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Hickel v. Halford and Cowper et al (4/4/94), 872 P 2d 171
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
WALTER J. HICKEL, Governor of the )
State of Alaska, DARREL J. ) Supreme Court Nos. S-
6124/6134
REXWINKEL, Commissioner of the )
Alaska Department of Revenue, ) Superior Court Nos.
and the STATE OF ALASKA, ) 3AN-93-6297 CI
) (consolidated)
Appellants and ) 3AN-93-6848 CI
Cross-Appellees, )
)
v. )
)
RICK HALFORD, President of the ) O P I N I O N
Alaska State Senate, DRUE PEARCE, )
STEVE FRANK, BERT SHARP, MIKE )
MILLER, RANDY PHILLIPS, TIM KELLY, ) [No. 4069 - April 4,
1994]
LOREN LEMAN, GEORGE JACKO, STEVE )
RIEGER, and ROBIN TAYLOR, )
comprising the Senate Majority )
of the Eighteenth Alaska )
Legislative Session, )
)
Appellees and )
Cross-Appellees, )
)
and )
)
STEVE COWPER, )
)
Appellee and )
Cross-Appellant. )
___________________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
John Reese, Judge.
Appearances: Jenifer A. Kohout,
Assistant Attorney General, Anchorage,
Stephan C. Slotnick, Assistant Attorney
General, and Bruce M. Botelho, Attorney
General, Juneau, for Appellants and Cross-
Appellees Hickel, et al. G. Kent Edwards,
Hartig, Rhodes, Norman, Mahoney & Edwards,
Anchorage, for Appellees and Cross-Appellees
Halford, et al. Douglas Pope, Wagstaff, Pope
& Katcher, Anchorage, for Appellee and Cross-
Appellant Cowper.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices,
and Bryner, Justice, pro tem.*
MATTHEWS, Justice.
This case requires us to interpret article IX, section
17 of the Alaska Constitution, which establishes the budget
reserve fund.1 The voters adopted article IX, section 17 in the
1990 general election. It was placed on the ballot after being
passed by a legislative resolution approved by a two-thirds vote
of each house of the 1990 legislature.
Section 17 requires deposit into the budget reserve
fund of all money received by the State after July 1, 1990, "as a
result of the termination, through settlement or otherwise, of an
administrative proceeding or of litigation . . . involving
mineral lease bonuses, rentals, royalties . . . or involving
taxes imposed on mineral income, production, or property . . . ."
17(a). Appropriations from the fund require a super
legislative majority, i.e., three-fourths of each house.
17(c). However, if the amount available for appropriation for a
given fiscal year is less than the amount appropriated for the
previous fiscal year, an appropriation from the budget reserve
fund can be made by a majority vote of each house of the
legislature. Such an appropriation is limited to the difference
between the amount available for appropriation for the fiscal
year and the amount appropriated "in the previous calendar year
for the previous fiscal year." 17(b).
The primary issue in this case is the meaning of the
term "administrative proceeding"as used in article IX, section
17(a) with respect to mineral taxes. The dispute can only be
understood in the context of the applicable statutory and
administrative procedures for collection of such taxes.
For all taxes, the tax collection process begins with
the filing of the return by the taxpayer. Oil and gas production
returns must be filed monthly. AS 43.55.020-.030. Income tax
returns must be filed annually. AS 43.20.030. Payments of taxes
due must accompany the tax returns. See AS 43.20.030; AS
43.55.020. The oil and gas audit division generally audits all
taxpayers for all tax periods, with a single audit covering from
one to three years, or twelve to thirty-six tax periods. The
income and excise audit division also generally audits every oil
and gas return filed under AS 43.20. When an audit is complete,
the taxpayer is notified of any deficiency by a notice of
assessment and demand for payment (hereinafter referred to as the
assessment). This is provided for in AS 43.05.245. Assessments
must be issued within three years after a return is filed or
collection is barred. AS 43.05.260(a).
When a taxpayer receives an assessment, the taxpayer is
presented with a number of choices. It may pay the taxes in
accordance with the assessment; it may appeal the assessment
within sixty days by filing a request for appeal under AS
43.05.240 and 15 AAC 05.010; or it may do nothing. If the
taxpayer does nothing, the Department of Revenue (DOR), after the
sixty-day period for appeal has expired, may proceed to levy on
the taxpayer's property until the tax is collected. AS
43.05.270.
When a taxpayer files a request for appeal with DOR, it
may request either an "informal conference" or a "formal
hearing." AS 43.05.240(a)(b). If a taxpayer requests an
informal conference and the conference does not resolve the
dispute to the taxpayer's satisfaction, the taxpayer may request
a formal hearing within thirty days after the decision resulting
from the informal conference. AS 43.05.240(b)(2). If a taxpayer
fails to request a formal hearing within thirty days after the
decision of the informal conference, the informal conference
decision becomes the final decision of DOR and it may be enforced
as such. Informal conference decisions may not be appealed to
the courts. AS 43.05.240(d); 15 AAC 05.020(c), .040. Where a
formal hearing is requested, either following an informal
conference or directly upon filing a request for appeal, the tax
payer is given a formal adjudicatory hearing. 15 AAC 05.030. If
the taxpayer is dissatisfied with the result of the formal
hearing, the taxpayer may appeal to the superior court within
thirty days after the decision. AS 43.05.240(d).
At any point in this process DOR and the taxpayer may
agree on the taxes owed, or the taxpayer may decide to pay the
amount claimed by the State either as a result of the assessment,
the informal conference decision, or the decision following a
formal hearing. DOR has taken the position that funds received
after a request for formal hearing must be deposited in the
budget reserve fund while funds received before a request for
formal hearing are paid into the State general fund. DOR, in
other words, is of the view that an administrative proceeding is
not initiated for the purposes of article IX, section 17(a) until
a request for formal hearing is made.
During the 1993 legislative session, the legislature
appropriated virtually all of the anticipated revenues from the
general fund for the fiscal year 1994. Subsequently, a group of
legislators who constitute the majority coalition of the Senate
(hereafter referred to as the Senate Majority) filed a suit
against Governor Walter J. Hickel and Commissioner of Revenue
Darrel J. Rexwinkel (hereafter referred to as the State). The
suit challenged the deposit into the general fund of funds
received after a request for appeal but before a request for
formal hearing. Former Governor Steve Cowper filed a similar
action. The cases were consolidated. The Senate Majority and
Gov. Cowper moved for summary judgment and the State cross-moved
for summary judgment.
