Budget battle in the big state.

• Author: Tkacz, Bob
• Position: Alaska

Alaska's in an uproar over $800 million in oil tax money that is being used for capital construction-illegally, some contend.

Some $800 million appropriated by the Alaska Legislature and being spent for school construction and other capital projects could be frozen by a court order sought as part of a lawsuit filed by former Governor Steve Cowper.

Cowper, the Democratic governor from 1987-90, and the 11-member Republican majority of the state Senate filed separate suits in July to force current Governor Walter J. Hickel to return almost $1 billion in oil tax settlements and interest to the state's Constitutional Budget Reserve.

As a power struggle pitting the Legislature against the executive branch, all parties have announced plans to carry the argument to the state Supreme Court. Because the money at stake is being used as the case progresses, all are hoping a high court decision will be rendered before the end of the year.

My goal is to get an order [to freeze funds] out of the Supreme Court before Christmas," said Douglas Pope, Cowper's attorney. Pope was confident his request for an injunction would be heard in state Superior Court in October with an appeal to the Supreme Court this month.

The Constitutional Budget Reserve was created by voter approval of a constitutional amendment in 1990. Its purpose is to protect windfall income (primarily from past-due oil taxes) from being used to balance the state operating budget or for pork barrel projects, if Alaska's oil income declines as projected through the 1990s. With no income or sales taxes, 85 percent of the state's revenue is derived from oil.

A three-quarters vote of each house is required to withdraw money from the reserve.

State law says oil tax income from "settlement or otherwise, of an administrative proceeding or of litigation" goes into the reserve. But in the past year Hickel deposited a $630 million settlement from British Petroleum and another $50 million from Phillips Petroleum in the state general fund rather than the constitutional reserve. His attorney general, Charlie Cole, issued an opinion arguing that the money came after "informal" conferences with the oil producers, rather than the "administrative proceeding" noted in the law.

Hickel is a lifelong Republican elected in 1990 after he bypassed the state primary and ran as the Alaska Independence Party's candidate in the general election. He proposed an ambitious $200 million program of long overdue school repair...