revenues for our present needs.[50]

         Although Governor Hammond's permanent fund language was subsequently modified by the legislature, the overall structure of his proposed amendment to the Alaska Constitution remained the same: (1) a percentage of revenue from nonrenewable resources would be placed into a permanent fund; (2) the permanent fund principal could be used only for income-producing investments; and (3) the legislature would have access to the permanent fund income.[51]

         The House amended the permanent fund clause's treatment of income to include an alternative to mandatory general fund deposits: "All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law."[52] Although there was some discussion about how the phrase "unless otherwise provided by law" might allow income from the fund to be used as security for bonds, [53] a joint report from the House Judiciary and Finance Committee chairs stated only that "[t]he purpose of the language in the last sentence of the resolution is to give future legislatures the maximum flexibility in using the Fund's earnings-ranging from adding to Fund principal to paying out a dividend to resident Alaskans."[54] After that joint report, language was added in the Senate State Affairs ...


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