Following a hearing, the superior court granted the
plaintiffs' motions for summary judgment, holding that for the
purposes of section 17, administrative proceedings begin once a
request for appeal is filed by a taxpayer. The court ordered the
State to restore wrongfully allocated funds to the budget reserve
fund, with interest, not later than the end of the regular
session of the current state legislature.2 The court noted that
preliminary indications were that at least $924,051,580.19 in
principal would be required in order to accomplish this. From
this order the State has appealed.
The superior court's Final Order and Judgment also
ordered the State to provide plaintiffs with an accounting of the
receipt and disposition of all monies received after July 1,
1990, as a result of the termination, through settlement or
otherwise, of all informal conferences. The accounting is to
include the date and amount of money received for each
termination. The court also ordered the State to produce its
interest computations for settlements received through informal
proceedings and "any documents referring to that part of the 1993
settlement of the oil and gas tax dispute with British Petroleum
which was allocated to preinformal conference general fund
revenues." The court also subjected the accounting and document
productions to a protective order, prohibiting the plaintiffs or
their attorneys from disclosing the contents of any of the
documents.
The State appealed from that portion of the Final Order
and Judgment which required the production of the British
Petroleum Company (BP) settlement documents.3 Gov. Cowper cross-
appealed, objecting to the confidentiality aspect of the
protective order. He also contends that the accounting should
include the actual income earned by the State on the settlement
funds.
Because of the significant public interest in a speedy
resolution of this dispute, we granted the parties' motions for
expedited review. Following oral argument on January 26, 1994,
we issued an order affirming the first three paragraphs of the
Final Order and Judgment of superior court.4 In addition, we
ordered the parties to brief the question whether an
administrative proceeding within the meaning of article IX
section 17 begins, in a tax collection context, with the issuance
of an assessment. Further, we ordered the parties to brief the
question whether, assuming that an administrative proceeding did
commence with an assessment, such a ruling should be given
prospective effect.5 We reserved decision on all other issues
raised in the appeal and the cross-appeal. In our order we gave
summary reasons for our action which we set forth here:
The essential attributes of an
"administrative proceeding"as the term is
used in article IX, section 17 of the Alaska
Constitution are:
1. A dispute must exist.
2. A document
reflecting the fact of
the dispute which serves
a function similar to
that of a complaint in a
civil action, or an
accusation or statement
of issues under the Admin
istrative Procedure Act,
AS 44.62.360, 370, must
be served by one party on
the other party.
3. The
document must set in
motion mechanisms pre
scribed by statute or
regulation under which
the dispute will
ultimately be resolved.
The proceedings which take place after a
"request for appeal" is filed under AS
43.05.240(a) and 15 AAC 05.020 clearly have
these attributes. For this reason, the first
three paragraphs of the judgment of December
14, 1993, are affirmed.
At oral argument, the question was
raised whether an assessment marks the
beginning point of an administrative
proceeding. This question was neither raised
nor resolved in the superior court and thus
would ordinarily be considered waived for the
purpose of this litigation. However, this is
a question of substance which can be raised
in the future. If it is raised successfully,
it could cause fiscal problems of an
extremely serious nature. Thus, sound
reasons require the consideration of an issue
not raised by the parties. See Vest v. First
National Bank of Fairbanks, 659 P.2d 1233,
1234 n.2 (Alaska) ("Where . . . an issue that
has not been raised involves a question of
law that is critical to a proper and just
decision, we will not hesitate to consider
it, particularly after calling the matter to
the attention of the parties and affording
them the opportunity to brief the issue."),
reh'g granted, 670 P.2d 707 (Alaska 1983).
For this reason we have ordered supplemental
briefing.
Supplemental briefs were submitted by the parties and
additional oral argument was held. Both Gov. Cowper and the
Senate Majority argue that an assessment begins an administrative
proceeding and that a ruling to this effect should not be given
only prospective effect. Gov. Cowper argues in addition to the
questions ordered briefed that an audit letter which identifies
the tax returns to be audited and the information and documents
to be produced at the audit, rather than a subsequently occurring
notice of assessment, is the beginning of an administrative
proceeding. In addition, Gov. Cowper argues specifically with
respect to a settlement with BP which included some years for
which no assessment had been issued as well as some years for
which an assessment and a notice of appeal had been issued, that,
as to the pre-assessment years, the funds received should be
included within the budget reserve fund because the funds were
received "as a result of the termination . . . of an
administrative proceeding,"even though the particular years in
question were not formally part of the administrative proceeding.
The State agrees that these questions should be addressed.
The Senate Majority also seeks the resolution of an
additional issue. The Senate Majority notes that in our order of
January 27, 1994, we indicated that one of the attributes of an
administrative proceeding included setting in motion "mechanisms
prescribed by statute or regulation under which the dispute would
ultimately be resolved." It points out that with respect to
royalty disputes as distinct from tax disputes, the State has
indicated that the Department of Natural Resources does not have
statutory or regulatory procedures by which such disputes are
conducted. The State agrees that further guidance on this issue
is warranted. Neither party, however, describes the dispute
resolution mechanism pertaining to royalties.
We address first the basis for our conclusion that
administrative proceedings possess the attributes we identified
in the order of January 27th. Next, we conclude that in view of
these attributes an administrative proceeding concerning back
taxes begins when an assessment is issued. An audit letter does
not mark the beginning of an administrative proceeding. We also
conclude that our ruling that an administrative proceeding begins
with an assessment should not be given solely prospective effect.
With respect to the issues characterized by the BP settlement and
the questions concerning the procedures used in resolving royalty
disputes, we express no opinion as the record before us is
insufficient both in terms of underlying facts and development of
legal issues for expression of any view. Finally, we hold that
on the record before us, the superior court did not abuse its
discretion by subjecting the accounting to a protective order, in
light of the confidentiality requirements of AS 43.05.230. On
remand, however, the superior court remains free to consider
whether a more narrow protective order may adequately protect
these concerns.
1. Attributes of an Administrative Proceeding
As noted, we set out the following as attributes of an
administrative proceeding in our order of January 27, 1994:
1. A dispute must exist.
2. A document reflecting the
fact of the dispute which serves a
function similar to that of a
complaint in a civil action, or an
accusation or statement of issues
under the Administrative Procedure
Act, AS 44.62.360, 370, must be
served by one party on the other
party.
3. The document must set in
motion mechanisms prescribed by
statute or regulation under which
the dispute will ultimately be
resolved.
Although there is no single authority which concisely defines an
administrative proceeding, examination of case law and Alaska
statutes involving adjudicatory administrative proceedings
demonstrates that these attributes are common to such
proceedings.6 The context in which the term administrative
proceeding is used in section 17, the common meaning of the
words, and evidence of legislative and voter intent and purpose
also support the recognition of these attributes.
