Court says Alaska reserve funds misspent.

• Position: On First Reading

An Alaska judge has determined that $924 million in reserve funds was wrongly appropriated and has ordered return of the money to a state savings account. The Legislature has until the end of the 1994 session to figure out how to do that. Judge John Reese said Governor Wally Hickel improperly spent $800 million in oil revenues that should have been placed in the state's Constitutional Budget Reserve fund.

That fund is a constitutionally protected savings account for oil-tax income from settlements or other past due payments. It can be tapped after a three-quarters vote of each house of the Legislature. During their 1993 session, legislators approved, by only a simple majority, use of money from the fund for school and other capital projects.

Since that vote, another $124 million in oil tax settlements has been put in the state treasury instead of the reserve fund. Judge Reese ordered that all the money must be returned to the Constitutional Budget Reserve by the end of the 121-day legislative session that began Jan. 10.

Simultaneously, Alaska faces an estimated budget shortfall of $600 million due to a drop in the price of crude oil, the sale of which provides the state with 85 percent of its income.

Reese's decision was in response to lawsuits filed by the Senate Republican majority and former Governor Steve Cowper. Ironically, the Republicans who filed suit originally approved the state budget that allocated reserve fund money for capital improvements. Cowper, a Democrat, backed creation of the reserve and was in office when it was created.

The governor's law department was...