Forrer v. AlaskaAnnotate this Case
Anticipating a shortfall of revenue from previously enacted tax incentives, the 30th Alaska State Legislature attempted to offset future fiscal unpredictability by authorizing a discounted buyback of tax credits financed by bonds without pledging the “full faith and credit” of the State. Without a vote of the people, the legislature created a public corporation capable of borrowing up to $1 billion through the issuance of subject-to-appropriation bonds to purchase outstanding oil and gas exploration tax credits, with bondholders to be reimbursed solely at the discretion of future legislatures through appropriations to the new public corporation. A taxpayer filed suit, alleging, inter alia, that the legislature violated the Alaska Constitution’s state debt limitation. The superior court granted the State’s motion to dismiss, ruling that the legislation did not create “debt” for purposes of the constitutional limitation. The Alaska Supreme Court reversed, finding that this financing scheme, even if unforeseeable in the mid-twentieth century, was the kind of constitutional “debt” that the framers sought to prohibit under article IX, section 8 of the Alaska Constitution. The Supreme Court reversed the superior court's decision granting the State's motion to dismiss, and affirmed the superior court’s decision rejecting the State’s arguments under section 11.