We have previously set forth the appropriate approach
to interpreting constitutional language. "Constitutional
provisions should be given a reasonable and practical
interpretation in accordance with common sense. The court should
look to the plain meaning and purpose of the provision and the
intent of the framers." Arco Alaska, Inc. v. State, 824 P.2d
708, 710 (Alaska 1992) (citation omitted); see also Kochutin v.
State, 739 P.2d 170, 171 (Alaska 1987). "Adherence to the common
understanding of words is especially important in construing
provisions of the Alaska Constitution, because the court must
'look to the meaning that the voters would have placed on its
provisions.'" Division of Elections v. Johnstone, 669 P.2d 537,
539 (Alaska 1983) (quoting State v. Lewis, 559 P.2d 630, 637-38
(Alaska), appeal dismissed, 432 U.S. 901 (1977)), cert. denied,
465 U.S. 1092 (1984). "Unless the context suggests otherwise,
words are to be given their natural, obvious, and ordinary
meaning." Hammond v. Hoffbeck, 627 P.2d 1052, 1056 n.7 (Alaska
1981).
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. Rather,
absent some signs that the term has acquired
a peculiar meaning by statutory definition or
judicial construction, we defer to the
meaning the people themselves probably placed
on the provision. Normally, such deference
to the intent of the people requires
"[a]dherence to the common understanding of
words."
Citizens Coalition for Tort Reform, Inc. v. McAlpine, 810 P.2d
162, 169 (Alaska 1991) (citations omitted) (quoting Johnstone,
669 P.2d at 539).
Our objective, therefore, is to identify the meaning
that the people probably placed on the term "administrative
proceeding." We begin by recognizing that administrative
agencies today perform a wide range of functions and activities,
including supplying services, licensing, investigating,
rulemaking, and individualized decision-making in the nature of
adjudication. In the proper context investigation, rulemaking,
and adjudication all could be labelled "administrative
proceedings." In the context of section 17, however, it is
extremely unlikely that the people would have understood
"administrative proceeding"to mean rulemaking or investigation.
First, rulemaking and investigation do not normally terminate "by
settlement,"as does adjudication, nor would they normally result
in the receipt of money as a result of their termination.7
Second, such an understanding of the term would be contrary to
the purpose of the amendment, which was to remove certain
unexpected8 income from the appropriations power of the
legislature, and to save that income for future need.9 Money
eventually received as a result of rulemaking, in accordance with
the rules adopted, can hardly be called unexpected.
Once we recognize that the people probably understood
the term "administrative proceeding"to mean adjudication-like
proceedings before administrative agencies, as opposed to
rulemaking or investigative actions, our task is to identify the
essential attributes of this type of proceeding in order to
distinguish between administrative actions which are
"administrative proceedings"within the meaning of section 17 and
related administrative actions which are not.10
The first attribute an "administrative proceeding"must
possess is that a dispute must exist for the proceeding to
resolve.11 This attribute derives from the language of section
17, the voter pamphlet, legislative use of the term, and our
recognition that the people understood "administrative
proceeding"to mean adjudicatory proceedings.
Article IX, section 17 clearly indicates that an
administrative proceeding is a proceeding which may "terminate,
through settlement or otherwise." 17(a). "Settlement," the
only specific means listed in the Constitution by which an
administrative proceeding may terminate, implies the existence of
opposing parties who reach a compromise. "Settlement" thus
assumes a preexisting dispute.
This reading is also supported by the voter pamphlet
for the 1990 election.12 Although most of the references in the
voter pamphlet to the sources of revenues which would be
deposited in the budget reserve fund use language which closely
parallels section 17's language,13 the statement in support of the
amendment refers to windfall revenues "that result from pending
litigation and tax disputes." When this statement is compared
with the constitutional language allocating to the budget reserve
fund money received "as a result of the termination, through
settlement or otherwise, of an administrative proceeding or of
litigation," it is clear that "tax disputes" refers to
administrative proceedings.
The use of the term "administrative proceeding"in the
Alaska Statutes also generally supports the existence of a
dispute as an essential element in that term's meaning.
"Administrative proceeding" is never defined in the Alaska
Statutes. In most cases, however, the context in which the term
is used demonstrates that an adjudicatory proceeding, usually
between an agency of the State and some private individual or
entity, is anticipated.14 As discussed below, such adjudications
are predicated on the existence of an underlying dispute.
Finally, we consider the existence of a dispute to be
an essential attribute of an administrative proceeding because it
is a common element in all adjudicatory proceedings. For
example, Black's Law Dictionary defines "adjudication"as "[t]he
legal process of resolving a dispute"and "adjudicatory process"
as a "[m]ethod of adjudicating factual disputes; used generally
in reference to administrative proceedings in contrast to
judicial proceedings." Id. at 42. Similarly, the formal rules
governing administrative adjudications under the Administrative
Procedures Act (APA), AS 44.62.330-.630, clearly anticipate the
existence of a dispute before action is taken. For example, an
accusation under AS 44.62.360 must set out "the acts or omissions
with which the respondent is charged, so that the respondent is
able to prepare a defense." AS 44.62.360(1). Both the use of
the word "charged"and the recognition of the need for a defense
indicate the necessary existence of an underlying controversy or
dispute. A statement of issues, as provided for in AS 44.62.370,
anticipates that the respondent "must show compliance [with a
statute or regulation] by producing proof at the hearing," and
must specify "particular matters that have come to the attention
of the initiating party and that would authorize a denial of the
agency action sought." AS 44.62.370(a)(1)(2). The necessity of
one party carrying a burden of production and the possibility
that a request for a right or privilege may be denied also
indicate the existence of an underlying dispute.15
Because a dispute exists in all adjudicatory
proceedings, and because the language of section 17 and the voter
pamphlet indicate that "administrative proceeding" meant a
proceeding involving a dispute, the first essential attribute of
an administrative proceeding is that a dispute must exist.
