Eric Forrer v. State of Alaska and Lucinda Mahoney
471 P.3d 569
| Alaska | 2020Background:
- Alaska enacted HB 331 (2018) creating the Alaska Tax Credit Certificate Bond Corporation to issue up to $1 billion in subject‑to‑appropriation bonds to buy outstanding transferrable oil & gas exploration tax credits at up to a 10% discount.
- Bond proceeds would purchase tax credits; repayments to bondholders would be made only if and as the legislature appropriated funds to the Corporation (no pledge of full faith and credit; bond payments expressly "subject to appropriation").
- Tax credits were discretionary obligations of the State; the State never had a legal duty to purchase them but had long outstanding purchase requests (~$800M–$1B estimated).
- Taxpayer Eric Forrer sued, alleging HB 331 violated Article IX, § 8 of the Alaska Constitution (state debt requires voter ratification), among other constitutional claims; the superior court dismissed, relying on Carr‑Gottstein to treat appropriation‑backed obligations as non‑debt.
- The Alaska Supreme Court reversed: it held HB 331’s subject‑to‑appropriation bonds constitute constitutional "state debt," are not saved by the Article IX exceptions (refunding or revenue bonds), and the statute is not severable, so the whole act is invalid.
Issues:
| Issue | Plaintiff's Argument (Forrer) | Defendant's Argument (State) | Held |
|---|---|---|---|
| Do subject‑to‑appropriation bonds created by HB 331 constitute "state debt" under Alaska Const. art. IX, § 8? | The bonds create a long‑term obligation and effectively bind future legislatures to repay, so they are "state debt" requiring voter approval. | Because repayments are discretionary and subject to appropriation, they are not legally enforceable state debt and thus not covered by § 8. | Held: HB 331 creates constitutional "state debt." Subject‑to‑appropriation bonds fall within § 8's prohibition. |
| Does Carr‑Gottstein’s three‑prong test validate HB 331? (non‑appropriation clause; limited recourse; no long‑term obligation) | Carr‑Gottstein does not apply; HB 331 fails the second and third prongs (recourse is to public appropriations; creates multi‑year obligation and credit pressure). | The statute has a non‑appropriation clause and limited recourse to the Corporation, satisfying Carr‑Gottstein and making the bonds non‑debt. | Held: HB 331 fails Carr‑Gottstein — recourse is to appropriations (not private res) and the scheme creates a long‑term obligation likely to bind future legislatures. |
| Do Article IX, § 11 exceptions (refunding indebtedness or revenue bonds) save HB 331? | HB 331 is not mere refunding of voter‑approved debt and the tax‑credit purchases are not self‑sustaining enterprises generating dedicated revenues. | HB 331 restructures existing obligations (refunding) or functions as revenue bonds because repayments can be treated as "revenues" of the Corporation. | Held: Neither refunding nor revenue‑bond exceptions apply. HB 331 bonds are not refunding of voter‑authorized debt nor payable from a self‑sustaining revenue stream. |
| If unconstitutional in part, is HB 331 severable? | N/A (severability relevant to remedy) | N/A | Held: Not severable. The bond issuance is the central purpose; invalidating the bonds undermines the statute as a whole, so the entire act is invalid. |
Key Cases Cited
- Carr‑Gottstein Properties v. State, 899 P.2d 136 (Alaska 1995) (adopted a three‑factor framework regarding non‑appropriation lease‑purchase arrangements and "debt")
- Village of Chefornak v. Hooper Bay Construction Co., 758 P.2d 1266 (Alaska 1988) (local debt limitations apply where entity endeavored to borrow money via bonds or similar instruments)
- DeArmond v. Alaska State Development Corp., 376 P.2d 717 (Alaska 1962) (revenue bonds backed solely by a corporation’s resources do not pledge the State’s credit for Article IX, § 6 purposes)
- Walker v. Alaska State Mortgage Ass’n, 416 P.2d 245 (Alaska 1966) (upheld bonding arrangements where obligations were tied to self‑supporting enterprise resources)
- Lonegan v. State (Lonegan II), 819 A.2d 395 (N.J. 2003) (New Jersey decision recognizing appropriations‑backed obligations as non‑debt in context of extensive prior practice; discussed and distinguished)