The second essential attribute of an administrative
proceeding is that a document reflecting the fact of the dispute,
which serves a function similar to that of a complaint in a civil
action, or an accusation or statement of issues under the APA,
must be served by one party on the other party.16 This element is
required in order to ensure that the procedures we recognize as
administrative proceedings meet minimal due process requirements.17
Although we are not directly concerned in this litigation with
the due process rights of the participants in administrative
proceedings, minimal due process requirements do define necessary
requirements of all adjudicatory proceedings. Without providing
at least notice and the opportunity to participate to those who
might be affected, no administrative action can either resolve
the dispute to the satisfaction of all of the parties or be
considered final despite later objections. See Wickersham, 680
P.2d at 1144; Kerr, 779 P.2d at 342. Because we conclude that an
"administrative proceeding"must be an action capable of finally
resolving the issue in dispute, either by the express consent of
all of the parties or by reaching a determination which could be
accorded finality consistent with due process, we hold that
sufficient written notice, specifying the nature of the dispute
and the relief requested, is essential to an administrative
proceeding.18
Our conclusion that an administrative proceeding must
be an action which is capable of being accorded finality
consistent with the requirements of due process is supported by
the language of section 17. The phrase "as a result of the
termination, through settlement or otherwise, of an
administrative proceeding"clearly implies that an administrative
proceeding may terminate with or without the express consent of
all of the parties. A party must be aware of the dispute and the
existence of the proceedings in order to terminate them by
settlement. More importantly, in order for an administrative
action to terminate without the consent of all the parties in a
manner which may result in the collection of money by the State,
individuals affected must have notice and an opportunity to
object. Otherwise, no finality will be accorded the
administrative agency's decision in any subsequent action.19
The third essential attribute of an administrative
proceeding--that the document which one party serves on the other
must set in motion mechanisms prescribed by statute or regulation
under which the dispute will ultimately be resolved--derives from
the ordinary meaning of the word proceeding and the nature of
adjudication.
Webster's Third New International Dictionary 1807
(1969) defines "proceeding"as "a particular step or series of
steps adopted for doing or accomplishing something."20 Our
reference to "mechanisms . . . under which the dispute will
ultimately be resolved" closely parallels the dictionary
definition and follows from it.21
The two requirements which our "essential attribute"
adds to this dictionary definition--that the document served on
the other party set these mechanisms in motion and that the
mechanisms be prescribed by statute or regulation--follow from
the nature of adjudication and from our recognition that a
administrative proceeding under section 17 must be capable of
being accorded finality.
Adjudicatory proceedings begin with the issuance by one
party to the other of a document which serves both as the
initiation of the dispute resolution process and as notice that
the process has been initiated.22 For example, the APA expressly
states that filing an accusation or a statement of issues
initiates a hearing. AS 44.62.360, .370. Similarly, the civil
rules provide that a civil action is commenced by filing a
complaint with the court, and that a copy of the complaint must
be served on the opposing party. Alaska Rules of Civil Procedure
3, 4. Therefore, it may be said that these documents have legal
significance beyond merely providing notice. They also start in
motion the coercive force of the law with the ultimate objective
of resolving the dispute. By providing notice, they ensure that
the use of this force is fair.
Our recognition that an administrative proceeding
necessarily possesses the characteristic of finality requires
that the proceeding which is initiated have legal authority to
bind the non-initiating party, subject perhaps to further appeal,
even if that party disagrees with the solution reached or fails
to participate in the resolution. This is a substantive
corollary to our earlier recognition that minimum due process is
required before binding a party over his objection. Simply put,
legal authority to bind a party over his objection, or without
his participation in the proceeding, cannot be assumed.
Therefore, we require that the mechanisms which attempt to do so
be prescribed by law.23
This final attribute, more than either of the other two
attributes, highlights the difference between the commencement of
an administrative proceeding and similar action by a party which
does not initiate a proceeding. Unless the document which the
first party serves on the opposing party creates a legal
obligation on the opposing party to either respond or accept a
determination made in the party's absence, then the opposing
party is free to ignore the document. If the opposing party is
free to ignore the document without consequence, then the
document is not part of a proceeding which is capable of finally
terminating the dispute without the consent of the opposing
party. In other words, so long as the opposing party is free to
refuse to participate or to withdraw from any attempt to resolve
the dispute without legal consequences, then the attempt may be a
settlement negotiation, but it is not an adjudication. By
contrast, where the law provides that even an opposing party's
complete failure to respond has legal significance and may
justify a decision against him or her, then the initial document
initiates an adjudication and, provided the other attributes are
also present, an administrative proceeding under section 17.
2. In a tax collection context, an assessment marks
the beginning of an administrative proceeding.
An assessment issued by DOR to a taxpayer under AS
43.05.270 satisfies all of the essential elements of an
administrative proceeding.
First, at the time that the State issues an assessment,
a dispute does exist. As noted above, a dispute may be defined
as "a conflict or controversy; a conflict of claims or rights; an
assertion of a right, claim, or demand on one side, met by
contrary claims or allegations on the other." Black's Law
Dictionary, at 472. Prior to the time that an assessment is
issued, the taxpayer has either filed or failed to file a return.
If the taxpayer has filed a return, this may be considered an
assertion by the taxpayer that the amount stated, and only the
amount stated, is due. Similarly, if a taxpayer fails to file a
return, this may be taken as an implied assertion that no taxes
are due.24 If DOR then issues an assessment to the taxpayer,
demanding additional tax payments (with interest and penalties),
then there has been "an assertion of a right, claim or demand on
one side, met by contrary claims or allegations on the other"and
a dispute exists.25
Second, the assessment reflects the fact of the
dispute, serves a function similar to a civil complaint or an
accusation or statement of issues under the APA, and is served on
the taxpayer. The assessment's reflection of the fact of the
dispute is self-evident. An assessment is also served on the
taxpayer. See AS 43.05.245 ("The notice and demand for payment
is issued when the notice and demand is delivered to the taxpayer
in person or placed in the United States mail, addressed to the
last known address of the taxpayer."). The only significant
question with respect to this attribute is whether an assessment
serves a function similar to a civil complaint or an accusation
or statement of issues.
As discussed above, the primary function of each of
these documents is to provide written notice to the other party
that a matter is being contested and that particular relief is
sought. Examination of the assessment notices provided by the
State reveal that assessments also serve this function. The
assessment letter itself lists a total amount due and demands
payment. This constitutes a claim for relief. In addition,
computations explaining the amount due are enclosed with the
assessment. These constitute specific notice of the matter being
contested and the basis for relief. Therefore, the second
attribute of an administrative proceeding is present in a notice
of assessment.
Third, the notice of an assessment sets in motion
mechanisms prescribed by statute or regulation under which the
dispute will ultimately be resolved. Contrary to the State's
arguments, this element does not require that a hearing be
convened by the document, so long as the law provides that the
document will lead toward a resolution of the dispute regardless
of the opposing party's response. It is the legal authority to
bind the opposing party, and not the exact means by which that
authority is exercised, that is essential.
Therefore, an administrative proceeding can begin
before any hearing is initiated, if the law constrains the
options of the opposing party on receipt of notice of the
proceeding and provides mechanisms for resolving the dispute
irrespective of the opposing party's response. An assessment has
this effect. On receipt of an assessment, the taxpayer may 1)
pay the assessment; 2) appeal the assessment; or 3) do nothing.
If the taxpayer pays, the dispute is resolved. This is similar
to a defendant admitting liability in a civil suit. If the
taxpayer appeals, the mechanisms provided for by AS 43.05.240 are
set in motion to attempt to resolve the dispute. Finally, if the
taxpayer does nothing, AS 43.05.270 provides that the State may
levy against the taxpayer. Once the sixty-day period for
appealing the assessment has expired, however, the taxpayer may
no longer challenge the substantive basis of the assessment.26
The statutory scheme by which an assessment is converted into a
debt to the State if no appeal is filed is itself a mechanism for
resolving the dispute.
As an assessment possesses each of the essential
attributes which we have identified, it marks the beginning of an
administrative proceeding in the tax collection process for
purposes of Article IX, section 17 of the Alaska Constitution.27
3. An audit letter does not mark the commencement of
an administrative proceeding.
An audit letter does not satisfy the essential elements
of an administrative proceeding. Mere notice of an intention to
investigate neither indicates the existence of a dispute nor sets
in motion mechanisms for the resolution of a dispute.
No dispute exists when the audit letter is sent. On
the contrary, the need for an audit indicates that more
information is required before the State can agree or disagree
with the taxpayer's return. For this reason, an audit is more
properly described as an investigation than an administrative
proceeding. See Mallas v. United States, 993 F.2d 1111, 1122-24
(4th Cir. 1993) (holding that an I.R.S. audit is an investigation
and not an "administrative proceeding").
In addition, an audit letter does not set in motion any
mechanisms for resolving a dispute, even if a dispute did exist
at the time. As an investigative procedure, an audit helps the
State to determine what its position is. Nothing in the audit
procedure itself can be characterized as an attempt to resolve a
dispute.28
4. Whether our ruling that an administrative
proceeding is triggered by an assessment should be
given only prospective effect.
This court set forth the conditions necessary for non-
retroactive treatment in Plumley v. Hale, 594 P.2d 497, 503
(Alaska 1979):
1) the holding is one of first
impression, or overrules prior law, and was
not foreshadowed in earlier decisions; 2)
there has been justifiable reliance on an
alternative interpretation of the law; 3)
undue hardship would result from retroactive
application;[29] and 4) the purpose and
intended effect of the holding is best
accomplished by prospective application.
We apply these factors both to our initial decision that an
informal conference is an administrative proceeding and to our
decision today that the notice of assessment marks the beginning
of an administrative proceeding in the tax collection process.
Although the question of retroactive application arose separately
in the course of the proceedings in this case with respect to
these two decisions, the analysis is essentially the same.
The first factor is a threshold requirement.
Commercial Fisheries Entry Comm'n v. Byayuk, 684 P.2d 114, 117
(Alaska 1984). It is satisfied. In Johnstone, 669 P.2d at 544,
this court held that this requirement was met where "[n]o prior
Alaska case has attempted to construe the meaning of the word"
and prior non-judicial opinions "indicated the presence of real
uncertainty." This court has also stated that "if the question
answered by the new rule was 'subject to rational disagreement'
the threshold showing is met and the court will weigh the
remaining criteria." Truesdell v. Halliburton Co., 754 P.2d 236,
239 (Alaska 1988) (quoting Vienna v. Scott Wetzel Services, Inc.,
740 P.2d 447, 450 (Alaska 1987)). Although we reject the State's
interpretation of "administrative proceeding,"we cannot say that
it was irrational. Moreover, at the time the State adopted its
position, no Alaska case indicated the proper result. We
therefore consider the remaining factors.
The second factor--justifiable reliance on an
alternative explanation--supports nonretroactive application, but
carries relatively little weight. The State has demonstrated
that the intended recipients of fiscal year 1994 appropriations
have relied on the appropriations. While retroactive application
might cause reevaluation of these appropriations, it will not,
however, require any specific appropriation to be rescinded. In
addition, this reliance is two steps removed from the issue in
this case--the proper allocation of money to the budget reserve
fund. The primary focus of concern in weighing this factor is
whether the legislative and executive branches justifiably relied
on the availability of the monies at issue in this case when
making fiscal year 1994 appropriations.
These monies were deposited in the general fund in
reliance on a April 24, 1992, Attorney General's Opinion. Even
assuming that the State's reliance on the Attorney General's
Opinion is an appropriate basis for considering nonretroactive
application,30 at the time that the legislature appropriated the
informal conference collection receipts from the general fund,
the Attorney General's Opinion had been subject to significant
criticism, and the possibility that the money should have been
deposited into the budget reserve fund was well recognized.31
Because the risk of a subsequent judicial decision requiring
deposit of these funds in the budget reserve was apparent at the
time of the appropriations, we give significantly less weight to
this factor.32
The third factor--whether retroactive application will
result in undue hardship or have a negative effect on the admini
stration of justice--is essentially neutral. Some hardship may
be inherent in ordering the State to restore close to one billion
dollars, plus interest, to the budget reserve fund after the
money has already been allocated. Repayment of this amount
could, to a certain extent, require reconsideration of 1994
appropriations. Such reconsideration could, in turn, cause
uncertainty and, in some cases, hardship, for those who have
relied on the appropriations passed.
Alternatively, however, repayment could be made without
hardship from other sources including, most notably, earnings and
accumulated earnings from the Alaska Permanent Fund.33 Moreover,
the provisions of section 17 provide the opportunity for
significant alleviation or elimination of hardships. First, if
and to the extent that removing this amount from the general fund
reduces the amount available for appropriation in fiscal year
1994 below the amount appropriated for fiscal year 1993, a simple
majority of each house can approve appropriations from the budget
reserve fund. Alaska Const. art. IX, 17(b). Second, to the
extent the legislature wishes to continue appropriations for
fiscal year 1994 in excess of fiscal year 1993, the legislature
can reach the budget reserve fund by an "affirmative vote of
three-fourths of the members of each house." Alaska Const. art.
IX, 17(c). The superior court's decision to effectively stay
its order to restore the budget reserve fund until the close of
the legislative session, which we affirmed in our January 27
order, allows the State the opportunity to employ these
procedures in order to alleviate or avoid hardships.
The final factor to be weighed is whether the purpose
and intended effect of the holding is best served by prospective
application only. This is "the single most important criterion
to use in determining whether to apply a new rule of law
retroactively or prospectively." Byayuk, 684 P.2d at 118. This
factor weighs heavily against nonretroactive application. Where
the issue before the court is one of constitutional
interpretation, the purpose of the court's holding is to give
effect to the purpose of the provision and the intent of the
framers. See, e.g., Citizens Coalition, 810 P.2d at 168 ("[W]e
must never lose sight of another important right of the people
implicated in all cases of constitutional construction, namely
the right to have the constitution upheld as the people ratified
it."); see also Johnstone, 669 P.2d at 544 (looking to purpose of
constitutional provision in considering this factor).
The purpose of the budget reserve amendment, as well as
two of its explicit provisions, would be frustrated or violated
by nonretroactive application. The constitutional amendment
arose out of concern about a growing gap between spending and
revenues. To combat this gap, the reserve fund was proposed to
save money against future economic downturns and to remove from
the current appropriations power certain revenues.
Nonretroactive application would frustrate this second purpose by
allowing the legislature to appropriate from these revenues close
to one billion dollars more than the voters of Alaska intended
them to have access to, without meeting the requirements for
appropriating out of the budget reserve which are specified in
the constitution.
In addition, prospective application would violate the
explicit retroactive provision and frustrate the repayment
provision of section 17. Section 17 provides that "all money
received by the State after July 1, 1990 [from the designated
revenues] shall be deposited in the budget reserve fund." Alaska
Const. art. IX, 17(a). The amendment was not voted on until
November 1990 and did not become effective until January 1991.
At the time it was presented to the voters, therefore, it
contained a retroactive provision. By approving the amendment,
the voters approved this retroactive provision. Nonretroactive
application would ignore the language of the amendment and the
intent of the voters.
In addition, nonretroactive application would mean that
money which was within the scope of the budget reserve fund, and
which should have been deposited into that account, would be
subject to allocation without following the procedures required
in section 17(b) and (c). Nonretroactive application would also
avoid the effect of section 17(d), which requires that all money
appropriated from the budget reserve fund must be repaid out of
money remaining in the general fund at the end of a fiscal year.
Alaska Const. art. IX, 17(d).
On consideration of all of these factors, we conclude
that nonretroactive application of our decision construing the
term "administrative proceeding"and holding that the notice of
assessment marks the beginning of an administrative proceeding in
the tax collection process would be highly inappropriate. The
potential hardships of retroactive application and the State's
reliance on a more narrow interpretation than we adopt do not
outweigh the importance of giving effect to the constitution as
adopted by the people.
5. The superior court did not abuse its discretion by
subjecting the accounting of informal conference
settlement receipts to a protective order.
Alaska Statute 43.05.230 provides that "[i]t is
unlawful for a current or former officer, employee, or agent of
the state to divulge the amount of income or particulars set out
or disclosed in a report or return made under [Title 43]"except
under limited circumstances. AS 43.05.230(a). At the time of
the superior court's final order, the parties disputed whether
the information which would be contained in the accounting,
particularly the dates and amounts of individual settlements,
would effectively reveal both the identity of individual
taxpayers and "particulars" of their returns. Rather than
resolve this dispute on the scant information before it and risk
accidentally revealing confidential information, or delay entry
of final judgment until the issue could be more fully litigated
and thus thwart the strong public interest in a speedy resolution
of the underlying dispute over a collateral matter, the superior
court granted the protective order and explicitly stated that it
was subject to further order of the court. On the record before
us, we are unwilling to say that the superior court abused its
discretion. On remand, however, the superior court is free to
revise this protective order in the light of a more fully
developed record.34
For the reasons set forth in this opinion, we hold that
an administrative proceeding begins, for tax purposes, with the
issuance of an assessment to the taxpayer. We express no opinion
on the issues characterized by the BP settlement, or on the
questions concerning the procedures used in resolving royalty
disputes. We remand to the superior court for further
proceedings in accordance with this opinion.
_______________________________
* Sitting by assignment made pursuant to article IV,
section 16 of the Alaska Constitution.
1 Article IX, section 17 provides as follows:
Budget Reserve Fund. (a) There is
established as a separate fund in the State
treasury the budget reserve fund. Except for
money deposited into the permanent fund under
Section 15 of this article, all money
received by the State after July 1, 1990, as
a result of the termination, through
settlement or otherwise, of an administrative
proceeding or of litigation in a State or
federal court involving mineral lease
bonuses, rentals, royalties, royalty sale
proceeds, federal mineral revenue sharing
payments or bonuses, or involving taxes
imposed on mineral income, production, or
property, shall be deposited in the budget
reserve fund. Money in the budget reserve
fund shall be invested so as to yield
competitive market rates to the fund. Income
of the fund shall be retained in the fund.
Section 7 of this article does not apply to
deposits made to the fund under this sub
section. Money may be appropriated from the
fund only as authorized under (b) or (c) of
this section.
(b) If the amount available for
appropriation for a fiscal year is less than
the amount appropriated for the previous
fiscal year, an appropriation may be made
from the budget reserve fund. However, the
amount appropriated from the fund under this
subsection may not exceed the amount
necessary, when added to other funds
available for appropriation, to provide for
total appropriations equal to the amount of
appropriations made in the previous calendar
year for the previous fiscal year.
(c) An appropriation from the
budget reserve fund may be made for any
public purpose upon affirmative vote of three-
fourths of the members of each house of the
legislature.
(d) If an appropriation is made
from the budget reserve fund, until the
amount appropriated is repaid, the amount of
money in the general fund available for
appropriation at the end of each succeeding
fiscal year shall be deposited in the budget
reserve fund. The legislature shall
implement this subsection by law.
2 It is anticipated that the regular session will end no
later than May 10, 1994.
3 At oral argument, the State abandoned this argument as
moot, in light of agreement among the parties on the scope of the
superior court's production order.
4 These three paragraphs stated:
1. The term "administrative
proceeding," as it is used in Article IX,
Section 17 of the Alaska Constitution,
includes the informal conference process
established pursuant to A.S. 43.05.240 and 15
AAC 05.010 and .020.
2. All monies received by the
State after July 1, 1990, as a result of the
termination, through settlement or otherwise,
of all informal conference appeals involving
mineral lease bonuses, rentals, royalties,
royalty sale proceeds, federal mineral
revenue sharing payments or bonuses, or
involving taxes imposed on mineral income,
production, or property, shall be deposited
into the Budget Reserve Fund established by
Art. IX, Sec. 17 of the Alaska Constitution,
along with an amount of money equal to the
income which would have been earned on these
funds if the funds had been properly placed
in the Constitutional Budget Reserve Fund.1
_____________________________________________
_
1The evidence presented by the parties
up to the date of this final order suggests
that the relevant monies received by the
State after July 1, 1990, totals an amount of
not less than $951,518.827.86, which total
represents at least $924,051,580.19 in
principal, plus at least $27,467,247.67 in
income which would have been earned.
_____________________________________________
_
3. The defendants are hereby
ordered to restore and fully fund the
constitutional Budget Reserve Fund, by not
later than the end of the regular session of
the Eighteenth Alaska Legislature, consistent
with the terms of this order and with Article
IX, Section 17 of the Alaska Constitution.
Action by the State of Alaska consistent with
the constitution and laws of the State which
properly obligate these funds is not
precluded by this order. (e.g., a 3/4ths
vote of each house of the legislature to
authorize appropriation of part or all of the
funds).
5 The order stated:
The parties shall submit
supplemental briefs, on a schedule to be
established by the clerk, on the following
questions:
(a) Whether the notice and
demand for payment provided in AS
43.05.245 -- also referred to as
the assessment -- triggers the
beginning of an "administrative
proceeding"within the meaning of
article IX, section 17 of the
Alaska Constitution; and, if so,
(b) Whether any ruling so
concluding should be given
prospective effect only.
6 To be distinguished are rulemaking administrative
proceedings which are clearly not included within the meaning of
the term used in article IX, section 17.
7 In construing the meaning of a statute or
constitutional provision, it is necessary to view the words in
the context in which they are used. Homer Elec. Ass'n v.
Towsley, 841 P.2d 1042, 1044 (Alaska 1992).
8 The record is replete with references, in both the
legislative history of Senate Resolve No. 129 and the voter
pamphlet explaining the proposed constitutional amendment which
became section 17, to the need to remove "windfalls" from the
normal appropriations power of the legislature. See House
Finance Fiscal Policy Subcommittee Report No. 3, at 15 (Jan. 10,
1990); House Finance Committee Hearing (May 1, 1990), transcript
at 37; Voter pamphlet, statements for and against amendment.
"Windfall" is not the most precise of terms. The most relevant
definition in Webster's Third New Int'l Dictionary 2619-20
(1969), is "an unexpected or sudden gain or advantage."
9 Article IX, section 17 is a response to a perceived
impending fiscal crisis resulting from a growing gap between
State spending levels and general fund revenues. See House
Finance Fiscal Policy Subcommittee Report No. 3 (Jan. 10, 1990).
To combat this "gap"and the crisis thought to accompany it, the
amendment seeks to hold down current spending levels, by
preventing the legislature from appropriating certain "windfall"
receipts and creating a savings fund to help offset future
revenue declines. Id.; see also Statement in support of
Amendment in voter pamphlet.
10 We undertake this "essential attribute"analysis rather
than rely on the labels given certain procedures by the
legislature or the agencies themselves because it is a necessary
step in interpreting the constitution as the people ratified it.
Recognizing that the people understood the term "administrative
proceeding"to reach the adjudicatory functions of administrative
agencies is only a first step. It is not an end in itself. We
must also determine what the people would have understood such
adjudications to contain. Labels alone cannot answer this
question.
Similarly, our use of the term "adjudicatory"and its
derivatives to describe the type of proceedings referred to by
"administrative proceeding"in section 17 is not meant to graft
"adjudicatory" into the Alaska Constitution. It is merely an
useful means of distinguishing the type of administrative actions
encompassed by the constitutional language from other types of
actions which are not included. We might also refer to this type
of administrative action as "dispute resolution procedures." For
this reason, we do not consider narrow, context-specific
definitions of adjudications, like those described by the
Administrative Procedures Act, AS 44.62.330-.630, (APA) to be
controlling. Although we look to the APA for help in determining
the essential attributes of adjudicatory procedures, the APA also
provides procedural protections which serve other functions and
are not essential to the concept of adjudication, or
individualized decision-making.
11 "Dispute"is defined as "a conflict or controversy; a
conflict of claims or rights; an assertion of a right, claim, or
demand on one side, met by contrary claims or allegations on the
other. The subject of litigation; the matter for which a suit is
brought and upon which issue is joined, and in relation to which
jurors are called and witnesses examined." Black's Law
Dictionary 472 (6th ed. 1990).
12 This pamphlet is an authoritative source of the voters'
common understanding of section 17. See, e.g., State v. Lewis,
559 P.2d at 637-38 (relying on widely distributed report
explaining constitutional provisions to Alaska voters as the most
"cogent expression of the intent . . . of those voting for
ratification of the Constitution").
13 The ballot measure refers to money received from
"mineral revenue lawsuits or administrative actions." The
neutral description of the amendment prepared by the Legislative
Affairs Agency uses the term "administrative proceeding." The
statement in support of the amendment also refers to "[r]evenues
from mineral or oil and gas legal settlements and administrative
proceedings."
14 See, e.g., AS 10.13.870 (providing for appeal from
"administrative proceedings"; implying that proceeding itself
adjudicated rights); AS 14.480.190 (providing for imposition of
civil fine in "administrative proceeding"); AS 25.35.120
(referring to parties to an administrative proceeding); AS
34.08.320 (granting association of owners in common interest
community the power to "institute, defend, or intervene in
litigation or administrative proceedings"). We decline to
undertake an extensive analysis of each of the several statutory
references to "administrative proceedings"because the use of the
term in the statutes is never so specific as to impose a peculiar
meaning.
15 We emphasis that a dispute may exist for our purposes
even where the non-initiating party immediately agrees with the
initiating party's assertions and where the non-initiating party
would have been disposed to agree prior to initiation of the
proceeding. It is the placing of an issue in controversy, under
circumstances that require a response and eventual resolution of
the issue, and not the exact means by which a resolution is
reached, that indicate the presence of a dispute.
16 The primary function of each of these documents is to
provide specific written notice to the other party that rights or
obligations between the parties are being contested and that
particular relief is being sought. For example, under the APA
both an accusation and a statement of issues must be in writing,
specify the statute or regulation at issue, include reference to
any particular conduct which would justify denial of the right at
issue, and be served on the opposing party. AS 44.62.360, .370.
Similarly, a civil complaint must contain a statement of the
claim showing entitlement to relief and a demand for judgment,
and be served on the opposing party. Alaska Rules of Civil
Procedure 4, 8. We note that each of these documents also serves
to set in motion mechanisms for the resolution of the dispute.
We address this function as the third essential attribute of an
administrative proceeding.
17 See Wickersham v. State, Commercial Fisheries Entry
Comm'n, 680 P.2d 1135, 1144 (Alaska 1984) ("An elementary and
fundamental requirement of due process in any proceeding which is
to be accorded finality is notice reasonably calculated, under
all the circumstances, to apprise interested parties of the
pendency of the action.") (quoting Mullane v. Central Hanover
Bank and Trust Co., 339 U.S. 306, 314 (1950); see also Kerr v.
Kerr, 779 P.2d 341, 342 (Alaska 1989) ("Notice reasonably
calculated to afford the parties an opportunity to present
objections to a proceeding, and affording them a reasonable time
to do so, is a fundamental requirement of due process.").
18 Our conclusion that minimal due process must be
afforded in order for an administrative action to be an
administrative proceeding under section 17 does not require
either a formal hearing or a right of immediate judicial appeal.
Both of these additional conditions relate to whether and to what
extent the administrative decision will be subject to judicial
review, assuming that the private party is not satisfied with the
decision. Our concern, however, is not with the means by which
further objections may be pursued, but rather with whether, if no
objection is made, the decision will be treated as final.
19 See, e.g., Black's Law Dictionary, at 42 ("Adjudicatory
hearing" is a "proceeding before an administrative agency in
which the rights and duties of particular persons are adjudicated
after notice and opportunity to be heard.").
20 In another context, we have stated: "'Proceedings' has
been generally described as 'all the steps or measures adopted in
the prosecution or defense of an action.' . . . the phrase
'other action or further action or proceeding' as used in AS
34.20.100 means a form of litigation or some type of in-court
proceeding." Hull v. Alaska Fed. Sav. & Loan Ass'n, 658 P.2d
122, 125 (Alaska 1983) (quoting Statter v. United States, 66 F.2d
819, 822 (9th Cir. 1933)). This definition was dependent on the
context in which the word was used in the statute and therefore
is not directly relevant here, especially given that an
administrative proceeding will never be an in-court proceeding.
Nevertheless, this definition does illustrate the use of the word
"proceeding"to signify the series of steps involved in reaching
a result.
21 See also Black's Law Dictionary at 42 ("Adjudicatory
action: Administrative actions are 'adjudicatory' in character
when they culminate in a final determination affecting personal
or property rights.").
22 The same document need not serve both functions. An
adjudication does not begin, however, until both functions have
been served. Notice without the initiation of the proceeding is
only notice of intent to initiate, requiring further notice.
Similarly, until the second party is notified of the initiation
of the proceeding, the proceeding cannot be effective as an
adjudication. Furthermore, the notice document could not vary
from the initiating document without a risk of misinforming the
receiving party of the nature of the proceedings. As a practical
matter the same document will serve both functions.
23 We do not address the question whether, in a
contractual setting involving rentals or royalties, dispute
resolution mechanisms prescribed by contract may substitute for
such mechanisms prescribed by statute or regulation within the
terms of this definition.
24 The taxation statutes of Alaska require a taxpayer to
file a return if taxes are due. See, e.g., AS 43.20.030(a),
43.55.020-.030. There is no provision which allows a taxpayer to
request without penalty that DOR complete its return. If the
taxpayer fails to file a return, DOR is authorized to complete a
return on the taxpayer's behalf. AS 43.05.245. The taxpayer
will, however, be responsible for all penalties associated with
failing to file a timely return. Therefore, if an individual or
entity fails to file a return, an implied assertion that no taxes
are due is made.
25 This is true even if the taxpayer immediately concedes
the correctness of the assessment and the error of its own
return. At the moment that the assessment is issued, the State
and the taxpayer have contrary assertions outstanding concerning
the amount of tax owed. Subsequent agreement cannot erase this
moment of disagreement. An administrative proceeding requires no
greater dispute.
26 In effect a taxpayer's failure to respond to an
assessment is similar to a failure to appeal a judgment or a
failure to participate in a civil action or an adjudication under
the APA. In all of these cases, the party's failure to act has
legal consequences. See Appellate Rule 204; Civil Rule 55; AS
44.62.530.
27 Because the assessment marks the beginning of an
administrative proceeding and because mechanisms which follow
from the assessment are part of the proceeding, it is unnecessary
to separately discuss application of our essential attribute
analysis to the informal conference process.
28 We note that at the time the House Finance Committee
amended the legislative resolve that was to become section 17 to
include the term "administrative proceeding,"the amendment was
described as reaching "back taxes that are still under consider
ation in the Department of Revenue." House Financing Committee
Hearing (May 1, 1990), transcript at 38 (comments of budget
officer Mary Halloran). We recognize that "back taxes" could
conceivably include all taxes received after an original due
date, including all amounts received during the course of an
audit. This phrase, however, does not control over the language
of the constitution itself, which explicitly requires that money
for the budget reserve be received as a result of an
administrative proceeding.
29 In Commercial Fisheries Entry Comm'n v. Byayuk, 684
P.2d 114, 117 (Alaska 1984), the court restated this element as
requiring consideration of the effect retroactive application
would have on the administration of justice. However this
element is stated, it requires an analysis of whether retroactive
application will cause more harm than good. See Johnstone, 669
P.2d at 545 (stating this element as "whether a holding of
retroactivity would cause substantial inequitable results,
injustice or harm") (quoting Warwick v. State ex rel. Chance, 548
P.2d 384, 395 (Alaska 1976)).
30 We have previously noted that this factor "is generally
designed to protect persons who innocently rely on judicial or
legislative law rather than agencies which rely on their own
regulation." Byayuk, 684 P.2d at 119.
31 Members of the legislature had insisted that informal
conference settlement proceeds be separately tracked within the
general fund. This accounting system was in use at the time
these funds were appropriated.
32 This factor carries more weight with respect to monies
received after a notice of assessment had been issued but prior
to a taxpayer appeal. The possibility that the constitutional
language reached such monies was not fully comprehended until
well into the current litigation.
33 The Alaska Permanent Fund was established under article
IX, section 15 of the Alaska Constitution.
34 We also reject Gov. Cowper's argument that the
accounting ordered by the superior court should include the
income actually earned on funds which should have been deposited
in the budget reserve but were not. Article IX, section 17
establishes the correct measure of income owed to the fund on
monies incorrectly withheld from the fund: "Money in the budget
reserve fund shall be invested so as to yield competitive market
rates to the fund." 17(a). The State proposed calculating the
interest due on the amount in controversy based on the actual
return received by the fund for the relative time periods. The
superior court ordered the State to provide Gov. Cowper and the
Senate Majority with these computations. Unless the plaintiffs
can show reason why this is not an accurate means of calculating
the interest owed, no further information is necessary. Our
ruling on this point should not be
read as suggesting that the income actually earned is not public
information available to any member of the public even in the
absence of litigation. Such information is, however, not
relevant to the remedy in this case.
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